Third-Party Administrators – Choosing the Right Partner for Your Organization

By: Carleen Patterson, Senior Vice President, Alliant Public Entity

An experienced and trustworthy third-party administrator (TPA) is crucial to the success of a self-insured workers' compensation program. TPAs manage workers' compensation claims efficiently, ensuring claims are handled in a timely manner by coordinating communication between the employer, employee, healthcare providers and insurance companies. Efficient claims handling can reduce the duration of claims, decrease costs and minimize disruptions to the workplace. By implementing strategies for proper claims investigations, medical bill review and monitoring medical treatment to prevent inflated or fraudulent claims, TPAs help reduce the overall costs to a workers’ compensation program.

Using data analytics and customized reporting, TPAs can identify trends, high-risk areas and opportunities to improve your program. This empowers organizations like yours to make informed decisions about safety programs, claims handling and risk management strategies.

Unfortunately, along with many other industries, the TPA field is facing a variety of workforce talent challenges:

• Many experienced claims professionals are nearing retirement, creating a talent gap.
• The field of claims handling is often perceived as less glamorous compared to other financial services, making it harder to attract younger professionals.
• Claims adjusting can be a high-stress field due to workload pressures, demanding timelines and the emotional nature of working with claimants. This can cause inadequate work-life balance, leading to burnout and high turnover rates.  
• The career is seemingly lacking in advancement opportunities, which also creates a revolving door of talent.

To address these challenges, TPAs must implement a combination of strategic hiring, ongoing training and development, fostering a culture of innovation and creating more flexible work environments.  Additionally, offering clear career progression paths and enhancing work-life balance can help attract and retain talent in the field.

Engaging the right TPA for your organization requires careful consideration and should begin with defining your needs:

• What types of claims will they be handling?
• What is the estimated number of claims?
• What are your expected service levels, e.g., response time, communication protocols and reporting frequency?
• Can the TPA meet all legal and regulatory requirements related to your claims?
• What kind of technology access do you need? Does the TPA have a claims management system that meets data security requirements and reporting capabilities? Will it integrate with your systems? Does the system provide real time access to claims data? Are there customizable reporting features? What analytics or predictive tools does the TPA use to help manage claims?

A request for proposal (RFP) allows you to outline all your requirements and compare proposals based on pricing, services and track records. A detailed evaluation of the TPA’s background, including experience in your specific industry, is critical to the process. For example, you’ll want to consider questions like: What are the average caseloads for each type of adjuster? What is the adjuster turnover rate for the proposing office?

Request the following to evaluate the experience and expertise of the team that will be assigned to your program:

• References from past and current clients for those team members along with case studies to gauge their past and current performance.
• Feedback from current clients on how responsive the TPA is and how they manage issues that arise.

Transparent pricing and a flexible contract are essential to the success of an engagement. Some common fees to watch for in TPA contracts include but are not limited to:

• Claim Processing Fees: Some TPAs charge fees based on the number of claims processed rather than on a flat rate. This can accumulate, especially if you have a large workforce.
• Subrogation Fees: When a TPA helps recover funds from a third party (like an insurance company), they may charge a percentage of the recovered funds as a subrogation fee.
• Network Access Fees: If the TPA provides access to a preferred provider network (e.g., for health insurance), there might be a hidden fee to access this network. These fees are often passed on to employers.
• Reporting fees: TPAs often charge for reports beyond the basic ones included in the contract. If you need specialized or detailed reports (e.g., analytics on claim trends), these could come with additional costs.
• Medical Bill Review Fees: TPAs review medical bills to ensure there are no errors, such as duplicate charges, billing for services not rendered or incorrect coding. There are various ways TPAs charge for these services: per bill, per line, percentage of savings, hourly rates or a combination model.  

Ultimately, the chosen pricing model should reflect both the client's goals (cost savings vs. accuracy) and the value provided by the TPA in ensuring bills are properly reviewed and compliant with applicable regulations.

Consider including an enforceable service level agreement that clearly defines penalties or remediation if service levels aren’t met, and agree on metrics for evaluating performance.

By focusing on these areas and avoiding common pitfalls, you can successfully solicit a TPA that meets your needs and bolsters your claims management process.