TPA Trends

Employment Growth Impacting TPAs

With three million U.S. jobs created during 2014 and a strong start to 2015, TPAs are managing more claims and seeing an uptick in revenue growth.
By: | March 6, 2015

U.S. employment growth is driving increased worker’s compensation claims volume and pushing claims management companies to hire new employees of their own.

The worker’s comp third party administrators have not hit on boom times. But with 3 million U.S. jobs created during 2014 and more than half a million added in the first two months of 2015, they are managing more claims and seeing an accompanying uptick in revenue growth.

Advertisement




At the same time, the TPAs are seeing more of their seasoned adjusters and other experienced employees who kept their jobs during the recession deciding to exit now that stock-market earnings have lifted their retirement savings.

That along with increased claims volume has led TPAs to post help-wanted signs for veteran claims handlers while also recruiting recent college grads they can train.

“We have a number of things we are doing in order to ramp up (hiring) whether it’s a very robust campus recruiting effort, because we want to be able to develop our own, as well as looking to add experienced hires who will be able to step into a desk and take over very quickly,” said Mike Hessling, chief client officer at Gallagher Bassett Services Inc.

“We are in growth mode,” added  Scott Rogers, executive VP, casualty operations at Sedgwick Claims Management Services Inc. “We are adding adjusters and other claims professionals at a couple hundred per month. We anticipate we will hire between 2,500 and 3,000 new colleagues in 2015.”

Some of that expansion comes from existing customers demanding more services, the acquisition of new clients, and job growth.

The U.S. Bureau of Labor Statistics reported March 6, that employers added 295,000 in February. That follows millions of job created during each of the past three years. The Bureau said February’s job gains occurred in in food services and drinking places, professional and business services, construction, health care, transportation and warehousing.

With more workers come more injury claims to manage. But other forces may also be at work.

During the recession, when claim volume was flat or declining, the frequency of minor, medical-only claims filed also declined, said Frank Murray, senior VP of claims services at ESIS, a TPA unit of ACE Group.

Observers speculated back then that the decline in those claims was partially due to employee reluctance to file minor-injury claims because they feared losing their jobs.

Now, as U.S. employment improves, Murray said he is seeing an increase minor, medical-only claims.

“As the economy improves people are less concerned about reporting a minor claim,” Murray said.

The overall number of claims rose “last year significantly and the year before that as well,” he said. “Prior to that, frequency was flat or slightly declining. But the last two years there has been a very noticeable increase in claim volume.”

Employment numbers are closely monitored by TPAs. Broadspire does so because of their correlation with claim volume, said Danielle Lisenby, the TPA’s president and CEO.

“We are definitely seeing year over year growth,” Lisenby said.

Broadspire’s revenue increased to $268.9 million during 2014, up nearly 7% from the prior year, driven in part by claims volume growth and acquiring new customers.

Several TPAs are privately owned and do not publicly report revenues.

But TPA leaders have similarly seen the volume of claims their companies manage steadily improve over the past year or two with the growth in claims depending on the industry sector served. As they handle more claims so do other worker’s comp claim industry entities -such as medical cost control companies- that the TPAs contract with for services.

So far, most of the growth in claims has come from sectors that typically lead the way in post-recession hiring, such as those in the temporary employment, retail, and service industries.

The recent years’ increases in overall U.S. employment, however, means TPAs are beginning to see growth in claims from other industries as well.

Along with noticing more construction underway in the cities she travels to, Debbie Michel, president of Helmsman Management Services said the TPA unit of Liberty Mutual Group has seen a slight increase in worker’s comp claims from construction industry customers and from companies providing products and services for construction companies.

“But construction is nowhere near where it was before ’09,” Michel said.

Overall, though, several of Helmsman’s larger clients are seeing more claims due to employment growth, Michel said.

Advertisement




Several TPA sources said they expect the claim volume growth to continue throughout 2015.

Worker’s comp claims, however, typically lag the addition of new jobs, said Rogers at Sedgwick.

“We have seen overall unemployment rates drop, which means our employers are adding salaries, adding staff, so we do anticipate the correlation that historically exists (between employment and claims growth) to continue,” Rogers said. “With more employment opportunity comes more risk and more potential for claims, but it is a lagging factor.”

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

More from Risk & Insurance

More from Risk & Insurance

Risk Matrix: Presented by Liberty Mutual Insurance

10 Critical Risks Shaping the Workers’ Comp Landscape Today

Emerging risks like workplace violence, disabling injuries and inexperienced workers are driving up workers' comp claims and costs.
By: | August 1, 2019




The R&I Editorial Team can be reached at [email protected]