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Why Unbundle with a Third-Party Administrator (TPA) versus a Fully Insured, Administrative Services Organization (ASO) Carrier?

Your health plan management choices significantly impact your business and employees. With a self-funded health plan, a decision must be made between bundling services with an ASO or unbundling with TPA. This blog post explores the compelling advantages of choosing a TPA and unbundled approach. This decision can enhance flexibility, provide a claims cost savings of 10-20%, and offer a tailored healthcare experience for your employees.

What is the main difference between an ASO and a TPA?

While both TPAs and ASOs work with self-funded plans to provide employee coverage, ASOs are more commonly managed by a large insurer. The ASO typically shares the insurer’s name, mindset, staff, and compliance team. A TPA is an independent entity, partnering with as many different vendors as necessary to meet the needs of their clients.

What does bundled versus unbundled mean?

The two distinct approaches to managing and administering a self-funded health plan are bundled and unbundled. A bundled plan involves a single provider offering a comprehensive service package. This includes administrative tasks, network access, and often risk management tools like stop-loss insurance. Everything is consolidated under one roof using the internal carrier teams rather than an outside vendor. An unbundled plan allows an employer to contract various health plan components separately. Employers can select individual vendors for network access, pharmacy benefits, dental care services, EAP providers, stop-loss, etc. There is fluidity available with every aspect of the plan.

Large groups sometimes have the option to unbundle with an ASO. However, the quality of the unbundled integration will be lower. An ASO business model is built around offering a standardized solution, and unbundling within the ASO is asking for an exception where resources are less available and less educated on a plan’s unique set-up. TPAs are fundamentally a different cost structure with greater staffing dedicated to teams who do high volumes of new vendor integrations and vendor management and frequently work with unique plan designs. The difference this creates in the function of a health plan can be the difference between significant savings and significant expenses.

Unprecedented Transparency into Your Healthcare Data

Knowledge is power, and unbundling with a TPA ensures that this power rests in your hands. As the plan owner, you gain direct access to a treasure trove of data, from claims details to financial analytics. This transparency is instrumental in demystifying healthcare costs, shedding light on spending patterns, and identifying opportunities for savings.

With this data at your fingertips, you become an informed decision-maker capable of pinpointing inefficiencies and areas of overspending. Your purchasing power can be optimized to prioritize programs that are working rather than paying for solutions to problems that may not exist for your employee population; obsolete offerings can be cut. Similarly, if the plan is double paying for programs that provide the same service, this oversight can be easily corrected.

Owning your data offers valuable insight into your employee population. This insight allows you to create benefits that directly improve your employees’ lives and can help create plan savings. If you have a high number of employees with diabetes, implementing a care management plan for diabetes will help reduce costs and improve your population’s health. The result is a healthcare plan that is more cost-effective and more accountable, ensuring that every dollar spent is working to improve your population’s health and the company’s bottom line.

Harnessing Cost-Containment Tools for Financial Stewardship

Cost containment is at the heart of any successful employee healthcare plan, and unbundling with a TPA provides a direct pathway to a suite of tools and strategies designed to keep costs in check. From rigorous audits to identify fraud, waste, and abuse to payment integrity checks and large claim reviews, your TPA is equipped to safeguard your financial resources while ensuring your employees’ highest quality of care.

As the health plan owner, you can customize audit thresholds, determining what claim charges trigger a review rather than having to comply with the ASO standard threshold. Prior authorization standards can also be determined and implemented. Once a claim comes through, if there are specific documents that should be reviewed before payment (like medical records or itemized bills, etc.), this can also be accommodated.

This proactive approach to cost management translates to immediate savings and lays the foundation for long-term financial stability. By entrusting a TPA with the administration of your self-funded plan, you are making a calculated investment in your company’s economic well-being.

Flexibility and Customization at Your Fingertips

One of the standout benefits of unbundling with a TPA is its unparalleled flexibility and customization. Unlike bundled services, where your choices are limited and predetermined, a TPA allows you to build the exact healthcare plan your employees need. Everything from benefits to communication is tailored to your employees, and the payoff is a bespoke plan that aligns seamlessly with employee needs and budgetary constraints.

This directly contrasts a standard ASO-bundled plan, which isn’t designed for your members or company and where communication may become a heavier lift for internal teams. Managing communications for members about a plan that wasn’t built with them in mind, the additional time that may be required to understand and explain the financial performance of a plan poorly designed for the employer, and the lack of urgency in ‘fixing’ issues that inevitably arise with the plan all require significant effort on the part of internal teams like a Finance or Human Resources department.

With a TPA, frequent plan reviews become a strategic tool in your arsenal. Armed with insights and data, you, your broker, and your TPA can collaboratively assess your plan’s performance, identifying areas for enhancement or modification. This iterative process ensures that your plan remains agile, adapting to the evolving needs of your workforce and the shifting landscape of healthcare costs. Plan changes to address a discovered issue, like implementing a new solution, can be completed at any point in the plan year. Most ASOs’ reviews are annual, and changes during the plan year are limited or non-existent.

Nimbleness in Action and Resolution

The dynamic nature of the workforce and the healthcare industry necessitates a healthcare plan that can pivot and adapt quickly. Trying to convince the plan administrator of an ASO to make a change requires the effort of internal teams whose time is better spent pursuing company goals. Delays in data delivery, or incomplete data delivery by the ASO, can also keep a plan from being as agile as it should be to maximize savings and benefits.

Unbundling with a TPA provides a nimble and responsive framework that empowers you to make swift changes in response to feedback, trends, or unforeseen challenges. Whether you’re altering vendors, tweaking benefits, or implementing new cost-containment strategies, a TPA ensures that these changes can be made efficiently and effectively without the bureaucratic red tape often associated with bundled services. This agility not only enhances the responsiveness of your plan but also ensures your employees are always supported by a healthcare system that is in tune with their needs.

Building the Right Ecosystem with Vendor Partnerships

Unbundling with a TPA opens the door to a world of vendor partnerships, empowering you to curate a network of services that align with your vision for employee healthcare. The choice is yours, from healthcare networks and dental services to vision care and pharmacy benefits managers (PBM). This starkly contrasts with the limitations of an ASO, where vendor options are often predetermined and limited.

Selecting and collaborating with vendor partners who resonate with your company’s values and objectives ensures a better fit. It fosters a competitive environment, driving down costs and enhancing service quality. Your broker and your TPA serve as guides in this ecosystem, helping you navigate the myriad options and ensuring that each partnership adds value to your employee healthcare plan.

Carrier ASOs typically have lower engagement and a more reactive member experience and often see engagement rates of 10%. They have an under-invested clinical and cost management program, often with a conflict of interest between the provider network and the auditing providers. Clients can see a medical cost trend as high as 6%. HealthComp offers a proactive outreach for members, seeing engagement rates of 60%. With the addition of audits, greater resourcing, and digital tools, HealthComp clients see a negative 1.5% medical cost trend. This experience could translate into savings of $800-1,600 per employee per year. With the HealthComp and Virgin Pulse merger in late 2023, clients will soon have wider access to vendors of both companies. By pre-negotiating and simplifying contracts, Virgin Pulse and HealthComp will be able to provide affordable options to smaller groups who were previously priced out of access to these and other vendors.

Choosing a TPA for your employee healthcare needs represents a thoughtful decision that places flexibility, control, and financial stewardship at the forefront. From the ability to tailor your plan to the specific needs of your workforce to the transparency and opportunities for movement that come with unbundling, a TPA empowers you to take charge of your healthcare coverage in ways that an ASO cannot match.

In an era where employee needs are constantly evolving, and the demand for cost-effective healthcare solutions has never been higher, unbundling with a TPA offers a path forward that is both innovative and responsive. By choosing this path, you are placing the well-being of your employees and your company’s financial health in capable hands, ensuring a brighter, healthier future for all.

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