Medical Carrier or TPA: What’s Best for You?

May 30, 2019 | Commentary

Vendor Reviews & Recommendations was the topic for a recent series of benefit roundtables our firm hosted for leading employers in several cities. It was a great opportunity to share and compare insights on a variety of benefit vendors.

One of the most intriguing conversation threads in each location involved medical plan administrators. As the clear majority of groups contracted directly with an insurance carrier (UHC, Anthem, MMO, Aetna, Cigna, etc.), we expected some standard vendor comparisons with associated pros and cons. However, what emerged was an across-the-board curiosity regarding alternatives to standard carrier relationships, which is what leads us here.   

The positive points expressed by several groups about their direct administrative services only agreements with carriers were:

  • Big Network. Broad provider networks that include access to all specialties.
  • Best Deal. Belief that network contracts offer the best overall financial arrangement, based on discounts and administrative fees.
  • One-Stop-Shopping. Add-on programs to meet many plan sponsor and member needs (i.e., case management, cancer support programs, consumer tools, and telemedicine).
  • Resources. Technical support for required documents such as SPDs and SBCs.

Interestingly, we just analyzed data from over 50 employer groups (involving almost 700,000 lives) and compared in-network utilization, reported discounts, and per employee per year medical costs between the carriers. On average, network use varied by 2%, reported discounts varied by 5% and per employee costs were essentially the same from one carrier to another.

But what didn’t they like? Their frustrations included:

  • Lack of Transparency and Reporting. Especially as it related to the performance of value-added services (i.e., case management, disease management, site-of-care, etc.).
  • Ineffective Large Claims Management. Lack of member engagement (generally less than 10%) and impact on cost or quality of care.
  • Ineffective Disease Management. Another service lacking evidence that it’s making a meaningful difference.
  • (Not) Shared Savings. While promoted to save money on out-of-network (OON) claims, shared savings programs have resulted in dramatically increased administrative fees (What ever happened to R&C limits?).
  • Lack of Flexibility. Particularly as it relates to PBM arrangements, stop loss insurance, and customized claim controls.

So, what’s the alternative for plan sponsors growing less comfortable with these constraints? Some are looking at independent third-party administrators (TPAs) or carrier-owned TPAs like UMR (UnitedHealthcare) and Meritain (Aetna).

While network discounts may be one to two percentage points less than via direct carrier contracts, the TPA path may provide the following advantages:

  • Transparency/Reporting. More open reporting with regard to high-cost claimants, site-of-care results, utilization management, etc.
  • Network Flexibility. A “Wrap Network” may be included as part of network fees, thus reducing claims subject to OON shared savings fees. Most TPAs are also more likely to support direct contracts, reference-based pricing, centers of excellence, etc.
  • Personalized Service. Customer service representatives who seem less overloaded and more willing to support your benefit plan nuances, culture and values, and service expectations.
  • Plays Well with Others. More open to cooperation and innovation when it comes to working with other service vendors (PBMs, stop loss carriers, COEs, concierge/consumer education vendors, etc.).
  • Lower Administrative Fees. As much as 40% lower than in direct carrier agreements.

The important takeaway here is that plan sponsors do have options when it comes to their medical plan administration. And depending on your specific needs and expectations, an independent or carrier-owned TPA may just prove the better overall choice.