Understanding the two major types of health insurance plans—fully insured and self-funded—is a must for any human resource or benefits administration professional. Fully insured plans are the traditional model, with insurance companies taking on the risk of the insured employees. However, self-funded plans—where employers collect premiums from enrollees and bear the responsibility of paying employees’ and dependents’ medical claims—are gaining in popularity due to their potential for cost savings. With these plans, employers can self-administer the plan, but most prefer to contract with a third-party administrator (TPA) for services such as enrollment, claims processing, and provider network communication, to add outside experts, advocates and assistants to their team. However, the first question most plan decision-makers ask is, how do we choose the right TPA?
It’s important to note there isn’t one “right” answer to this question; it depends on your organization’s size, needs and a host of other considerations. However, a good place to start is determining the type of partner you want. There are large, national TPAs as well as many strong regional players. The average members per employer for each may indicate what client size it’s best prepared to serve. If you have 150 employees and are looking to switch from a fully insured to a self-funded plan, you’ll want to be sure you’re going to get the attention of the TPA after that change is complete.
Client retention may be more important than a TPA’s size and growth rate, especially its recent growth. A TPA that has recently invested in sales and marketing may experience a surge in new clients—but are their long-term clients happy? Getting references is a good way to find out, particularly from those who have experience with at least one other TPA.
Network access should be near the top of any TPA evaluation. Moving from a fully insured carrier to a self-funded TPA, or from an existing TPA to a new TPA, can result in many questions. The one we hear most often from employees relates to their doctors and providers continuing in their new network. A network disruption report should be run early in your TPA evaluation to identify potential shortcomings. Most TPAs have multiple networks available to address disruption issues, but be sure to ask if there is a cost to access these networks or discounts offered for other provider networks. Also make certain that centers of excellence for high-cost or specialized procedures are available, as well as walk-in service providers (minute clinics) for routine claims.
One of the advantages of self-funded plans through a TPA is the ability to carve out a Pharmacy Benefit Manager (PBM). For a fully insured organization changing to self-funding, the PBM evaluation process can be overwhelming. Lean on your broker to give recommendations when a TPA presents multiple PBMs for consideration. Ask questions about rebate transparency and what resources exist for specialty pharmacy advocacy and negotiation of high-cost medications.
Most large employers self-fund their health plans because it costs less, so a focus on claim payment accuracy is a must. A TPA should have a comprehensive, high-dollar claims review process, especially for out-of-network claims that include individual negotiations. Automatic hospital bill auditing, as well as fraud, waste and abuse recognition, are also important components.
Your TPA should have data reporting tools that are accurate, actionable and user-friendly. It should work closely with you and your broker to use that data to tailor programs to your specific needs while promoting a culture of good health to lower the total cost of care. Ask, how involved are they in the performance review of the plan? Do they monitor claims activity so you know where your money is going? And do they use benchmark data to assist in short- and long-term planning?
Flexibility, both internally and externally, is touted by many TPAs—but what does it mean? Beyond unique medical and Rx plan administration, a flexible TPA offers solutions for administering dental, vision, spending accounts, COBRA administration, dependent eligibility and retiree billing. It also means a TPA should have strong partnerships with carriers of top-rated stop-loss insurance (protection against catastrophic or unpredictable losses), wellness partners and healthcare quality and cost data managers.
Of course, customer service should not be overlooked in the TPA review process either. Members may not understand the nuances between fully insured and self-funded plans, but they will quickly realize—and complain about—any decrease in customer service. Inquire about the TPA’s customer support team structure to determine if it is in-house or outsourced, and if it is dedicated to (and thus, familiar with) your account, or if member inquiries are routed to the first available rep for the fastest response time.
Finally, be sure to look at these core management components:
- Case Management: Large claims are inevitable. Your TPA should advocate for the best possible care while negotiating price. How do they ensure early intervention on high-cost claimants to understand options and guide treatment paths?
- Utilization Management: Ensuring medical necessity with a commitment to providing high-quality treatment in a cost-effective manner is key to preventing runaway health plan costs. Does the TPA monitor all hospital admissions from prior authorization through discharge? How about a review of medical necessity throughout the hospital stay to determine the appropriate length of stay and identify alternative treatments?
- Disease Management: Chronic health conditions such as high blood pressure, heart disease, asthma and diabetes can exceed 50% of total health plan costs. Identifying these members and engaging them with a nurse coach can significantly improve overall health, thereby reducing a member’s cost and the cost to the plan. Additionally, when disease management is connected to a wellness program, it helps ensure a more comprehensive approach by identifying high-risk members before a chronic condition fully develops.
- Maternity Management: Inpatient hospital costs for premature deliveries are significantly higher than those for full-term deliveries. Identifying high-risk pregnancies and educating expectant mothers on premature labor symptoms can reduce the likelihood of pregnancy complications.
- Nurse Line: Different from telehealth, this is typically a 24/7 communication tool available to offer advice on medical treatment options to ensure the right level of care is utilized. This typically results in fewer emergency room visits and hospital admissions.
As you can see, there is a lot to consider, but a comprehensive evaluation of your TPA is worth the investment of time—and it should lead to a valued partnership for many years to come.