Selecting the right TPA is a crucial first step for self-funded employers.
For many employers, self-funded health plans have become a viable option for providing employee health benefits. Flexibility in plan design, control of cash reserves and administrative simplification are some of the main benefits of self-funding that can lead to a significant cost savings. Employers usually choose to finance their self-funded plans in one of two ways: fully self-funded or partially self-funded. In a fully self-funded plan the employer takes on the full financial risk, where in a partially self-funded plan the employer will purchase stop-loss insurance to lessen the amount of financial risk associated with excess or extreme case scenarios. Being fully self-funded is usually only an option for very large employers or those with significant cash reserves.
Employers who self-fund their health benefits are financially responsible for the health claims of their employees. To administer the claims, employers have three options. These include administering the claims in-house, sub-contracting the claims management function to an insurer or hiring a third-party administrator (TPA). Employers often find that this last option is the preferred route for several reasons. For one, TPAs specialize in claim adjudication and servicing self-funded employers. Their expertise and knowledge of health plan administration can be invaluable to a self-funded employer. TPAs have also made an investment in computer systems, software and training that increase efficiencies in management of a health plan. Employers may find that it is too costly to make this investment. Lastly, by using a TPA employers can ensure that there is privacy of health information that might otherwise be available to company employees. It is important to note that TPAs can vary greatly in their expertise approach, processes and services provided to employers. The services offered are also highly customized to the needs of individual clients.
When an employer is considering self-funding, one of the first steps is to consult with a TPA. Using defined parameters and metrics, a TPA can assist employers in determining if self-funding is an option. If after weighing all options the employer decides to proceed with self-funding, the TPA can assist in designing and implementing the health plan. Administering the health plan is of course the main role of the TPA. Services provided may include:
- Development, preparation and printing of forms and other collateral necessary to administer the program
- Adjudication of medical claims and processing of health benefits
- Provider reimbursement management
- Fraud detection
- Eligibility/enrollment determination and reporting
- Communications and customer service to plan members
- Report preparation and record keeping for both employer and government uses
- Assistance in acquiring excess loss (stop loss) coverage
- Cost containment services (medical case management, utilization review, audits, pre-certification)
- Out-of-network claim negotiation
- Access to specialty services (second medical opinion, medical escort, etc.)
The scope of services provided by the TPA will be listed on the agreement with the employer and provided on a fee-for-service basis. Typically, fees are presented in a “per member- per month” format but can also be structured in other ways. Fees charged by a TPA are usually significantly lower than the overhead costs associated with an insurance carrier.
For more information on Self-Funding, see these previous posts: Is Self-Funding Right for Your Company?, Cost Management: Strategies for Self-Funded Health Plans and Benefits of Self-Funded Plans.
PayerFusion is a Health Plan Administrator that offers complete health plan administration solutions customized to meet the needs of self-funded employers. These include provider network design/support, policy design, full-service TPA, technology solutions/support and informatics as well as access to our PayFuseNet provider network. Click here to learn more about our services Contact Us for more information.