In a casual conversation describing one of his subordinates, an insurance executive recently remarked to me “if you find a man’s greatest strength, there you will also find his greatest weakness.” Ironically, I think the same can be said about health insurers.
The management team of one of the nation’s largest Third Party Administrators (TPAs) was at our office last week and selling us on the concept of utilizing their services to administer claims instead of the traditional carrier’s. Of course, for the lion’s share of claims, the TPA is still leasing a large carrier network in order to secure the negotiated discounts with doctors and hospitals. But this TPA explained there are some services for which the carrier’s network rates are egregiously high – and for those services the TPA will simply apply Medicare reimbursement levels instead. Such categories included dialysis services, ambulance charges and high-dollar facility claims.
In fact, the TPA explained that whereas carriers negotiate 50–60% discounts on dialysis services, Medicare only pays 9 cents on the dollar. A whopping 91% discount! The projected impact of carving out administration to this more aggressive TPA would purportedly save clients in similar networks 4–8% on total claims spend.
There is no doubt that the carriers continue to offer a valuable platform for clients who want to be self-funded; administration, network strength, funding variety, health management services and customer service. But for those clients willing to step out of the box, TPAs can act as compelling alternatives.