Optimizing benefits means offering health coverage that enriches and simplifies the lives of covered members at a price point optimized to the employer’s total rewards strategy. This can be a challenging task in a complex marketplace full of options. By working with a Third-Party Administrator, you can improve the overall health and well-being of your population, reduce healthcare costs, and increase the satisfaction of the employer and the employees.
Human Resource (HR) leaders wear many hats, including benefits designers and health plan managers. These roles can be time-consuming for leaders at companies with self-funded plans, where they are responsible for managing costs for all stakeholders, from the C-suite team to hourly employees to covered dependents. Brokers and consultants hold the responsibility of guiding their clients through the building of their benefit plans and managing vendor relationships in partnership with their Third-Party Administrator (TPA).
According to the most recent Employer Health Benefits Survey by the Kaiser Family Foundation, 65% of covered employees in the US are enrolled in a self-funded plan, with 82% of those employees being employed at larger companies. Companies that are self-funded do not purchase traditional health insurance from a known payer but act as the insurer themselves, carrying the risk and administering the plan. It is common, and beneficial, for these companies to work with a best-in-class Third Party Administrator to reduce costs and increase plan efficiency.
Understanding and working with an industry-proven TPA can help companies gain greater independence, take control of their benefits plan, reduce administrative burden, and use tech-enabled analytics to optimize healthcare benefits for their employee population. Brokers and consultants with a strong TPA partner like HealthComp can ease administrative burdens, open the doors to additional vendor partnerships, and provide even greater insight into plan performance.
The following article will guide employers, brokers, and consultants in how to best work with a TPA to create generous, effective health benefits plans and increase employee engagement and wellness, while still managing costs efficiently.
What is a TPA?
Third-Party Administrators serve as an administrative team for companies that are self-funded. Typically, TPAs coordinate with brokers, consultants, and a company’s HR team to develop and deliver a healthcare benefits plan with the goal of optimizing superior employee benefits. Administrative tasks TPAs provide include:
- Claims processing – Taking on the role of adjudicating and paying claims for members and providers.
- Plan design and implementation – Working closely with HR teams to create the best plan for an employee population and helping to implement it.
- Compliance management – Making sure self-funded health plans are compliant with federal and state regulations such as ERISA, HIPAA, and the ACA.
- Member services – Working directly with members to ensure their needs are being met by the plan. This includes answering and managing member requests and working with high-risk members to guide them to the right point of care.
- Network administration – Communicating with providers and networks to negotiate contracts and pricing.
- Reporting and analytics – Providing comprehensive and data-driven reports about a plan’s utilization and spending, as well as the overall health of an employee base.
- Managing stop-loss – Sourcing and managing stop-loss carrier claims.
How do TPAs Save Time and Money?
TPAs specialize in benefits administration and help ensure all aspects of a plan are utilized, thereby limiting waste. This expertise allows them to handle tasks more efficiently while reducing administrative costs that would otherwise have to be managed in-house. They do so by (but are not limited to):
Offering Network Flexibility
TPAs partner with multiple payers and insurance carriers to offer best-in-class networks (e.g., Anthem, Cigna, Aetna) paired with the TPA’s own Member Services, Technology, and Reporting and Analytics. TPAs can go as far as administering direct contracts between the employer and a local provider or hospital. This can help mitigate issues with out-of-network providers and out-of-area providers.
Optimizing Allocation of Funds
A TPA partner saves employers money through analytics that identify wasted funds from underutilized programs. TPAs can advise on whether the employer should spend time increasing engagement with specific programs or optimize the plan the following year by offering alternative programs which will be used more efficiently.
TPAs are experts in navigating the complex world of healthcare regulations and compliance. A TPA is adept in the rules and regulations associated with benefits plans and can help ensure the employer organization remains compliant with the latest advancement in state and federal regulations. This expertise helps employers reduce the risk of costly fines and penalties that could otherwise be incurred unknowingly.
Enabling Unbundling and Carve-out Strategies
Many network carriers require their preferred Pharmacy Benefit Manager (PBM) also be purchased with their network and administration services when an Employer purchases through the network carrier. TPAs allow employers to select a provider network without being locked into the Pharmacy Benefit Manager (PBM) bundled with the network. This is often advantageous for reducing cost while strengthening access to care.
Providing Superior Technology
A modern TPA will offer technological solutions that make administration more efficient on the backend for employers, and on the front end for employees and providers. This is especially important during enrollment and for the ongoing member experience. For employers, this can look like consolidated billing and custom reporting to reduce administrative burden.
Clinical Care Management
Finally, TPAs save money by offering services that catch members during high-cost events. Pre-admission counseling, second opinions, discharge planning, and other care coordination can all drive cost savings. Reducing unnecessary doctor’s visits and treatments saves money and time for both the company and the employee. Putting employees on the right path to care and recovery also helps them return to work faster. HealthComp can analyze claims, biometrics, medical records, and even member-submitted data to identify risks, then work with members to identify cost-effective solutions.
Recently, HealthComp’s Case Management team intervened in a member’s care where the member was struggling to afford treatment. This team offered a viable solution that was easy for the member to implement and saved both the employee and the company significantly.
In addition to the above, TPAs also offer unique and creative solutions for self-funded employers looking to create non-traditional, cost-effective, and affordable plans for their employees, such as reference-based pricing. TPAs negotiate rates with healthcare providers, pharmacy benefit managers, and other vendors to ensure their clients receive the best possible prices for medical services and supplies. By pooling resources, TPAs can often offer better rates and discounts than individual employers could negotiate on their own. Below are some frequently asked questions regarding TPAs, the different plans available with their administration, and how groups, brokers, and consultants can interact or choose a partner when considering self-funded plans.
How do TPAs Differ from an Administrative Services Organization (ASO)?
To work with an ASO means to bundle your services with a single healthcare company, with that company providing all administrative services and insurance. Choosing to remain “unbundled” allows you to contract with specialized companies to manage or provide each portion of their program, separating out the different services needed to administer and manage the cost of your plan.
There are significant benefits to choosing an unbundled approach with a TPA for your coverage, including the ability for flexibility and customization, transparency with data, flexibility with solutions, and access to superior cost containment strategies.
What is Reference-Based Pricing (RBP)?
Reference-based pricing (RBP) is a health plan pricing strategy used as an alternative to a traditional PPO network. Administered by a TPA, RBP determines the amount an employer will reimburse for a particular medical service or procedure based typically on a percentage of Medicare. In some instances, it is negotiated with a provider prior to a service, but more frequently after.
How Do TPAs Work with Pharmacy Benefit Managers (PBMs)?
Pharmacy benefit managers (PBMs) sit between payers—in this case, self-funded plans and the companies who administer them—and drug manufacturers. Like TPAs in healthcare benefits administration, PBMs focus solely on prescription drug costs and often work with a TPA as part of the employee benefits team. As a TPA, HealthComp can partner with multiple different PBMs, allowing their brokers, consultants, and clients to choose the partner who best fits their needs and financial goals.
How Do TPAs Improve Employee Health?
Working with a TPA can improve employee health in several ways. TPAs have access to plan analytics which allows them to assess plan usage and implement programs tailored specifically to the employee population. For example, if an employer has a high population of women of childbearing age, the health plan would benefit from a maternal health program such as HealthComp’s Nurturing Together, which offers families access to prenatal nurses who provide support throughout pregnancy, including the post-birth season; assist with the location of in-network providers; and more. Other programs which can be added to a health plan include behavioral health, chronic condition management, employee assistance programs (EAPs), and even smoking cessation.
TPAs improve employee health by tailoring health plans to meet the needs of members and proactively finding healthcare gaps where programs (such as those listed above) can prevent, or minimize, more serious health issues. Employees want to feel supported by their employers, especially when it comes to their health.
Employee engagement programs, like a wellness program, are also beneficial to add to an employer health plan to promote healthy habits and lifestyle choices, provide ongoing health education, and encourage employees’ proactive access to preventive healthcare such as annual well-visits and routine vaccinations.
One of the most direct ways TPAs have an impact on employee health outcomes is through clinical care management.
What is Clinical Care Management?
Clinical care management is a supportive administrative program that handles the medical management side of healthcare. TPAs can help members navigate clinical care pathways to find the most beneficial and cost-effective care solution by working with healthcare providers to coordinate care for employees with complex medical needs, such as those who require multiple medications, surgeries, or hospitalizations. This can help ensure employees receive high-quality, coordinated care tailored to their individual needs.
Additionally, using a TPA’s array of clinical care management services can help employers mitigate costs in areas such as emergency room usage, maternal health, radiology, and inpatient services, particularly as health plan spending in these areas continues to rise. HealthComp offers a proven solution for clinical care management through a variety of services. These proven solutions help guide employees to the right point of care, whether their care needs are long-term, preventive, physical, behavioral, or at-home. As of 2022, healthcare spending is one of the highest annual expenses for employers, exceeding an average of $10,000 per insured member. Understanding the impact of available service options and their respective costs is an important part of healthcare benefits plan optimization.
HealthComp offers clinical care management programs that have proven to be effective and efficient while keeping costs down. An analysis of HealthComp’s clinical care management programs, conducted by the independent actuarial firm Wakely, found that adopting these programs yielded 30% lower overall utilization in areas such as in-patient costs and emergency room utilization.
How to Work with a TPA
TPAs are an extension of an employer’s HR Department and can help HR leaders maximize the impact of their employee benefits plan. By offloading the administrative work and claims management to a TPA, HR can focus on employee retention, talent acquisition, culture, and other C-Suite priorities.
A TPA can help their clients build a unique solution from the ground up—so it’s customized to their individual needs. Once implementation is complete, a TPA will help manage the health plan and optimize it to ensure it is meeting its financial goals through cost management solutions. To achieve these goals, a TPA will leverage analytics and insights from utilization reporting and clinical care management programs to guide employees to the most appropriate point of care as well as efficient claims management.
Here are some steps employers can take to better partner with a TPA:
- Define goals and expectations. Employers should clearly define their goals and expectations for the TPA, including cost containment, employee satisfaction, quality of care, white-labeling, and compliance with state and federal regulations.
- Choose the right TPA. The employer should carefully evaluate potential TPAs based on their experience, expertise, reputation, ownership, and cost. It’s important to choose a TPA with a proven track record of success who can provide the services and support the employer needs.
- Establish a partnership. The employer and TPA should work together to establish a strong partnership based on open communication, collaboration, and trust. They should develop a shared understanding of the employer’s healthcare goals and work together to achieve them.
- Develop a customized plan. The TPA should work with the employer to develop a customized healthcare plan that meets the unique needs of their employees. This may involve designing a plan that balances cost with quality, offers a range of healthcare options, and incorporates incentives for healthy behaviors. This may even involve customization of scripts and training materials to align the health plan with the corporate culture of the purchasing employer. After a health plan is built, the administrator will pay claims as directed by the plan, making it important to consult with the TPA throughout the plan build process.
- Monitor and evaluate performance. The employer and TPA should regularly monitor and evaluate the performance of the healthcare plan to identify areas for improvement and make necessary adjustments. This may involve analyzing claims data, assessing employee satisfaction, and reviewing compliance with state and federal regulations.
By working closely with a TPA and following these steps, self-funded employers can effectively manage their employee healthcare plans and ensure that their employees have access to high-quality, affordable healthcare.
What is the Role of the Broker and Consultant?
A broker and consultant acts as a liaison between insurance companies and a TPA. They help employers find the TPA best suited to implement and manage the desired benefits plan. Brokers and consultants are industry experts and know the products and offerings, as well as trends, to consider for each client.
These individuals partner with TPAs to ensure the benefits plan is administered correctly and to allow their client the best benefits and better flexibility for the lowest cost. Brokers and consultants choose TPAs as they allow clients to “unbundle” their benefits, by choosing to work with multiple different vendors who best meet the needs of their clients and their chosen solutions. TPAs allow brokers and consultants to easily access critical financial and healthcare data to continuously advise employers. TPAs partner with brokers and consultants by sharing financial statistics, industry insights, and innovative product offerings, abilities that are not always available through a typical health insurance company. Most importantly, TPAs act as a constant partner that can flex and bend with the changing needs of an employer without requiring a full change in administrator and acclimation with a new vendor. TPAs offer brokers and consultants a competitive advantage as they navigate a rapidly evolving industry.
What type of employer should brokers and consultants be introducing to TPAs?
Any employer with a self-funded plan can (and likely should) be partnered with a TPA by their broker or consultant. The types of employers that would benefit most from a TPA’s services include:
- Employers with complicated benefits design – A TPA can help manage health plans that offer a range of tiered multi-plan options while also helping members navigate their choices. Complex programs could include standard PPO solutions, high-deductible plan options, reference-based pricing, unbundled solutions with many different vendors, or any plan the account needs to best meet the individual needs of the plan members.
- Employers seeking cost-containment strategies – To be the most cost-aware and offer the best savings for the group and employees, companies should implement cost-containment strategies by considering options like utilization review, clinical care management, claims review, and pharmacy benefit management, among many others. These are all tools designed to help employers control costs while improving health outcomes.
- Employers looking for help with administration – Most employers managing a self-funded plan do not have the capacity or resources to manage their plan in-house. A TPA can help employers administer plans by deploying a large team of experts who are already trained and who excel in health plan management.
- Employers looking to expand their network –An employer who chooses to be self-funded and work with a TPA like HealthComp gains access to a larger network and multiple insurers. This is because HealthComp has relationships with different insurers, and employers are not limited to working with one vendor for their benefit deployment. Having the freedom to work directly with multiple networks and vendors allows employers to build a health plan that best suits their employees’ needs.
If an employer is looking to switch from a fully funded model to a self-funded plan, HealthComp can facilitate a successful transition. During the implementation process and then annually prior to open enrollment, brokers, consultants, the client, and HealthComp will work together to assess the current health plan and determine how health plan offerings can be adjusted to provide the greatest benefit to employees at the best cost to the employer. Because HealthComp believes their clients’ data is proprietary to them, we allow clients, brokers, and consultants access to an on-demand reporting system to ensure insight into plan performance.
When to Consider a Self-funded Health Plan
Healthcare is one of the largest expenses for an employer, and costs will only continue to increase. To contain costs, employers who can shoulder the expense of a self-funded plan are turning to these models. Oftentimes, it’s the best choice to help manage employer costs and increase health plan affordability for employees. If considering a self-funded model, it’s beneficial to work with a TPA or consultant to ensure it’s the right time to make the switch. Among other considerations, an employer will want to:
- Assess claims data to find out overall spend and how current and historic claims have been paid out.
- Consider the age range and overall health of the employee population.
- Review the benefits that are most and least used. Employers may find they’re able to eliminate some offerings, find less expensive options for others or increase benefits in other high-utilization areas.
Working with a Broker and Consultant to Assess a TPA
If an employer has decided to make changes to their health plan, they may begin to consider working with a TPA, or changing from one administrator to another based on their needs. Before engaging with just one administrative partner, or when considering a move, the broker and consultant will work with the employer to issue an RFP (request for proposal) to assess multiple TPAs and decide who will be the best partner for them. The process typically includes the employer, broker, and consultant working together to create the RFP, which is then distributed by the broker and consultant through their network or through a public bid platform. Once the initial process is complete, the employer will be presented with a variety of options to assess which TPA is best for them. An RFP can also be shared for multiple different types of benefits vendors and administrators, not only TPAs.
When choosing which TPA to work with, it’s important to ask your broker and consultant questions on the history of their business relationship with the TPA in question, such as:
- Has the broker and consultant seen success with this TPA and other clients?
- Can the broker and consultant share some data on cost improvement and plan efficiency with this TPA?
- Can the broker and consultant provide references or case studies from working with this TPA?
- How long has the broker and consultant worked with this TPA and do they frequently shop for other TPAs to ensure it continues to offer the best solutions available on the market?
Evaluating TPAs and Making a Change
Working with a TPA has many advantages for benefits plans and HR departments, but what makes a TPA the right fit? If an employer hasn’t worked with a TPA or is just starting to search for a TPA partner, it is important to know your company’s needs and your expectations of an administrative partner. Most importantly, a strong TPA partnership should include:
- A TPA who works to help employers understand their health plan options.
- The ability to provide high-quality, flexible, and tailored options for current needs.
- An agile partner with a wide variety of detailed, accurate, insightful, and helpful reports.
After bringing on a TPA partner, employers should start to see cost savings and greater employee satisfaction. The results and savings are not immediate, but in a few years, the benefit of moving to a self-funded, TPA-administered plan will become apparent. Below are a few questions an employer can ask themselves annually to evaluate how this change is impacting their company:
- Have I seen meaningful impact in healthcare spend or an improved trend in my healthcare spend?
- Does my TPA have an actionable plan to help reduce costs?
- Am I receiving real-time data to optimize my plan prior to open enrollment?
- Are my employees receiving timely payments or reimbursements?
- How is the care management at my current TPA? Are employees being directed to the most beneficial care setting, helping them to keep their costs low and giving them the best chance at successfully improving their health?
- Are my employees satisfied with their experience?
Making a Change
Once a benefits plan and budget are considered, reach out to the TPA with the capabilities to satisfy your HR, C-Suite, and, most importantly, employees’ needs. An introductory conversation, whether it be on switching from fully funded to self-funded, the process of implementing with this TPA, or to review their cost management strategies and successes, is essential to get both parties aligned on each partner’s needs and the creation of a benefits plan optimized for you.