A Two-Part Series By Jim Arnold CEO And Founder of finHealth
Want to Read Something Really Scary?
Here’s the second part of our 10 “SCARY” provisions which may be lurking in that otherwise innocent looking 50-page Master Services Agreement with your Third-Party Administrator (TPA)…
6. For those medical expenses paid as “out-of-network” claims, your TPA may retain a third-party to negotiate on your behalf to reduce the charges. If so the TPA may retain 25% of the money saved versus the “out-of-network” rate. (Note: The primary fallacy in this approach is that hospitals routinely drop their rates 40-60% just by being asked, as anyone knows who ever offered to pay cash. If a $50,000 “billed charges” is reduced to $20,000, TPA will collect nearly $7,500 in fees which are typically not itemized.)
7. The TPA will charge a reasonable fee for administering the subrogation services program for plan sponsors electing (Note: Key question is “Who is deciding what is “reasonable”?). Subrogation charges are detailed (a.k.a. “buried”) in your renewal package or financial assumptions.
8. From time to time, TPA may offer health & wellness programs offered by other third parties, the TPA themselves or one of their affiliates. TPA may receive compensation from the vendor when members elect to purchase or use these products or services; however, no compensation is due the plan sponsor in relation to these products & services.
9. Plan sponsor may conduct audits of the TPA’s processing of medical claims subject to certain restrictions as follows:
a. A plan sponsor shall pay TPA’s administrative costs to the extent that any audit (I) cannot be completed within a five-day period; (II) contains a sample size in excess of 250 claims; (III) otherwise creates exceptional demands on the TPA;
b. Plan sponsor may not compensate their contracted auditors on a contingent fee basis, however the TPA can (mainly because that will attract skilled audit practitioners); and,
c. Overpayments may not be determined by indirect or inferential methods of proof, such as statistical sampling, extrapolation of the error rate to the population, or by the application of software or other review processes that analyze claims in a manner different from the claim determination and payment procedures and standards used by the TPA (meaning “can’t use software” AND even if every claim sampled is incorrect, plan sponsor cannot collect any compensation for payment errors made by TPA);
10. TPA has a financial accuracy performance guarantee of 94.0% (in other words, on a base of 10,000 employees and $125 million in spend, the TPA is allowed to make up to $7.5 million in payment errors). YIKES…………….TALK ABOUT SCARY!!!!!!!!
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