TPAs such as HealthSource Plus, are turning the Canadian benefits industry on its head:
When you compare the two models, it becomes clear that insurers today are also TPAs. They actually outsource many of their services. For example, if you have a pay direct drug card, look at the logo on the front or back; you’ll notice that claims payments are processed by a company other than your insurer. Indeed, insurers are TPAs themselves, but they only offer the products of one insurer. TPAs provide the same administrative, claims and billing services as the insurer, but they offer the employer the benefit of choosing many insurers for each line of benefit.
Depending on demographics and industry, the average cost of group benefits is $3,000 to $5,000, per plan member, per year. Now, multiply that by hundred(s) of employees, and you’re potentially spending over a million each year. Employers are discovering that spending all that money in one place may not be in their interest. For this reason, they are approaching TPAs to procure their benefits – one line of benefit at a time. One insurer may have an attractive Life rate, while another may have a deep LTD expertise and a fair rate for the industry. By pairing up with two or more insurers, the employer is buying ‘best of class’ for each line of benefit.
The TPA consolidates each line of benefit and bills the employer monthly with one bill, despite multiple providers. TPAs provide the flexibility to custom design a bill that seamlessly integrates with your companies system, eliminating hours of work for plan administrators. When changing an insurer, the billing and service model remains firmly in place with no new systems for HR or Finance to adopt and learn.
With a TPA, 48 month rate guarantees on pooled rates, and 60 month rate guarantees on admin fees are not uncommon. Imagine negotiating rates in 2020 and not having another renewal discussion until 2025. This allows employers to focus on wellness, managed drug formularies, plan design, employee engagement and other critical cost drivers.
When an employer approaches an insurer as a single group they lose the concept of leverage as a small fish in a very large pond. By working with a leading TPA, the employer can begin to experience this leverage due to the TPAs buying power. Larger TPAs will have contracted relationships with every leading insurer in Canada, with huge blocks of business with each one. This translates into better, more stable rates for the employer.
In part two we’ll dive deeper into the benefits of working with a TPA and how to access the TPA market.