The passing of the Affordable Care Act (ACA) in 2010 brought drastic change to the healthcare industry. Beginning with the economic setbacks the country endured in 2008, many companies needed to find new ways to save money in the face of the recession, health care reform and rising premiums. The ACA added a number of taxes and restrictions on fully-insured companies that other companies with partially self-funded plans are usually able to avoid, according to Mark Haegle, director, sales and account management for HealthLink.
What is a Third Party Administrator for Employee Health Benefits?
A TPA for employee health benefits is “a person or organization that performs administrative services, such as claims processing, adjudication or record-keeping, typically on behalf of an employer that self-insured health benefits,” according to an article recently published by Zane Benefits. They’ve become prominent players in the managed care industry of health insurance and are contacted by the self insuring company Usually, TPAs operate as an independent entity relative to health insurance carriers and the insured employer. Today, more than 40 states have a TPA licensing requirement, while several more have other minimum requirements.
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Why Do Employers Choose Self-Funded Insurance Policies?
Perhaps the biggest selling point is flexibility. For example, if an employee wants to have an extremely expensive surgery performed, certain states mandate that a fully insured business must pay for the surgery, while a self-funded business has the ability to choose. As another example, in a business with self-funded insurance, employers can “identify disease prevalence and assign benefits to accommodate for its employee’s specific needs”, according to Small Business online. This allows these companies to prioritize what they are paying for based on employees needs. So, if an employer discovers a high incidence of a specific ailment in its employers, it can choose to allocate 100 percent of its funds to pay for services to managed the illness.
Self-insured policies allow businesses to identify the makeup of their employee population to design and build a plan which supports the population’s needs. It gives companies a way out of being trapped by state mandates or insurance company’s systems. With a self-insured policy, you can “maximize your interest income on premiums that would otherwise go to an insurance carrier” and avoid paying unnecessary healthcare coverage, according to Small Business Online. Lastly, self-funded insurance is only subject to federal law and isn’t required to adhere to any conflicting state laws, benefit mandates or state health insurance premium taxes.
How to Find and Work with a TPA?
Today, according to the Society of Professional Benefits Administrators, nearly 66 percent of all U.S. workers are now covered by self-funded health plans, the majority of which are managed by TPAs. Choosing the right TPA is very important, as you will be forming a close relationship and granting them access to your assets. Every employer creates a customized arrangement with its TPA, who can perform as many or as few tasks as their client wishes. TPAs can do everything from help design insurance plans and administer claims to ensuring compliance with government regulations and review how employees use their health plans. Additionally, they can arrange participation in preferred provider organizations, maintain plan records and prepare materials to explain health care changes to employees. Some companies choose to hire brokers or consultants to help them search for the ideal TPA. Whether you decide to hire someone to assist in your search or not, it’s best to do your research before committing to one TPA over another.
Aligning your Employees’ Health Needs with your TPA Search
When searching for a TPA, be sure to find one capable of tailoring a health plan to the specific needs of your workplace. The ability to innovate and be creative is a major advantage to a self-funded insurance plan. The TPA you choose should be flexible enough to design a health plan that fits your business and employees. For example, if a number of your employees suffer from diabetes, you may want more coverage there. Certain TPAs may be specialized within a certain niche, so it’s important to find one that is familiar with your industry and business size.
When you’ve chosen a TPA, it is recommended that you ask how it will manage your funds.
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