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State of the TPA Industry + Forecast for 2015




This is my 34th year of State of the Industry & Forecasts, and I appreciate President Anne Lennan’s invitation for me to continue them in my Active Past President role.  I’m always amazed that the issues & forecasts have had over 90% accuracy rate over the years (though I will make a confession/correction below of a prior major misplaced concern).  You will find these reports/forecasts very candid, and they are designed for both SPBA members as well as transparency to the general public.


SPBA’s growing family:  SPBA’s legal charter is to represent & assist employee benefits Third Party Administrators (TPAs).  However, SPBA’s family has grown over the years to include entities that have especially close roles in which knowledge & interaction is key to the TPAs’ delivery of services to client plans & employers.  Stop-Loss Service Partners were added in 1995, and have brought ever-greater insight & value to SPBA’s efforts.  In late 2014, Technology Service Partner status was created for firms with services/products crucial & specific to the TPA role.  (Contact President Anne Lennan at (301) 718-SPBA for more detail on eligibility.) So, SPBA is an ever- stronger family.


SPBA was formed in order to make members the best-informed players in the employee benefit arena.  Why?  When ERISA was passed, the various players such as law, actuarial, consultants etc. were preparing to be the ultimate experts.  TPAs were envisioned to be just clerical “go-fers”.  A key ERISA official, who understood the breadth of the TPA role, said that TPAs had to take the lead or they’d just be cleaning up the errors of others.  So, knowledge to help both members and government administer employee benefit laws has been the unique focus & goal.


SPBA’s success in this double role has far exceeded even the wildest dreams of the founders.  SPBA has the advantage of being the “largest” and broadest perspective of real-world employer & employee situations.   What??  SPBA and the TPA industry are relatively small, over half of all US covered workers in non-federal plans are in plans using some form of TPA.  Also, uniquely, SPBA’s TPA’s clients represent every size & format of employment (corporate employers, unionized, and state/local governments & religious entities as employers). SPBA is very participatory, with members reporting a couple-hundred real-world situations every week.  This means that the whole SPBA family gets big-picture as well as very specific insight.  


Government officials also respect and seek input from this unique reservoir of knowledge.  SPBA is non-political & non-partisan, so there is no “spin”, but an extra trust factor.   I tell that background, because it has played out in spades during the evolution & implementation of ACA (Obamacare).  It has saved the government from some unknowing errors, and it has smoothed the process for employee benefit plans. (Even if “smooth” is not the word that comes to your mind; …think what would have been without SPBA).


Confession/correction & new reality:  While I am proud of the 90+% accuracy rate of these reports over the years.  I need to confess & correct a goof that took place over a few years in the early 2000’s.  I grossly underestimated our members.  In the first years of the 2000’s, everyone was exhausted from 15 years of non-stop new pestering regs & rules, and there was a deceptive lull.   (Note that those 15 years covers Democrat, Republican, conservative & liberal, so micro-managing employee benefits comes from all political persuasions.)  Meanwhile, we were in a generational change, with too many TPAs & firms seeming to be just coasting to retirement and not putting in the effort to remain cutting-edge on market & government changes.  So, my forecasts for a few years warned that TPAs who got laid-back would get lost and probably stumble into trouble.


However, as ACA (Obamacare) was emerging, it was as if every firm got a giant shot of adrenaline!  One member who admitted he had been a coast-along said.  “I’ll be damned if I’m going to let them kill this business out of ignorance.”  This revival of spirit defines the state of the TPA & self-funding world today and the forecast for 2015.  



The change may have been triggered when hundreds of SPBA members who attended the Spring 2009 SPBA meeting had detailed face-to-face brainstorming with the specific people writing the legislation; provision by provision.  As one TPA described it, “When you’ve had your head inside the lion’s mouth, you understand the threat.”  At that meeting, SPBA members successfully pointed out legal & procedural realities of self-funding & TPA roles, which would not work in the format the drafters were envisioning.  From that straight talk, self-funding was removed from most of the punitive fees, limits, etc. that are imposed on insurers.  The message was that self-funding is not insurance companies.


Today:  In the last 5 years, SPBA members have been on overdrive actively brainstorming, cajoling, and steered government compliance policy.  It has been amazing & inspiring.   I purposely waited until after the SPBA Fall meeting to write this so that I could see & talk with members dealing with some of the most complex rules & hoops anyone has ever seen (such as ACA Pay or Play).  The sessions were heavy content, but everyone was intently tuned in.  The result is that SPBA members truly are the best & most widely informed group on this planet.  So, the last laugh is on me.  There is no one associated with SPBA who is in lazy coasting mode today; quite the opposite!


The market:  The status of SPBA TPAs and Service Partners being coordinated and best-informed comes at a time when polls show the majority of employer owners & senior execs say they don’t know or understand the requirements & thinking of ACA and interaction with other rules.  This is because most other players in employee benefits are much further down on the learning curve...or their role leaves them only focused on certain aspects, so they are not giving employers comprehensive informative explanations.  SPBA members have been tracking the spider web of compliance factors since before the law became law.


Anytime something is shaken up, people think about change.  ACA has certainly had that effect.  Employers who have had other types of employee health coverage for years are exploring and often actively seeking to move to self-funding.  The result is that the almost universal response during the recent SPBA meeting when I asked TPAs how they are doing was “Busy, really busy” with employers wanting to have customized self-funded plans with personalized TPA services.  This is solid growth.


What are the marketplace challenges?  Self-funding is a more customer-involved concept with more powers & choices.  So, there is an education component to make new employers aware and prepared.    Also, most frustratingly, ACA has an amazing number of regulations & interpretations, and many leave important points unaddressed and/or are not issued until just before (or too late) for prompt implementation and design of plan details.


Timing of this forecast:  I am writing this before the 2014 mid-term elections and before the start of the 2015 renewal of and state Exchanges.  Both will provide drama & rhetoric, but I don’t think either will dramatically or uniquely impact the TPA self-funding market.  


As I write this, Republicans are slightly forecast to control the House & Senate.  However, unless they have a veto-proof Senate, they can debate & nibble around the edges, but anything major could be “spun” politically against them (and the 2016 campaign & posturing is well underway).   


As far as health reform, Republicans are generally split into 3 different ideas for reforming the current status, and some of their ideas would alienate much of their base constituency.  So, “repeal & replace” has almost no chance of the politically popular  “goodies” of ACA being repealed, and no consensus on details of what would be the replacement.


What about the “inevitability” of national health insurance with government as single-payer?  There is a major new development taking place.  For decades, public opinion has had a fallback feeling that a government single-payer plan is the inevitable solution, “because only Uncle Sam is big enough to handle it”.  Even before the Ebola fumbling approach, there had been the VA crisis, the ACA Exchange problems and other examples of big government being unable to manage big programs.  Various polls this year show that over 50% of Americans think the government cannot handle big programs.  The Ebola situation will probably further undermine the “inevitability” of a government single-payer system.  This is the biggest game-changer on this issue in 40 years.


So, the state of the industry & forecast is that SPBA members have worked hard to be the best-informed & candid resource of expertise for government compliance as well as real-world hands-on factors relating to employee benefits.  They have the respect & trust of government to provide unvarnished real-world insight (to avoid having disastrously-unworkable laws & regulations), and the employers & plans are seeking that expertise as they proceed in this strange new health coverage environment.  I forecast literally a happy new year.


Fred Hunt

SPBA Active Past President