At its most basic, self-funding is a mechanism an employer uses to pay for its employees’ health care. It’s also an investment in controlling a major cost of doing business. The employer relies on three consultants to deliver a return on that investment: their insurance advisor, the stop loss carrier, and the third-party administrator (TPA). Advisors are the gatekeepers that influence the selection of the stop loss carrier and TPA. There are several considerations that impact the TPA selection:
- Access: The chosen network often drives TPA selection, but this can be short sighted, particularly when networks are often selected based on reputation and marketing, rather than a careful comparison. Advisors should ask potential TPAs for access reports to determine health care provider options. They should also consult with the stop loss carrier to determine the value of the network discounts. In all likelihood, there are several good options. With the flexibility to go with one of several networks, the employer can select its TPA based on fit.
- TPA Focus: There are fantastic TPAs with an average group size of several thousand. While they do a great job for those clients, their quality might not transfer to an employer of 200. There are certain services that large employers need that small and mid-market employers do not. The advisor should be sure to assess the TPA’s preferred client type. When the employer is matched with a TPA that focuses on their type of client, the employer will receive the best possible service, and the TPA will be able to deliver their services within its regular business model.
- Vendor Flexibility: The value of self-funding is that it incorporates variable spend. But that value can be limited if a TPA does not accommodate choice of pharmacy benefit manager, wellness provider, and other cost containment vendors. If a TPA limits cost containment vendors, the advisor should fully vet the limited options to ensure they deliver savings to the employer and not just additional compensation to the TPA.
- Services Contract: A TPA should be willing to provide its services contract well in advance of the effective date. The employer will need time to find an alternative, if it contains unreasonable and non-negotiable provisions. The contract should include necessary services and clearly set forth run out administrative costs.
- Enrollment Process: The enrollment/on-boarding process with a new TPA is a single event. For a group making the transition from fully insured to self-funded, however, it is the first impression. The entire self-funding experience can be marred if it does not go well. Open communication and planning will demonstrate that the TPA’s process will work for the employer.
- Customer Service: Employee complaints are also a quick way to damage the self-funding experience. TPAs that have made an investment in customer service and show dedication to quick responses are more likely to keep employees satisfied. This is especially important if the employer is switching plan design or networks, since the employees will need additional attention in navigating those changes.
- Claims Management: Claims Management is more than just “claims processing.” TPAs typically don’t have skin in the game when it comes to accurate claim payment, which can lead to incorrect claims slipping through. A TPA can demonstrate its commitment to accurate claim management through investment in technology and personnel. An advisor can also discuss hypotheticals to understand how the TPA approaches situations like egregious billing, subrogation, and out of network providers. The TPA should have clear, aggressive plans for dealing with these and not just act as a rubber stamp.