Many fully-insured organizations, negatively impacted by PPACA and hearing more and more about the benefits of self-funding, are looking to their advisors for information on self insurance. Often, these companies are told that they can easily move to a partially self-funded plan with their same carrier and there’s no need to involve a TPA. This is a disservice to the employer.
To self-fund, employer groups can outsource to a Third Party Administrator (TPA) or an Administrative Services Only (ASO) Division to help design, build and manage their health plans. While TPAs and ASO divisions may appear to offer the same services and value to employers, there are key differences, including…
1. Plan Customization: TPAs are all about providing alternatives and are not tied to any single carrier or program. They have spent many years building innovative plans that address the specific needs and interests of different employer groups. Most ASO plan offerings are limited to those available through their parent carrier and can be restrictive when compared with TPA offerings.
2. Flexibility: Plan performance and member satisfaction are tied to the networks, providers and benefits offered. TPAs can build plans that incorporate those providers and networks that best support the geographic, cost and quality needs of the employer and members; while ASOs are primarily limited to those providers and networks contracted by their carriers.
3. Reimbursement Options: Today, how providers are paid really matters. Typically, ASO offerings offer provider reimbursement at network rates contracted by their parent organization (with discounts that may be based on an inflated pricing structure). Third party administrators can offer more innovative reimbursement structures based on a percentage of Usual, Reasonable & Customary (UCR) or Cost+, which uses a negotiated percentage above Medicare reimbursement.
4. Transparency: Many ASOs are not able to capture the significant plan and member data available to TPAs. Plan data is essential to identifying individuals that can benefit most from healthier life and nutrition choices, and being able to direct them to services and facilities that deliver the best outcomes.
5. Service: No two employer groups are alike. While ASOs offer standardized products and services, TPAs have a more personalized approach with a focus on client service and plan performance. In addition, potential conflicts of interest can occur if the ASO is more focused on meeting parent company objectives than the needs of the employer client.
While self-funding can be an effective and affordable solution for employer groups seeking health plan alternatives in our post-reform environment, it is important to know and understand all of the options available in order to determine where the greatest value exists.