Articles | May 2, 2024

5 Tips for Improving Your TPA’s Performance

Many organizations rely on a third-party administrator (TPA) to provide the expertise, technology and staffing that allows the machinery of their benefits programs to run smoothly and efficiently. However, it’s not uncommon for both plan sponsors and participants to experience frustrations and service issues — such as processing backlogs for healthcare claims and/or pension applications, poor reporting, difficulty gaining access to plan data or overall unresponsiveness.

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If this is your experience, you might be considering switching vendors to resolve service issues. Likely giving you pause is the fact that selecting a new vendor can be time consuming and costly. Moreover, even if you make a change, there are no guarantees that service will be better, given that current TPA consolidation limits vendor options; and other ongoing concerns, such as an aging workforce and lack of succession planning.

Some plan sponsors' response to TPA service issues is to move to partial or full in-house administration. Pursuing that strategy requires addressing staffing, technology and logistical challenges that can also take time and money.

Fortunately, there is a more cost-effective alternative: improving the performance of your TPA by managing the relationship.

This article outlines five tips for successfully managing your TPA relationship:

  1. Learn more about your TPA.
  2. Set expectations for service improvements and provide the TPA with clear, written policies.
  3. Identify key metrics and monitor them.
  4. Hold the TPA accountable for performance guarantees.
  5. Meet regularly with the TPA one-on-one.

Tip #1: Learn more about your TPA

This important exercise should cover technology, security practices and workforce issues. It will help you assess the TPA’s strengths and weaknesses.

Find out what technology the TPA is using to manage your data

If your TPA is struggling to produce timely accurate reports and data extracts and/or you (or your professional advisers) are not receiving reliable data consistently, chances are your TPA’s systems and tools are either outdated or not supported appropriately. Modern systems and technology platforms should allow for easily configurable, on-demand reporting solutions.

In addition, if you suspect that there are a lot of manual work processes, experience significant pass-through programming costs and don’t have access to adequate online/self-service tools, discuss with your TPA its plan for technology investments and future direction.

Ask about the TPA’s information security practices and how it responded to any breaches

When was the last time your TPA conducted a cybersecurity and/or HIPAA risk assessment? Ask for a copy of its compliance policy. Is the TPA proactively protecting its business against breaches? Ask about the TPA’s cybersecurity practices and business-continuity plans.

Your day-to-day interactions with TPA staff (e.g., emails and data transmissions) should provide some tell-tale signs of the adequacy of their security protocols and practices.

Understand the TPA’s workforce issues

You should have a good understanding of your TPA’s staffing levels. Common workforce issues include high turnover, insufficient staffing/training, a performance change (for better or worse) in post-pandemic hybrid work model (if they allow it), burnout and key employees nearing retirement.

You should also understand your account manager’s reporting structure and job responsibilities. Find out from the TPA leadership the level of support that person receives. Without adequate support, they may be experiencing burnout.

Assess the TPA’s strengths and weaknesses

Are you able to identify these areas? Can the weaknesses be improved upon if the TPA has the time, means and resources to fix them? Is this weakness prevalent across all TPAs or would another TPA do better? Are the strengths so unique that you would lose them if you changed TPAs?

The answers to these questions may help you to better manage the relationship — or to determine whether it might be worth making a change.

Tip #2: Set expectations for service improvements and provide clear, written policies

Setting expectations for service improvements can be done at any time, not just during contract renewal.

TPAs do best when they have clear administrative direction from plan sponsors in the form of written policies and procedures on a variety of operational areas that are not clearly spelled out in plan documents and/or federal and state regulations. Examples include document retention guidelines and collection procedures.

While TPAs are expected to follow industry best practices for most operational processes, some areas of administration related to compliance with the plan’s rules and regulations, including interpretation of eligibility rules, should not be left to the TPA’s discretion.

Tip #3: Identify key metrics and monitor them

Examples include meeting industry standards for service, such as the turnaround time for claims processing and the speed with which phone calls are answered. Whether or not your TPA has provided contractually enforceable performance guarantees and penalties within your current agreement, it is a good idea to have metrics reported back to you and monitor your TPA's actual performance against those guarantees and/or industry benchmarks.

Tip #4: Hold the TPA accountable for performance guarantees

Your TPA should provide performance guarantees. Service areas to consider for performance guarantees include:

  • Turnaround times
  • Wait times on phone calls (speed of answer)
  • Processing accuracy

The TPA should also provide reporting on these metrics. Be sure to track these metrics and hold them accountable when they are not met, including, but not limited to, financial penalties.

Tip #5: Meet regularly with the TPA one-on-one

You should be able to confidently delegate administration duties to your TPA and rely on its operational expertise and resources. But often TPAs take actions that have a direct impact on participant services and outcomes without consulting the appropriate client decision-makers.

Checking in regularly allows for a more proactive and collaborative approach to making policy decisions. If you’re unable to assign a single point of contact for the TPA, you may consider (if your budget allows) hiring an administrator to manage the vendor relationship or requesting a dedicated account manager for your plan(s).

Most TPA executives will tell you they want to be considered as a “partner” — but in order to be one, both the TPA and the client must meet regularly and become more proactive in addressing existing and emerging issues.

Managing your TPA relationship is worthwhile — and you don’t have to go it alone

Properly managing your TPA relationship can help your benefit programs run more smoothly and enhance participant satisfaction. However, it can be challenging because it requires that you have the know-how and resources to do so.

If your team and resources are already stretched thin, we can help.

Our team can work directly with your TPA on your behalf to conduct an operational review, identify opportunities for performance improvement and report on what they should be doing better.

Additionally, we can continue to monitor metrics from your TPA and work with them to configure workflow processes that will continue to drive performance improvement.

Want to learn more about how Segal can help you manage your TPA relationship?

Let's talk.

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What to do if your TPA’s service doesn’t improve

If you’re interested in issuing a request for proposal (RFP) for a new vendor, be sure your RFP includes enough details about your administrative complexities and what makes your plan(s) unique. Plan documents and SPDs alone do not address the workflow complexities that TPAs should know about so they can properly understand the scope and resources needed and price their services accurately.

If you are interested in bringing some or all of plan administration in house, consider conducting a feasibility study so you can make a well-informed decision. Comprehensive feasibility studies cover all aspects of administration needs — staffing, technology, and logistical requirements — as well as cost estimates and implementation timeline projections. These studies typically take three to four months to complete.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.