Choosing a Third Party Administrator

The administration of an employee benefit plan can be very complex. There may also be certain pressures brought to bear, especially in the area of claim payment. Also, in order to obtain the excess risk insurance, reinsurance companies may require that the employee benefit plan retain an approved Third Party Administrator.

When choosing a TPA it is very important to understand how the health care dollar spent. While the percentages may differ slightly from plan to plan, it is safe to say that roughly 15% of the dollar applies to the administration of the plan and an additional 15% is spent on stop loss insurance. So, it is safe to deduce that that roughly 70% of the dollar is spent on claims. Therefore, the adjudication or the payment of such claims is of the utmost importance.

First, you MUST look at the technological capabilities and advancements of the TPA which includes:

•  Internet Capabilities

•  Style of Claims Payment (Manual Claims Payment or Auto Adjudicated Claims Payment)

•  On Line System Access

•  Web-based reporting

Other important “cost savings” capabilities would include:

•  Rebundling of unacceptable claims

•  Coordination of Benefits

•  Subrogation of Benefits

•  Managing Ineligible Claims

•  Pre-Certification

•  Case Management

•  Utilization Review

•  Claims Processing Accuracy

Most TPAs can pay claims. However, a quality TPA will assist your company in the actual claims management process, thus, helping to manage the claim dollar. Accurate, timely and proper claims management can help reduce claims by as much as 30%. Again, since claims account for roughly 70% of the dollar - and thus 70% of the cost of your self-funded plan - and assuming $600,000 of incurred claims, this can reduce costs by as much as $180,000 annually.

For more information, please contact us online or call us at 1-800-223-9941.