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CCH® BENEFITS — 12/20/07

Changing Health Insurance Benefits Market Offers New Opportunities For TPAs

From Spencer's Benefits Reports: The changing health insurance market presents new opportunities for third party administrators (TPAs) not only to survive, but also to thrive, according to Fred Hunt, president of the Society of Professional Benefit Administrators (SPBA) in his annual report to members, “State of the TPA Industry & Forecast for 2008.” The Chevy Chase, Md.-based SPBA is a national association of employee benefit TPA firms and stop-loss service partners.

In order to survive and succeed in this new health care environment, TPAs must apply the following three strategies, Mr. Hunt advised:

1. Be alert to and respond innovatively to changes and opportunities.
2. Shape the future by shaping public opinion and political outcomes at the local level and by sharing with the SPBA insights, from the “trenches,” on the actual functioning of the health insurance market. The SPBA functions more like a think-tank than as a lobbying group “to provide unbiased and candid insights from members,” and to warn of unintended consequences of proposed legislation and regulations, Mr. Hunt explained.
3. Continue to provide attentive, personalized service, the hallmark of TPAs. TPAs, large and small, need to be sure that all their employees, including local office staff, are well informed on the most current requirements, or they will lose the business. “There is a tendency to cut off key staff in merged or branch offices,” Mr. Hunt said. “However, clients think of that local office as their TPA firm.” TPAs that cut staff from local offices might save money in the short term, but ultimately might lose business and income, he warned.

Some TPAs think that the TPA core function is shifting from the traditional claims processing to “an ever-growing array of services and programs” that employers seek. These are as varied as wellness programs, investment and other assistance for the growing health savings account (HSA) market, and other new benefits offerings, Mr. Hunt reported. “TPAs are finding that the profit margin is far above what is earned from claims-processing, and the legal and regulatory headaches are much fewer,” he added.

“In summary, we [TPAs] are already on the road to the biggest change in the delivery and payment of health care and employee benefits in 65 years,” Mr. Hunt concluded. “It is still early enough to shape national policy and the strategy of your firm for the future. Be open to change and be alert to opportunities to grow or adapt your services. And finally, never forget the importance of informed, flexible, personalized service and having all your staff fully in the loop of information and industry developments.”

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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