- Key insight: Learn why some employers are abandoning traditional group health plans.
- What's at stake: Small employers face devastating renewal costs if just one worker requires specific medical treatments.
- Forward look: On the horizon: Brokers evaluating which TPAs can actually execute complex cost-containment solutions.
Source: Bullets generated by AI with editorial review.
Third-party administrators (TPAs) wield tremendous power in today's healthcare ecosystem, serving as the operational hub for cost-containment efforts at a time when self-insuring group health benefits continues to trickle down market.
In this intensifying climate, rising healthcare costs and limited internal HR capacity are driving demand for stronger partnerships between brokers and TPAs to deliver actionable insights, strategic guidance, and administrative support, according to a recent report by Nova Healthcare Administrators Inc., a leading TPA.
Collaboration between employers, brokers and TPAs will be essential to developing customized, cost-effective and employee-friendly solutions, noted the report, which serves as a benchmarking tool to compare strategies, identify emerging trends, and better understand where the market is headed.
The time clearly has come for more aggressive approaches, explained Todd Martin, chief sales officer at Nova Healthcare Administrators, noting that providing health plan members access to care anywhere at any time is becoming less and less sustainable.
"You can have a group of 50 lives and all of a sudden, one of them is taking a drug that costs $25,000 a month," he said. "A group plan is going to get absolutely destroyed with 50 employees at their renewal if somebody has an expense like that."
Martin noted that some employers are abandoning a group health plan altogether. Instead, they're adopting an individual coverage health reimbursement arrangement known as an ICHRA and earmarking a set dollar amount for employees to shop for health insurance coverage in the individual market.
More meaningful collaborations
Without clear communication and collaboration, the most effective solutions can and will fall flat, cautioned Tyler Perry, founder and CEO of Sero Benefit Consulting. With brokers at the helm of these discussions, he said they need to completely understand the TPAs ability to accept, adjudicate and monitor the solutions being considered so they can explain to the employer plainly how these solutions work in practice.
More meaningful collaborations can be built around tools that incentivize health plan members to choose high-quality providers with a backend reimbursement for any out-of-pocket expense, Martin noted. Such efforts might include centers of excellence for certain medical procedures.
Cost shifting onto employees erects a financial barrier, he observed, adding that there are ways to close care gaps. "If employers are going to increase their deductible, they might offset that with direct primary care for their membership," he said.
One particular group he worked with contracted with a local clinic for unlimited utilization with no out-of-pocket costs. "We saw their aggregate claims go down over a three or four-year window," he reported. In another instance, a group of electricians did not incur any expenses from a direct contract with a large orthopedic clinic in their area.
The way a TPA is structured also can have a huge impact on how aggressively costs can be contained. Since Nova Healthcare Administrators is owned by a regional nonprofit whose main goal is to improve the overall well-being of its community, Martin said the TPA enjoys greater flexibility.
In contrast to that, he noted that a TPA owned and operated by one of the BUCAs (Blue Cross Blue Shield, UnitedHealthcare, Cigna, Aetna) is part of a publicly traded company that reports to shareholders. He said the same is true for a TPA that has been acquired by a private equity firm.
In both cases, there may be a strong incentive to work with stop-loss carriers and pharmacy benefit managers that are part of the same ownership group, which undermines the TPA's ability to stay truly independent.
Where Perry believes TPAs can make the most impact is collaborating with various outside vendors on direct contracting with providers and pharmacies, bundled payment solutions, cash-pay options, international drug sourcing, mail-order and specialty pharmacy, J-codes and outpatient dialysis to name a few.
"For these solutions to work it is imperative employers, brokers and TPAs are working hand-in-glove to provide the best understanding of how these solutions work for members when they use them," he explained, noting the importance of understanding which TPAs say they can execute and which ones actually can do it.
