We get occasional waves of calls from entities interested in seeing the TPA industry outsource, usually off-shore, what are variously called mundane" or "clerical" or "routine" claims, data entry and/or other duties. This seems to be one of those instances where business school theory and reality collide. From the business school economic perspective, it looks like an obvious solution & improvement. HOWEVER, this demonstrates how unique the TPA business and the service provided by TPAs is.
Let me clarify that SPBA is always in favor of any and everything that will expand the (legal) quality & efficiency of work performed by TPAs, and will maximize the private employee benefits system. So, that's the perspective from which we view this issue. As usual, we're just noting what we hear from the real-world experts, our members.
Because of the volume of calls, last autumn, at our convention, I raised the issue and asked for the insights of the people who are on the front lines. Obviously, front-line TPAs are always interested in increasing efficiency & profits, so it is hard to imagine an audience more eager to achieve those goals.
In that brief discussion time and in many subsequent conversations, I learned that some TPAs had given it great consideration to see how it would fit into their operations. Others were responding to gut feeling and comments from their clients, suppliers and others with whom they need to deal in their business. The point is that no front-line TPA indicated confidence & enthusiasm for the concept. So, for those who think TPAs will swarm to the idea, don't count on it.
Here are some of the obstacles/reasons expressed:
>>Personalization personalization personalization is the key to TPA success. The superb service has given clients extremely high expectations. Even in domestic mergers of two TPAs, saying something like "Our central computer in (another city)" is like a bucket of cold water. A client expects to call his TPA and get the person or a senior person on the phone within a minute or two, and be given an answer very quickly. The more things that a TPA has at his fingertips, the better he can fulfill that client expectation. Yes, modern technology allows data from around the world to be on the TPA's screen instantly...but most issues that raise questions need between-the-lines information or informed human instinct.
>>TPAs have also learned (the hard way) that the more of the process that they control directly in-house, the less chance of something falling through the cracks. Small oversights can lead to crippling consequences.
>>TPAs live and breathe government compliance. SPBA often receives compliments from government regulators who comment that SPBA TPAs are the best about knowing and following legal requirements. Those who are ignorant of or make "lazy" assumptions about government compliance create giant legal liability for their clients and themselves. So, everything about TPAs & plans must be judged through the lens of government compliance…not only keeping track of sometimes-conflicting items from different agencies, but also the thousand-or-so new laws, regulations, interpretations, etc. etc. TPAs also know that it is not as if the old & new rules can be printed or downloaded. Only about 1/3 ever get adequate mention, even in the technical trade press, and only about 1% get final comprehensive guidance how to comply. So it takes a lot of teamwork within each TPA firm to proceed in the uncharted territory.
>>In my 24 years with SPBA, I have learned that claims processors (and those who do what the outsourcers consider "mundane", "clerical", "data entry", or "routine" duties) are often the most crucial part of a TPA team. They are the front-line troops to spot and avoid government compliance traps. For example, the Medicare Secondary Payor (MSP) law requires a TPA firm to have psychic power to know when there was medical treatment, even if there is no report or bill for that treatment. The kinds of duties that would be outsourced are also the front-line in the constant battle against fraud, waste & abuse. They tend to know the characteristics of their clients and the medical providers in their area. So, anomalies or suspicious trends are noticed quickly.
>>In many TPAs, the people doing "mundane" & "clerical" duties are the front lines of government compliance and most-appreciated customer service representatives. They handled the papers; they were the ones to talk to the doctors or hospitals; they know who said/did what when, and they know (and can directly go over and talk to) the entire system within the TPA to get a quick true explanation or solution. So, those who do "mundane" services are often what truly accomplish the goal of personalization, personalization, personalization.
>>TPAs do not work in a vacuum. There are dozens of entities which either watch TPAs or interact with them. So, all of them must be supportive of an outsourcing offshore arrangement.
>What will each State TPA licensing office think or require if the TPA outsources?
>Talk things over thoroughly with your Errors & Omissions carrier.
>Who will be responsible for ERISA fiduciary and other legal liability & responsibility of the duties outsourced? (Note even if an outsource entity offers to accept responsibility, the Department of Labor and others can go after whomever they decide should have been prudent enough to avoid the possibility of such a problem.) How would US government entities enforce in foreign countries?
>Be sure that your Stop-Loss sources and their re-insurers are in complete understanding & agreement of the proposed arrangements. Will the Stop-Loss have the comfort level that they can audit a TPA or a particular claim when key parts of the process are taking place in some far-distant location? Be sure this issue is very clear & agreed in advance.
>Can an SAS 70 audit be achieved if a big part of the process being audited is not seen?
>Medical Privacy (and probably soon HIPAA Security) has been blown somewhat out of proportion, but TPAs are expected to live up to those expectations. How will a client employer or patient or medical provider be assured that the law will be followed and enforced in an area that is outside U.S. jurisdiction? I'm sure that assurances can be made, but the grain of doubt can turn-off a potential client and/or have a patient or doctor be obstinate about providing necessary information, or be a point for a lawsuit to inflame. So, it is mostly a hassle consideration….but potentially big hassles.
Will TPAs be passed-by if they don't follow the "efficient" & "modern" trend of outsourcing? If that were true, they would have been left in the dust over the past 25 years. There has been no shortage of ideas and those who have tried them to "modernize" and/or "streamline" the process. They don't last long, and when their process causes shortcuts in government or legal compliance, they end up in jail or ruined.
There is a delicate issue. By definition, TPAs are working with employers and workers, and sometimes unions…and often on the issues of growth or shrinkage of employment and the bottom-line of the employer. These are the entities who have been hit hardest or feel the most sensitive about outsourcing in general. So, if a TPA outsources, it can be a poison pill to the TPA-client relationship (and lying is not an option). Clients leave TPAs for much less offense.
In summary: TPAs are almost opposite of the normal corporate model, so normal business management concepts cause counter-productive results. TPAs would love to be cutting-edge cost-efficient...but they would love to keep and grow their client base even more. They have seen the landscape littered by disasters and wasted millions caused by people who thought they had better ways to run TPAs. The TPA business is high-touch. It is definitely high-touch with clients (personalization, personalization, personalization). It is high-touch with and from a host of governmental entities and staggering number of laws & individualized requirements. It is high-touch with service partners such as Stop-Loss and Brokers. We're not against progress…merely trying to avoid more unnecessary disasters & wasted millions. (Every time there is a disaster or displaced clients due to a TPA going downhill when the "new" ideas fail, the whole industry gets hit with the bad publicity.)