Self-funding is an ideal way for small to midsize businesses to save on health insurance costs. Part of the self-funding puzzle is finding a TPA that will meet your needs and help you enjoy the benefits that self-funded insurance can offer.

Knowing how to find a TPA that’s a good fit ensures you partner with a company that runs your plan efficiently and helps members engage with their employee health benefits.

While you are free to choose whatever TPA you wish to help manage Roundstone’s self-funded employee benefits plans, we can also recommend one of our preferred TPAs, including Bywater, our in-house TPA.

Choosing the Right TPA for Your Self-Funding Needs

At its most basic, self-funding is a mechanism an employer uses to pay for its employees’ healthcare costs. But it’s also an investment in controlling a major cost of doing business. The employer relies on three trusted partners to deliver a return on that investment: their benefits advisor, the stop-loss carrier, and the third-party administrator, also known as the TPA.

Advisors are the gatekeepers who influence the selection of the TPA, who provide administrative services and claims management for self-insured health plans. Several considerations should impact your TPA selection, including the following:

1. Evaluate Network Access for TPAs

First, review the TPA’s network access, which determines the provider network you will be using. The chosen network often drives TPA selection, but this can be short-sighted, particularly when networks are often selected based on reputation and marketing rather than a careful comparison.

Your advisor should ask potential TPAs for access to reports to determine provider options. They should also consult with the stop-loss carrier to determine the value of the network discounts.

In all likelihood, you’ll have several good network options. With the flexibility to go with one of several networks, you can select your TPA based on fit.

2. Find a TPA That Specializes in Your Business Size

Another important point to consider when finding the right TPA is the company’s focus. There are fantastic TPAs with an average group size of several thousand. While they do a great job for those clients, their quality might not transfer well to an employer of 200.

There are certain services that large employers need that small and mid-market employers do not.

Your advisor should have a good handle on the TPA’s preferred client type. When employers are matched up with a TPA that focuses on that type of client, the employer will receive the services it needs, and the TPA will be able to deliver those services within its regular business model.

3. Consider Vendor Flexibility in TPA Service

Another vital component of a good TPA is vendor flexibility. The value of self-funding is that it incorporates more variable than fixed costs — and helps you to control them. But the value can be limited if a TPA does not accommodate your choice of Pharmacy Benefit Manager (PBM), wellness provider, and other cost containment partners.

If a TPA limits cost containment vendors in your employee benefits plan, your advisor should fully vet the limited options to ensure they deliver savings to you and not just additional compensation to the TPA.

4. Review TPA Services Contracts Thoroughly

One major document provided by a potential TPA to a company health plan is the services contract. A TPA should be willing to provide its services contract well in advance of the effective date.

You will need time to find an alternative if it contains unreasonable and non-negotiable provisions. The contract should include necessary services and clearly set forth administrative costs.

5. Ensure Open Communication During Enrollment

When introducing new corporate health benefits, first impressions are everything, especially during the enrollment process. The enrollment with a new TPA is a single event. For a group making the transition from fully insured to self-funded, however, it is the first impression of self-funding.

The entire self-funding experience can be impacted if the enrollment process does not go well. Open communication and planning will demonstrate that the TPA’s process will work for you.

6. Prioritize Customer Service in TPA Selection

The TPA will also make an impression by the way it manages customer service. Employee complaints are a quick way to damage the self-funding experience. TPAs that have made an investment in customer service and show dedication to quick responses are more likely to keep employees satisfied with their company healthcare.

This is especially important if you’re switching plan design or networks; your employees will need additional attention while navigating those changes.

7. Ensure Efficient Claims Management by TPAs

TPAs typically don’t have skin in the game when it comes to accurate claim payments, which can lead to incorrect claims slipping through that impact the cost of employee benefits. Claims management is more than just “claims processing.” A TPA can demonstrate its commitment to accurate claims management through investment in technology and personnel.

Your advisor can also discuss hypotheticals to understand how the TPA approaches situations like egregious billing, subrogation, and out-of-network providers. The TPA should have clear, aggressive plans for dealing with these and not just act as a rubber stamp.

8. Choose a TPA That Doesn’t Charge Excess/Undisclosed Fees

Choose a TPA that only charges a transparent per-employee-per-month (PEPM) fee and does not retain an undisclosed percentage of claim saving fees or PBM overrides.

Some TPAs can charge a percentage of savings from claim adjudication or claim adjustment. They’ll keep a percentage of those savings, which can add up to significant unnecessary costs. Sometimes TPAs will charge employers for overrides received from PBMs.

Avoid those TPAs. Choose a TPA that charges a flat, upfront, and transparent administrative fee. Roundstone’s in-house TPA, Bywater, adjudicates each claim to its accurate cost without charging additional fees. This ensures that all savings are retained by the employer.

To learn more about choosing a TPA, see the frequently asked questions below.

Enjoy the Benefits of Self-Funding with an Effective Third-Party Administrator

If you consider all of these qualities during the TPA selection process, your employee benefits plan is bound to have a solid claims management partner. Roundstone has researched numerous TPAs throughout the country and has found strong candidates for every type of plan. We can work with advisors and management teams to find a TPA that’s the right fit for your company.

Contact Roundstone today to receive a few potential TPA options you can speak with to determine which is the right fit for your self-funded plan.

Frequently Asked Questions

1. What is a third-party administrator (TPA)?

A third-party administrator (TPA) is an organization that manages various aspects of self-funded employee insurance plans, including claims processing, employee health benefits administration, and compliance with regulatory requirements. TPAs help employers handle the administrative tasks associated with their insurance plans.

2. Why do companies use TPAs for self-funded insurance plans?

Companies use TPAs to manage their self-funded insurance plans because TPAs bring expertise in handling complex insurance regulations, processing claims efficiently, and managing employee health benefits. This allows companies to focus on their core business operations while making sure their insurance plans are effectively administered.

3. How do I choose the right TPA for my company?

To choose the right TPA for your company’s self-funded health plan, consider factors such as the TPA’s experience in managing self-funded plans, their reputation in the industry, the range of services they offer, and their ability to customize plans to meet your company’s specific needs. Additionally, check for references and reviews from other clients to gauge their satisfaction with the TPA’s services.

4. What services do TPAs typically provide?

TPAs typically provide services such as claims processing, benefits administration, regulatory compliance, employee communication, wellness program management, and data analytics. Some TPAs may also offer additional services like network management and stop-loss insurance.

5. How do TPAs help with regulatory compliance?

TPAs assist with regulatory compliance by staying up to date with the latest federal and state laws affecting employee benefits and insurance. They ensure that the self-funded plans they manage adhere to all relevant regulations, reducing the risk of legal issues for the employer.

6. What are the costs associated with hiring a TPA?

The costs of hiring a TPA vary depending on the size of your company, the complexity of the company health plan, and the range of services required. TPAs typically charge fees based on a per-employee-per-month (PEPM) basis or a percentage of claims processed. It’s important to obtain detailed pricing information and compare quotes from multiple TPAs.

7. Can TPAs handle claims processing for all types of employee health benefits?

Yes, TPAs can handle claims processing for a wide range of employee health benefits, including medical, dental, vision, disability, and workers’ compensation. They have the expertise and systems in place to efficiently process and manage claims for various types of benefits.

8. How do TPAs ensure data security and privacy?

TPAs ensure data security and privacy by implementing robust cybersecurity measures, such as encryption, secure data storage, and access controls. They also comply with regulations like the Health Insurance Portability and Accountability Act (HIPAA) to protect sensitive employee information.

9. What should I look for in a TPA contract?

When reviewing a TPA contract, look for clear descriptions of the services provided, fee structures, performance guarantees, termination clauses, and confidentiality agreements. Make sure the contract aligns with your company’s goals and provides flexibility to make adjustments as needed.

10. How do I evaluate the performance of a TPA?

To evaluate the performance of a TPA for your company medical benefits, monitor key performance indicators (KPIs) such as claims processing times, accuracy of claims adjudication, employee satisfaction, and cost savings. Regularly review reports provided by the TPA and solicit feedback from employees to ensure the TPA is meeting your expectations.

Lisa Kerr

Lisa Kerr is the Strategic Onboarding Manager at Bywater, Roundstone’s in-house TPA.