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What Does Your TPA Charge For? You May be Surprised

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08 March 2021

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Corporate and organizational self-funded medical plans depend on third-party administrators (TPAs) to process their claims. The trend has been for the role of TPAs to grow as in-house departments have been streamlined and downsized. As a result, self-funded plans increasingly need claim audits and continuous monitoring to catch problems and oversights to ensure TPAs effectively administer their plans. It's also common for there to be disconnects between in-house managers and TPAs about the fees for various services, which also can be uncovered by audits and monitoring. 

The good news is that 100-percent claims auditing is well established to provide unbiased independent analysis of TPR performance – including any hidden fees and places where a plan's claims administration may be going off track. Audits and monitoring often bring to light costly errors and mistakes that, when corrected, can save significant sums of money. It's easy for TPAs to make promises and assurances, but the only way to know if they are being kept and followed is to audit and monitor. Auditors with best practices and sophisticated software understand all the nuances of the industry and catch everything.

An area of savings that can be surprisingly significant is the fees the TPA charges for its services. Many times they are shown to be above what is budgeted. Plan language and agreements with TPAs are complex, and there are numerous opportunities to 'tuck-in' fees that may not be obvious initially. Some of the most common include extra charges for subrogation, recovery of overpayments, and negotiations about out-of-network services. Each can come up frequently, and when additional charges are added, they become sizeable numbers in time. It's easier to manage costs when audits and monitoring track them.

It's relatively common for TPAs to outsource subrogation and overpayment recovery to vendors that charge hefty commissions – ranging between 10 and 30-percent. If your plan loses money to overpayments and then is charged a commission to recover it, you're paying to correct someone else's mistake. Your auditor and continuous monitoring service will find and flag these costs to make sure you don't miss them. Anyplace funds leak out of ar plan for ancillary costs hurts the company and the plan beneficiaries. Many TPAs do an excellent job, but there is no substitute for checking their work.

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