When it comes to healthcare plan administration, ASOs (administrative services only) say they offer a big discount to self-funded plans. If you look closer, however, you’ll see that they actually do come with a cost, both monetarily and in terms of lack of flexibility.
ASO’s omnipresence would make you think they are the only game in town. The reality, however, is that a combination of a third party administrator, along with robust internal plan administration, can do everything and more than an ASO does.
Here are five benefits of working with a TPA.
Unbundling drives down rates. When you unbundle plans, you invite competition for medical, prescription, dental, vision, wellness, disease management and stop-loss plans, and plan administration. Employers can choose premium providers with the services at the best rates.
This is a very powerful advantage not only for your current plan choices, but also for future rate increases. Competition helps reduce future rate increases by improving your company’s negotiation leverage. The big insurance carriers would like you to think that bundling saves money, but that’s often a lot of smoke and mirrors. Yes, some of the plan will be competitively priced, but other parts may be excessively high; there is no transparency. Transparency encourages competitive pricing.
Claims analysis catches errors and excessive billing. We’ve all heard about the $100 Tylenol tablet that appears on hospital bills. A strong TPA will perform comprehensive claims analysis. It will catch billing errors and line items that are excessive, egregious and unnecessarily expensive and go back to the provider before paying. The Tylenol tablet can be just the tip of the iceberg; some of these charges can be tens of thousands of dollars more than they should be.
Claims adjudication. ASOs often pay claims without performing due diligence; this is referred to as auto-adjudication. When ASOs occasionally go back and audit payments to doctors and hospitals, they keep a portion of the recovered amount. So they first overpay, then they keep some of the overpayment. But employers end up paying. As impartial third parties, TPAs will review large bills for accuracy. It is part of their service to contest bills that appear out of line and save the employer money, which could add up to six figures or more.
Cost containment through data analysis. For all the money that you pay an ASO, you would think that you get to own your own data. But think again. Information is power and, despite ERISA regulations, ASOs are not into sharing. In contrast, with a TPA, the employer owns the plan and member-level claims data.
When you own your data, your company can measure claims activity, such as top diagnoses and high claimants, evaluate preventative care and routine exam usage, make more informed decisions about plan strategy, develop better financial models and forecasts, and compare your company’s activity to industry and regional benchmarks.
Increased plan flexibility. ASOs limit clients to their own carrier’s plans. Large carriers can and often do curtail offerings to pre-defined plan options. What makes it easier for them doesn’t necessarily make it right for your company. With a TPA, you get to pick the best providers with the services that are right for your company and employees.
A strong TPA can make all the difference in how your self-funded healthcare benefit program is managed. It will make the difference in employee satisfaction, cost savings and quality service.
Don’t be misled by what appears to be bundled discounts. Dig deeper and you will see that savings is a relative term. Once you take apart the pieces and competitively price each service plan, you see that the parts add up to a lot less than what you are being charged for. TPAs offer savings and flexibility, transparency and objectivity. Isn’t that what you want for your company and employees?
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