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How to Select the Right Third Party Administrator


How to Select the Right Third Party Administrator

June 29, 2020

Tim Flanagan

The Role of a TPA

Working with a TPA has become one of the best ways to handle claims for an organization. TPA’s are organizations that process insurance claims or certain aspects of employee benefit plans on behalf of a separate entity. In some ways, it can be viewed as outsourcing the administration of claims processing. Traditionally, companies used to handle the tasks now performed by TPA’s, but now, TPA’s are mainly handling claims processing for employers that self-insure their employees. There’s no one-size-fits-all TPA for every business, so understanding what qualities to look for and learning that there are significant differences in TPA’s can give you a big leg up as you search.

Below we list the five most important elements to look for while selecting a TPA.

Important Elements to be Explored when Selecting a TPA

  1. A Strong Claims System

When selecting a TPA, it’s best to ensure they have a strong claims system while also learning any possible limitations. For example, some TPA’s may offer remote access so you can review claims online, while others may not. Some TPA’s may provide a paperless filing systems or other systems that help lower costs. These may include litigation management billing software or some sort of unique estimating program. Overall, you should aim to have your TPA create less work for your and your business, not more.

  1. The Service Team

Learn all you can about the team that will service your account and determine whether or not you need a team of dedicated adjusters, a separate unit on-site at your location or designated adjusters. Dedicated are assigned to work on your organization’s account and do not handle claims from any other company, while designated adjusters are assigned to your organization’s account, but handle claims from other companies in conjunction with yours. Keep in mind, if you have exceptionally high claim volume, it’s most likely best to go with a dedicated service team.  You may ask: Do they have experience in your industry? If your company has occupations overseas, does the TPA have global capabilities? Asking these types of questions early-on has the potential to save you a big financial headache down the line.

  1. Internal Audit Procedures, Performance and Best Practices

It’s best to select a TPA with proven methods for ensuring internal quality control and correcting any problems when they arise. Your TPA should have a proactive internal audit program that requires all offices to meet high quality standards. If the internal audit program is not thorough enough, your business runs the risk of encountering repeat problems that cost a lot of time and money to fix. Moreover, consider selecting a TPA whose adjusters and teams achieve more than 80% of their best practices for claims handling. In some cases, they may be given numeric scores and incentives for achieving best practices. With these, it’s more likely that the highest quality standards will be upheld.

  1. Plan Design and Service Flexibility

Organizations will benefit the most from selecting a TPA that provides enough flexibility to create a health plan that fits their employees’ needs. A flexible TPA can help create a customized coverage plan with services workers can actually use to increase their happiness while saving money. One of the biggest reasons businesses opt for self-funded health plans is to reduce costs. By choosing a TPA with a lot of flexibility, you can ensure a reduction in health care expenses and an affordable administrative fee. Remember, the point of selecting a TPA is to reduce burden, cost and to transition to a self-funded health plan smoothly, so be vigilant throughout your selection process to make sure that ends up being the case.

  1. Look for Performance Guarantees

Ideally, choosing a TPA should make transitioning to a self-funded health plan pain-free however, as I mentioned earlier, not all TPAs are created equal and not all TPAs perform at the same level of quality. Some TPA’s offer performance guarantees, such as a guarantee that claims will be completed in a certain period of time. Guarantees should incentivise TPAs to provide exceptional service and, on the flipside, should penalize them if standards are not met. However, this may lead to TPA’s to speed up processing time to complete claims as fast as possible without making sure they are accurate to take advanced of performance guarantee rewards.

Every TPA has a different pricing systems and menus of services available. Hiring a TPA is a vital process that should be reviewed and considered carefully. As a business owner, you should take the time to conduct a thorough analysis and due diligence. An alternative option would be to hire an expert to do this for you, but that includes added cost. With a comprehensive analysis, you can ensure you choose the best TPA for your organization and don’t waste precious time, money and resources on a partnership that won’t help your business.

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