Frank Pennachio is one of the smartest people in workers comp. His piece on the complicity of employers in screwing up their own claims published in Risk and Insurance is just terrific.

TPAs are making a lot of money on managed care. At least in part, that's because employers are hammering them on claims handling costs. There is just no way that a TPA can effectively adjudicate a lost time claim for $1200 for the life of the claim/contract.

So, they have to make up the margin somewhere, and managed care is that 'somewhere'.

Here's Frank's summary:

"Claims administration contracts between employers and their insurance companies or third-party administrators have created a cycle of misaligned incentives and unintended consequences.

Many employers have lost sight of what a workers' compensation program is supposed to do, and vendors have created products and services that often drive costs up instead of down."