First, let me clarify what I’m not<\/strong> talking about when I talk about Third Party Administrators (TPA for short). \u00a0I’m not<\/strong> talking about self-insured businesses that provide compensation for their injured workers out of their own pockets and use a TPA to manage the processes. \u00a0While this might be the most common use of a TPA, it is not the world in which I live, so I don’t know much about that. \u00a0I live in the world of small business where business owners have to use a workers comp policy, available through a workers comp insurance company, to pay for employee injuries.<\/p>\n Those insurance companies that provide workers comp insurance either handle their own claims with their dedicated in-house claims adjusters, or they use a TPA. \u00a0The latter is what I’m talking about when I talk about TPAs.<\/p>\n Whether an insurance company uses their own in-house claims team or a TPA is a question every business owner should ask when he’s\u00a0choosing a workers comp policy.<\/p>\n Why does it matter? \u00a0Because of the quality of service you get when you actually have an employee injury. \u00a0In my opinion it comes down fraud – the potential for a fraudulent injury to get paid. \u00a0I’m sure that there are more issues that can arise when using a TPA, and as I spend more time pondering this issue, I will have more thoughts on it,\u00a0but that is what I see for now.<\/p>\n Before I talk about fraud, I also want to mention that there are many good TPAs out there and the people that work for them are like those in most other industries: honest, hard working people that care about others and want to do a good job. \u00a0It is not anyone in the TPA that allows fraud to take place; it is the system itself that allows fraud to take place.<\/p>\n Why? \u00a0The primary reason is that when an insurance company handles its own claims it has a better watch on the money. \u00a0When an insurance company outsources claims handling to a TPA, it is entrusting another entity to be good stewards with its money. \u00a0Based on human nature, the company that pays its own claims has more of an incentive to put a red flag on claims where the costs start rising.<\/p>\n