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State of the TPA Industry + Forecast for 2009

By SPBA President Fred Hunt

Just as the first flickers of sun at dawn tell of a coming beautiful day, we are seeing signs from various sources that we are in the early dawn of a significant upturn in business for TPAs.   This is the 29th year I have prepared these reports on the industry and forecasts.  I am happy (relieved) to say that they have had an excellent record of accuracy.   Many things do not change much from year to year, so I recommend you re-read cautions & hints in recent year reports (on SPBA's public website at  They are still important.  This year, I will be more brief, and SPBA members will be receive a steady flow of forecasts and positioning for the political developments.

Independent researchers who call SPBA for insight tell us that they are hearing the positive buzz about TPAs, and at a recent meeting of employers, the conversation on employee health coverage indicated that 80% of the employers present planned to renew or move to a TPA-run plan.  (We only know this story because SPBA's name came up in the discussion as a reason for desirable TPA services, so a staffer at the meeting called SPBA to ask what "TPA" is.)  The 80% sounds a optimistic to me (though cross-referencing the TPA segment of a mass of studies by various entities over the years indicates that 52-55% of covered workers in non-federal plans use some degree of some kind of TPA).  In any case, it is true that SPBA members are telling us that they are seeing (to varying degrees) more interest and more serious prospects than for several years.  There is also growth in non-traditional clients such as native tribes, state & local jail systems, etc. approaching TPAs to apply health cost & processing expertise & services to non-employment formats of health coverage or care.   Wellness and a host of new and add-on services are also appearing for TPAs.   There is a growing openness in the TPA industry to trying and evolving with new areas (and thus profit centers) for TPAs.  We're still at the dawn of this trend, but it is growing.

The attraction of TPAs is personalized service, innovation, and being instantly up to speed on new concepts such as Wellness, Never Events, and other cutting-edge factors about health and the payment thereof.  Also, statistics are showing that insurer and managed care premiums are rising higher than TPAs can arrange a custom-designed self-funded plan.  (Warning, use statistics as guidance, not gospel.  Every number or statistic has a potential 1,000% distortion factor, not because anyone is lying or incorrect, but because meanings of even the most basic vocabulary terms have vastly different understandings in the insurance, health, benefit &TPA worlds. So, do not rely upon or get hung up on numbers.)

CAUTION:  All this rosy news will only boost TPAs who stay on the cutting edge of innovation and adapting.  If a TPA sits back and "waits to see what happens", or if a TPA says  "I'm too old a dog to learn new tricks."  that TPA is falling behind and fading away.   So, the question is where is a TPA getting their information about trends & requirements and opportunitiesÉ.and what do they do when they learn something new.

Similarly, as mentioned in earlier years, there is a Catch 22 challenge for larger TPAs and those with outside ownership.   Size brings some obvious business operational efficiencies, but  the key to success of  the TPA business is providing extremely personalized service for clients, and the client wants to know that the person to whom they are speaking is personally on the cutting edge of knowledge and interaction in the broader industry.  So, we find that if a large or merged firm drops individuals from being designated "contacts" with access to SPBA for information & brainstorming, then those cut-off individuals are no longer personally on the cutting edge of knowledge.  Clients can tell the difference and often leave, and too often the uninformed staff stumble into some serious legal or other problems that could have been avoided.  It is so sad and avoidable.

DIFFERENT ENVIRONMENT:  A major difference in the situation today (besides the fact that this is the first time in three decades when the threat of replacing  the private employee benefits system with national health insurance is not a significant goal of government) is that for many of the new innovations, instead of being written laws and regulations which you can read and SPBA can analyze for you, the new concepts, such as Wellness, Never Events, "Medical Home", Health technology exchange, Global healthcare, CDHP, etc. are evolving in the private sector.  That means that you have the freedom to exercise your imagination, personalization, and innovationÉ.at which TPAs excel.  However, it also means that you have to initiate the effort in your firm and you are in unexplored territory.  To grab the success, you are going to need to be a pioneer; to brainstorm with other TPAs & Stop-Loss to avoid reinventing the wheel, and working at the industry-wide level to coordinate winning strategies that function with other players.   SPBA meetings are the most famous venue for this kind of candid exchange.  So, if a TPA says that they don't have time for SPBA meetings, it means that they don't have time to build success.

Welcome and revel in the brightening dawn!