By Jim Arnold CEO & Founder of finHealth
Negotiating that contract with your third-party administrator (TPA) can be tricky. Self-insured employers typically hire a third-party administrator (TPA) to process claims. While outsourcing your claims to a TPA is advisable, employers must provide a strong level of oversight as the financial risk of your plan is owned by your company and not the TPA. Below are a few suggestions on to help safeguard your organization and enable you to properly oversee your self-funded plan unencumbered by tricky legal jargon and restrictions.
1. Be clear about who owns the CLAIM DATA
First and foremost, you must establish that the healthcare claims data belongs to YOU! As a self-insured plan, you are the fiduciary for your health plan, and ultimately responsible for compliance with all applicable rules and regulations. You will want to make sure your contract with the TPA is specific that you own the data. TPA’s should not try to commingle your healthcare data with their “business practices” or “confidential information” to give them ownership rights. These are after all, your critical financial records.
2. Protect your AUDIT RIGHTS
Your audit rights are critical. Audits not only ensure compliance with applicable rules and plan regulations, but also ensure that the TPA is acting as an effective steward with your money. After all, you are essentially handing over your healthcare checkbook to the TPA, and asking them to be the ultimate decision maker around what healthcare expenses you will pay and not pay, what price is considered a “reasonable” one, and exactly how your employees and their families medical expenses are going to be reimbursed. The TPA should not insert language in the audit clause that enables them to “veto” the use of your chosen audit firm or audit requests.
Other restrictions that need to be stricken from the agreement include:
3. Go for FULL FEE DISCLOSURE!
We strongly endorse the need for full disclosure of fees. Many Benefits leaders mistakenly believe that the “per head” charge quoted in the contract represents the primary compensation that the TPA is receiving for their services. We have identified at least 10 other revenue streams that your TPA may profit from directly, or indirectly through one of their affiliates / subsidiaries. These include:
We strongly recommend an itemized listing of all compensation streams and the fees associated with each, delivered on a monthly basis. Additionally, if you’re one of those companies who doesn’t pay your broker / consultant directly, we recommend that you reconsider. While there may be budgetary advantages for you to operate in this manner, we believe it represents a potential conflict of interest. Remember, the broker / consultant should be working for you and not your TPA.
4. Clarify who’s on point for measuring and enforcing PERFORMANCE GUARANTEES
Let’s talk performance guarantees. They sound like an awesome idea, right? But question number one is, who is defining what is “effective performance”? Just as importantly, which party is measuring these results to verify performance? If the TPA is filling out their own report card, don’t be surprised if they rarely or never fall short of the target. Any performance guarantee that you embed within the contract needs to be clearly enforceable by
you and have significant “financial teeth”. That is, enough financial teeth to make sure that the TPA will dedicate the needed resources to achieve or surpass the guaranteed performance or have significant negative financial consequences if they miss the mark.
5. Make your TPA treat your company’s money like it’s THEIR MONEY!
At the end of the day, you as a client want the TPA to treat your money as if it’s their own. In order to create this level of financial alignment, the TPA needs clear guidelines as to responsiveness to client requests. Here’s a few items we like to see addressed in the contract:
There you go! Five recommendations for you and hopefully just in time for your contract renewal. Good luck in negotiating a fair agreement with your TPA, and please give finHealth a call when you’re ready to verify that your TPA’s internal controls are properly safeguarding these critical health plan assets for your company and your employees!
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Download Article: Five Contract Negotiation “Asks” for Your Upcoming TPA Renewal