Tag Archives: tpas

How to Pick a TPA for Work Comp Claims

Many self-insured employers choose to outsource their workers’ compensation claims handling to a third-party administrator (TPA) instead of creating their own internal operation. Choosing the right TPA is crucial because TPAs will be coordinating essential functions like managing loss reserves, facilitating claims investigations, issuing claims payments and settlements, coordinating medical management and organizing transitional work.

When picking a TPA, it is important for companies to first determine what they are looking for. There are several effective fact-finding questions that can help.

Capabilities

First and foremost, employers must find a TPA that can meet their company’s individual needs, which can vary by type of business and location. Many states are complicated, so the insured must confirm that the TPA has the appropriate expertise by state. Questions that can help uncover the TPA’s ability to handle the employer’s specific business include:

  • Do you have the appropriate resources to handle all jurisdictions applicable to my company?
  • Can you provide references within my jurisdiction to support your capabilities?
  • Do you have the capabilities to handle my company’s various business operations?
  • Can you handle all of my company’s claims so that I do not need to enlist multiple TPAs?
  • Are you approved by my insurance carriers?
  • Are you following best-practices procedures, and can you provide claims handling results to prove it?
  • What quality assurance processes do you have in place to guarantee consistent results between offices and adjusters?

Claims System

A TPA’s system is very important to the entire process. Effective claims management requires a system that is easy to access, with enough information readily available when the employer asks for it. Poor and inaccurate data can cause major headaches if it ends up in the employer’s financial reports. Questions that can help evaluate claims systems include:

  • How can you ensure that your claims system will provide clear, accurate data?
  • Does your claims system meet my company’s financial data reporting requirements?
  • Does your claims system meet my company’s analytic needs for benchmarking, stewardship reports, etc.?
  • What measures do you have in place to help prevent data breach?

Personnel

Personnel issues often affect the claims outcomes that an employer receives from its TPA. The employer will want to ensure that it is working with an experienced adjuster who can make informed decisions, as opposed to an adjuster using automated responses based on decision trees. Caseloads at the TPA, employee turnover rate, supervision and other personnel issues can also factor in. Questions that can help identify troublesome factors include:

  • Would my company be issued a dedicated account manager or team?
  • Who would be my key contact and provide information and answer questions?
  • How do your adjusters make decisions on their cases? Are they educated and capable of making flexible decisions based on circumstances, or do you use an automated response process?

During the RFP process, most TPAs will insist that they have the staff to meet the employer’s needs. It is best to ask for validation.

Thinking Beyond the Fee

Although employers regularly make TPA fees the deciding factor, estimates show that fees only represent 8% of total claim costs. What many fail to realize is that paying higher fees for a TPA whose adjusters have lower caseloads and are more experienced can significantly reduce overall risk costs.

Rather than focusing on the 8%, insureds should focus on the remaining 92% — the other aspects of the claim that come into effect. This includes evaluating if the TPA can ensure:

  • Effective medical management
  • Timely disposition of claim issues
  • Return-to-work or settlement success
  • Transparency of third-party vendor use in the claims process
  • Ability to minimize leakage and avoid excessive expenditures because of mistakes, errors in judgment, ineffective litigation management, penalties and fines
  • Measures in place to prevent fraud
  • Transparency of managed care capabilities, including bill review and preferred provider organization (PPO) and case management

Choosing the right TPA takes time and due diligence, but it is worth the effort to find the best fit for an employer’s industry and jurisdiction and meet risk-management needs. It is important to look beyond fees and consider all variables, including staffing, adjuster education, claims systems, reporting capabilities and the TPA’s ability to apply a teamwork approach to supporting your organization’s claims efforts.

Considering that a TPA plays a large role in an employer’s workers’ compensation claims outcomes and costs, finding the right one is one of the most important decisions that an employer can make.

Built For Reform: Third Party Administrators And The Affordable Care Act

The Affordable Care Act (ACA) is considered the most significant, albeit poorly written, law that Congress has passed in the last 50 years. As regulators devise the details needed for the law to be fully implemented, unprecedented new administrative and compliance burdens are looming for employers. Independent Third Party Administrators (TPAs) have decades of experience guiding employers through the pitfalls of government rules and requirements. This expertise makes independent Third Party Administrators invaluable to employers trying to mitigate the impact of health care reform.

A Brief History Of The Third Party Administrator Industry
Most employee benefit plans are highly technical and difficult to administer. Those complexities gave birth to the Third Party Administrator industry.

While there are reports of a Third Party Administrator operating as early as 1933, the modern Third Party Administrator concept is rooted in servicing mostly pension plans codified in the 1946 Federal Taft-Hartley Act. Such plans are typically comprised of several employers whose employees belong to a single union.

By the late 1950s, there were also a few Third Party Administrators specializing in servicing medical plans sponsored by single employers. The industry boomed after the enactment of the Employee Retirement Income Security Act of 1974, as employers began exploring the option of self-funding when traditional insurance coverage failed to meet their cost expectations. Today, the administration of self-funded medical plans is the primary line of business for many independent Third Party Administrators.

Employers that self-fund assume the financial risk of paying claims for expenses incurred under the plan. Medical, dental, vision, and short-term disability plans, as well as Health Reimbursement Arrangements (HRAs), can all be part of a self-funded program.

Most employers sponsoring self-funded medical plans purchase stop loss coverage to limit their risk. An insurance carrier becomes liable for the claims that exceed certain pre-determined dollar limits.

The Value Of A Third Party Administrator-Administered Self-Funded Program
Employers can choose to administer their self-funded plans in-house. However, few have the experience to do it well. Considering the heavy penalties for regulatory non-compliance, self-administration is generally ill-advised.

Some insurance carriers offer Administrative Services Only (ASO) contracts to employers that wish to self-fund but rely on the carrier to do the paperwork. Unfortunately, most insurance carriers have benefit administration systems that are too inflexible to accommodate the unique plan designs that are the hallmark of self-funding. In addition, they are more attuned to the legal requirements applicable to fully insured products, which differ dramatically from those for self-funded plans.

Insurance carriers may assume financial risk under an Administrative Services Only contract by providing the stop loss coverage. Conversely, Third Party Administrators are not risk-taking entities so they are clearly in a position to act in the best interest of the plan and its members.

The independent Third Party Administrator industry was built on change. Never having settled for the “one-size-fits-all” approach of the fully insured model, independent Third Party Administrators maintain sophisticated information technologies that adapt easily to new demands, as well as professional staff accustomed to responding to regulations that continually reshape employee benefits in profound ways.

Independent Third Party Administrators usually provide a broad range of à la carte services to self-funded employers: plan design, claims processing, placement of stop loss coverage, case management, access to networks and disease management, wellness, and utilization review vendors, eligibility management and enrollment, subrogation, coordination of benefits, plan document and summary plan description preparation, billing, customer service, compliance assistance, ancillary benefits and add-ons such as Section 125 plans, consulting, and COBRA and HIPPA administration. Independent Third Party Administrators are best at customizing their services and plans to suit a client’s specific needs including benefit philosophies, demographics, risk tolerance, and compliance requirements.

A fully insured arrangement cannot compete with a thoughtfully designed, Third Party Administrator-administered self-funded program. Employers that self-fund enjoy increased financial control, lower operating costs, flexibility with plan design, a choice of networks, detailed reporting of plan usage and claims data, and effective cost management.

The Challenges Of The Affordable Care Act
When small employers (those with fewer than 50 full-time equivalent employees) offer health benefits, the coverage is usually fully insured. However, self-funding has gained momentum among small employers.

In 2014, large employers (those with 50 or more full-time equivalent employees) will be subject to the Affordable Care Act’s “pay or play” requirements. A large employer must offer its full-time employees (working at least 30 hours per week or 130 hours total in any given month) and their children minimum essential coverage that is affordable and provides minimum value. Otherwise, the employer will be subject to a penalty if any of its full-time employees obtains health coverage through a Health Insurance Exchange (now called a Health Insurance Marketplace) and is certified as eligible for a premium tax credit.

The premiums for fully insured coverage are expected to rise significantly due to the Affordable Care Act imposing an annual fee on most insurers, modified community rating in the individual and small group markets, and expensive mandates for essential health benefits. Self-funded plans are exempt from these requirements. In addition, while Affordable Care Act requirements will likely inflate insured premiums, stop loss premiums remain competitive (even for small employers).

Self-Funding As A Strategy For Overcoming The Affordable Care Act’s Challenges
Depending on size, employers must make important decisions about managing the costs associated with health care reform. They can provide coverage or not provide coverage (and possibly pay a penalty), reduce hours, eliminate jobs, or find a way to offer a cost-effective and compliant plan.

Independent Third Party Administrators are the experts at self-funding. A Third Party Administrator can custom design a high quality, Affordable Care Act-compliant, self-funded program that a small or large employer can offer at a controlled cost. For employers looking for flexible solutions to manage costs while continuing to recruit and retain talented employees, a Third Party Administrator-administered self-funded program with medical stop loss coverage is a viable solution.