Third-party administrators (TPAs) play pivotal roles in the handling of self-funded medical healthcare plans. When navigating health care claims through negotiations and subrogation, TPA’s provide a wealth of services to the insurance industry. This has been especially true for a handful of years since the economic downturn forced companies’ hands into cutting or consolidating their claims departments.
Now, firms that range from small and medium in size all the way to the biggest of Fortune 500 A-listers are forced to rely on their administrator to not only adjudicate their claims but control the entire claim handling process as well, language and all. This is where problems can come into play and oversights can often occur. If you’re expected to speak the same language as your TPA but aren’t truly on the same page, fees you’re not expecting can pop up and add up.
So, do you know what your TPA is charging you? Are your expectations in line with the language of your plan? Are you aware of any additional fees you may not have budgeted for? Chances are you just may be surprised. Plan language is complex and often challenging to understand. Just be aware that there is a wide variety of fees you may be charged for the administration of your plan. There are simply too many to list. But, for the time being, here are three commonly found types of added fees to be on the lookout for.
Subrogation
Simply put, subrogation is the right for an insurer to legally pursue a third party causing a loss to an insured. This is done as a means of recovering the amount of the claim paid by the insurance carrier for the loss.
A classic example of this is an automobile insurance claim where another party is found to be liable. The health insurer will usually pay for the injury treatment costs, but, after (or sometimes before) making payment, an investigation may be started to determine responsibility and assess blame to other parties so your carrier can recover any fees they are not legally responsible for.
What you might not know is that your TPA will generally outsource this process to a vendor...sometimes coming with a sizable fee. You see, it’s within this process that a commission ranging anywhere from 25-33% is charged by your TPA. Seems ok, right? Not so fast! That percentage usually ends up being charged back to your group! If you’re not aware of this language, chances are you might end up seeing red.
Overpayment Recovery
Overpayments are another frequent finding uncovered during audits of the administration of self-insured healthcare plans. They occur for a number of reasons including eligibility, copays, and deductibles amongst others. However, it’s not only the overpayments you should be aware of but the often-associated fees that go along with their collection.
Much like the subrogation process, TPAs sometimes hire a vendor to collect the overpayment(s) on their behalf. Though the fees are less than you’ll see added on for subrogation, they can still range between 10-25% and can be netted from the overpayment recovery amount. This fee directly affects you, the self-funded employer. These kinds of leaks should be stopped immediately.
Out-Of-Network Fee Negotiations
Most of us will remember, years ago, insurance policies, in an effort to control costs, developed managed care policies in which there are in-network and out-of-network providers. In a nutshell, in-network providers agree to accept a certain reduced reimbursement, whereas out-of-network providers do not agree to that reimbursement and are, thus, uncontracted.
Generally, employees choose providers that are outside of their insurance plan’s network of preferred healthcare care providers for three reasons -- a family or individual may have a preference to meet with longtime doctors that for one reason or another are no longer in-network, a medical emergency may dictate immediate treatment from whatever provider is closest, or the patient may need to see a specialist who is not part of the insurer’s network.
The fees to be on the watch for in these scenarios occur when there is a large difference between what an out-of-network provider bills and what the UCR (usual, customary and reasonable) rate is. If the difference is great enough, TPAs will negotiate these fees in order to minimize balance-billing situations for employees. For example, an employee opts for an out-of-network knee replacement and is charged $30k, whereas the UCR is $5k. Your TPA then negotiates a $10k charge. It looks like they’ve saved your plan $20k, right? Unfortunately, what you might not know is your TPA or their vendor will take a commission ranging from 20-33% of that difference. Not only did you pay $5,000 above UCR, but you also paid $4,000 - $6,600 commission. Wouldn’t it have been easier and more cost effective to simply pay UCR and allow the employee to be balanced billed for seeking services outside the network?
The Solution
Comprehensive medical healthcare audits can provide independent and accurate pictures of your TPA’s performance, and can help find leaks in your plan’s administration, including these hidden fees. These audits often times discover other costly mistakes, ultimately bringing a wide variety of errors or conflict in language to the surface. Our team of industry-leading experts is always on standby, ready to answer any questions you may have.
