Dear Plan Sponsor, Trustee, or Medical Provider
I am often asked by potential clients of our members about the value of contracting with Third Party Administration benefits outsourcing firms....nicknamed "TPAs". They also ask why the TPA's membership in SPBA (the national association of TPA firms) is so valuable for the administrator and the client employers & benefit plans. Frankly, we had hoped to write a concise pamphlet. However, the number and variety of services and advantages are too long...and ever-expanding. This letter is to give you a candid overview of why you should use a contract TPA firm...especially an SPBA member.
Why Independent Contract Administration? Lower costs, flexibility, personalized service and clearer government compliance are the main reasons. This type of employee benefit administration has boomed in recent years. It is estimated that 66% of U.S. workers with employee benefits are covered by plans using some degree of some kind of TPA. It is further estimated that 5/6 of that TPA market (about 52-55% of covered U.S. workers) are served by SPBA member TPA firms. Since each TPA firm handles many clients and SPBA acts as an active "grapevine" to compare experiences with other TPA firms, plans that are clients of TPAs get the advantage of practical insight from thousands of plans who've faced almost any problem. That brainstorming capacity saves you big money & liability.
Government compliance: With the increasing enforcement and fines for ERISA fiduciary prohibitions against "self-dealing" and privacy issues, the arm's-length role of an independent TPA becomes all the more valuable to plan fiduciaries. Having an independent TPA is convincing evidence of arm's-length dealings and privacy in many of the plan's fiduciary responsibilities. TPA's have also been in the forefront of finding, following, and shaping the estimated 1,500 new laws, regulations, interpretations, official opinions and major court decisions that apply to plans each year. Only about 1/3 are adequately announced in the press...though you are responsible to obey all of them, and only about 1% (yes, 1%) ever get final comprehensive guidance how to obey. Thus, SPBA, as a clearinghouse & network of insights from government agencies & TPAs is often the only answer. As the CFO of one of America's largest (self-administered) companies told me, "We spend $100,000 on lawyers & consultants each time there's a new development, while companies that hire SPBA TPA members get the advantage of more reliable information for free."
Important Note: Most employee benefit government requirements (such as COBRA, MSP, military, privacy, ADA, etc.) are employer laws...not technically requirements of insurance companies or benefit plans. While insurance & others companies may say, "Sorry, but that's your problem, not mine.", TPAs have played a special role to help client employers and plans meet the various requirements. This can protect an employer or plan from hundreds of thousands of dollars of otherwise uninsured claims and liability. It is not fool-proof, but it is a major advantage.
Also, as more & more medical entities get into providing or involvement in employee benefit plans, they often forget that they have thus entered the employee benefits business and must obey the thousands of benefits laws & limits. TPAs are working with doctors & medical entities to provide TPA services for these new activities.
Each Spring, SPBA members meet with the bureaucrats in charge of the major issues. These meetings improve or avoid problems in laws & regulations that would have been expensive or troublesome for your plan. Your TPA also gets the advantage of access to "the horse's mouth" about specific questions relating to your plan. With so little official guidance issued, having a TPA with access to get needed answers and the breadth of insight from administering other plans is practically a necessity.
Health Reform: Every health "reform" balloons the amount and detail of red tape. This simply magnifies the reasons described in this letter to have a TPA.
Cost Savings: Your independent TPA can bring you significant savings in several ways. First, of course, is that instead of paying 100% of the costs for in-house benefits administration staff, you pay only a fraction of that price for an even wider range of expertise. That, alone, can save you tens or hundreds of thousands of dollars. Cost containment programs can also bring you claims cost savings. TPAs have been in the forefront of not just planning, but actually implementing effective cost containment strategies for client plans. TPAs normally customize cost-containment programs to the needs of each client. TPAs can also help you avoid traps in which "common sense" cost-saving techniques might actually break one or more laws.
Flexibility: Your plan is the client and prime concern of the TPA firm! They do not simply sell you a one-size-fits-all policy. You work together to design and operate a custom-made program and funding. This also allows for the special wants and needs of employees, and also assists in cost containment programs for that particular plan.
Personalized Service: Just as the design and implementation of your plan is personalized...so, too, is the service. You are #1 priority! TPAs know the plan, covered employees, and the medical providers up-close & first-hand. Thus, they can often save client plans significant amounts of money. Most importantly, your TPA is accessible when you have a question or need help.
Why Should Your TPA Belong To SPBA? We are unique among associations. SPBA has been designed to enhance the work of its members. Thus, SPBA simply multiplies the TPA advantages mentioned in this letter.
Practical Advantages: Your SPBA-member benefits outsourcing TPA firm has access to an amazing information network. Above and beyond information in the frequent newsletters, SPBA is very much a self-help group. Members feel free to call their colleagues and competitors to seek advice or experience. No one wants to spend time to "re-invent the wheel." SPBA members don't! Advice ranging from computers and claims to how to avoid disasters is freely shared. Each Fall, SPBA members gather to share "nuts & bolts" advice and experience. The concept works, and members report that the good advice and experience of others has saved their TPA clients hundreds of thousands of dollars. SPBA helps their members serve their clients! That makes you the winner.
Frederick D. Hunt, Jr. - Past President