HHS Announces 2017 Out-of-Pocket Maximums

Money and gavelThe Department of Health and Human Services (HHS) has announced the 2017 out-of-pocket maximums applicable to self-funded and fully insured employer health plans. The maximums for 2017 have been set as follows:

  • Individual coverage: $7,150
  • Family coverage: $14,300

All non-grandfathered health benefit plans in effect on or after January 1, 2014 are required to comply with the Affordable Care Act’s (ACA) mandate that employer health plans’ annual in-network out-of-pocket maximums not exceed HHS’ established limits. The 2017 limits represent an increase from the current 2016 maximums of $6,850 for individual coverage (an increase of $300), and $13,700 for family coverage (an increase of $600).

The out-of-pocket limits represent the maximum amount that an enrollee must pay for covered essential health benefits through cost-sharing. It typically includes the annual deductible as well as any cost-sharing obligations the enrollee must meet after the deductible has been satisfied. The out-of-pocket maximum does not include premiums, cost sharing associated with of out-of-network services, or the cost of nonessential health benefits.

According to a recent study by United Benefits Advisors (UBA), out-of-pocket costs have increased significantly over the past decade, although median plan limits have remained below HHS’ out-of-pocket maximums. According to UBA, both individual and family coverage plans saw significant increases in median in-network plan out-of-pocket maximums in 2015. It is expected that out-of-network expenses will continue to increase significantly as well, as employers continue to widen the cost-share gap between employer and employee responsibilities.

For solutions to help mitigate employee health benefit plan costs that don’t simply shift costs to valued employees, contact the benefits experts at POMCO today.


Congress Delays Cadillac Tax Until 2020

BusinessmanPresident Obama has signed into law a two-year delay of the Cadillac Tax. The delay is part of Congress’s $1.8 trillion omnibus spending deal, the Consolidated Appropriations Act of 2016. In response to strong concerns expressed by employers and labor groups regarding the potential negative financial impact of the tax, Congress proposed the two-year delay.

The Cadillac Tax was added to the Internal Revenue Code by the Affordable Care Act (ACA) and was originally slotted for 2018. It is a 40 percent excise tax on the health plan value  that exceeds $10,200 for individual coverage and $27,500 for family coverage. The tax would be imposed on applicable employers, health insurers and “persons who administer plan benefits.” The Consolidated Appropriations Act also makes the Cadillac excise tax deductible for those entities required to pay it. The tax was originally enacted as non-deductible, so the change in tax status will potentially ease the burden to some applicable employers.

The Consolidated Appropriations Act also authorizes the U.S. comptroller general and the National Association of Insurance Commissioners to study whether the ACA uses appropriate benchmarks to determine whether the tax should be adjusted to reflect age and gender factors when setting excise tax thresholds.

Over the past several years employers have started making strategic benefit plan decisions to avoid the pending tax, such as shifting costs to members, reducing benefits, or transitioning to high deductible health plans. Even though the tax has been delayed, employers are still encouraged to work with their benefits administration partners and brokers to assess whether their health benefit plan is at risk of being subject to the tax so that adjustments can be made prior to its eventual enforcement.

It is anticipated that the two-year implementation delay will provide time for further examination of the proposed Cadillac Tax law to allow Congress and the new Administration to further examine and consider how best to execute the proposed tax. Some are still hopeful that the tax will be repealed before January 1, 2020.


A CFO’s Guide to Making Benefit Plan Determinations

What Questions Should You be Asking?

Simplifying AdministrationEmployee benefits are one of the most significant bottom line costs for any organization. Chief financial officers play an essential role in determining what benefit plan solutions not only fit into the organization’s budget, but have the potential for the greatest cost savings. As you plan for the coming year’s expenses and work with your human resources director and benefits consultant to determine the right employee benefit solutions for your employees, ask the following questions:

Is our current health benefit plan at risk for the Affordable Care Act’s (ACA) Cadillac Tax?

The Cadillac Tax is a 40 percent excise tax on employer-sponsored health plans with annual premiums in excess of $10,200 for individual coverage, and $27,500 for family coverage. The mandate is set to go into effect in 2018¹, leaving employers only two full calendar years to make plan changes in order to avoid the tax. For organizations that are collectively bargained in particular, it may be necessary to begin negotiations and planning now, in order to avoid the tax in 2018. To mitigate the risk of the tax, some employers are choosing to restructure benefits, move to narrow networks, or offer a high-deductible health plan (HDHP) in order to reduce overall plan costs and health plan value.

What is the cost of our spousal coverage?

According to BenefitsPro, the average cost of providing health care for a family was $16,351 in 2013, a 4 percent increase from the year prior, and employees paid, on average, only $4,565 of that total. As part of a trend to not only reduce overall health care costs, but also as a strategy to further avoid Cadillac Tax implications, a growing number of employers are restricting spousal benefit coverage by implementing a working spouse rule. The rule stipulates that if the spouse of an employee has access to primary health care through his/her own employer, and the employer pays for a designated portion of the single coverage cost, the spouse is not eligible for coverage under your plan. As an alternative, some employers are allowing spouses to remain covered, but are adding a surcharge to the cost for the employee. CFOs should weigh the cost benefits of a working spouse rule against how such a significant change may be viewed by employees. Though bottom line costs are a priority, recruitment and retention of talent must be considered with every benefit decision.

Are we conducting eligibility audits?

One of the largest causes of benefit leakage is outdated or inaccurate coordination of benefits. Employees may inadvertently fail to notify their employer of a change in their dependent’s status, but regardless of the reason, employers have an obligation to protect their health plan by ensuring that claims are not paid to anyone who is not truly eligible for coverage. Eligibility audits are a helpful tool for identifying such scenarios as dependents that have exceeded the plan’s age limit, a change in marital status such as a divorce, or cases when a child is not a legal dependent per the terms of the plan, such as a nephew or grandchild. According to Employee Benefit Advisor, a dependent eligibility audit can provide a typical ROI of nearly 15 percent and millions of dollars in cost savings. Organizations should conduct an eligibility audit at least every four years in order to identify enrollees who, per the plan guidelines, should no longer be eligible for coverage

Have we considered self-funding?

According to the Kaiser Family Foundation’s 2014 Employer Health Benefits Survey, more employers are self-funding their employee benefits, and that number has been on the rise. According to Kaiser, 15 percent of covered employees at small companies with 3-199 employees, and 81 percent of covered employees at larger firms, are enrolled in plans which are either partially or completely self-funded. CFOs should consider the advantages of self-funding, which include a greater flexibility in plan design and benefit options, access to actionable claims data, and lower administrative costs. Self-funding also provides enhanced cash flow options. Unlike fully insured plans that require advanced premium payment, under a self-funded plan, claims can be funded as they are due, which allows employers to keep more money in a bank account where it can earn interest.

For a health benefit plan assessment and customized cost-avoidance solution for your health benefit plan, contact the benefit experts at POMCO today.


¹ After this article was published in December 2015 Congress delayed the Cadillac tax until 2020. Read more here.



Does Your Consumer-Driven Health Plan Put You At Risk for the Cadillac Tax?

Affordable Care Act (ACA), Out-of-Pocket-MaximumsThere are significant questions regarding 2018’s potential Cadillac Tax in the minds of employers across the nation. The Affordable Care Act’s (ACA) proposed 40 percent excise tax on high cost plans has the potential to either significantly add costs to employers’ health plans, or require a shift of costs to members in an effort to avoid the tax – something many employers are hesitant to concede. Aside from the potential impact to health benefit plans, new insight indicates that the Cadillac tax may impact employers’ abilities to offer consumer-driven health plans (CDHP) such as flexible spending accounts (FSA) and health savings accounts (HSA). Read on to prepare your benefit strategy prior to 2018.

Potential Impact to FSAs

The Cadillac tax intends to levy a 40 percent penalty on health plans with annual premiums in excess of $10,200 for individual coverage, and $27,500 for family coverage. The tax applies only to the portion of the plan cost that falls above those thresholds. Since the maximum FSA contribution limits, which are estimated to be $2,700 by 2018, are typically additive to other benefit costs for employees that elect contributions, the cumulative cost of coverage between health and FSA plans could easily trigger the penalty fee for generous health plans. For this reason, some employers are considering terminating their FSA benefit, but maintaining their health benefit plan structure.

According to BenefitsPro.com, a recent survey of hospital management personnel identified that many hospitals intend to remove their FSA plans from their benefit plan offering if the ACA’s Cadillac Tax goes into effect in 2018. This potential trend is because FSA benefits may have an impact on triggering the Cadillac Tax penalty. According to the Kaiser Family Foundation, an estimated 26 percent of employers anticipate that their FSA offering may, in part, trigger the excise tax.

As an alternative solution to canceling an FSA plan entirely, other employers are considering re-structuring their FSA to only allow employer contributions, or to limit the employee’s contribution below the maximum IRS thresholds, thus diminishing the risk that an employee’s additional contribution may push the employee’s total cost of overage over the Cadillac Tax’s acceptable limit

Aside from FSA plan reductions, employers may also want to consider reducing such pre-tax ancillary health benefit options as critical disease or hospital indemnity plans.

Potential Impact to HSAs

As the proposed ACA mandate currently stands, employer and employee contributions to HSAs are also subject to the Cadillac Tax’s threshold limit. While the popularity of HSAs coupled with high deductible health plans (HDHP) have been on the rise as employers look for solutions to mitigate their overall benefit plan costs, HSAs, when coupled with employer pre-tax contributions, may now increase an employer’s risk of being subject to the 40 percent excise tax.

Similar to the decisions facing employers offering FSAs, employers are considering reducing or eliminating their pre-tax contributions to their employees’ HSA accounts in order to avoid reaching the Cadillac Tax’s threshold. Such a trend could reduce the effectiveness of HSAs as a successful strategy for employees to reduce their out-of-pocket health care costs. It may also limit opportunities for employers to incentivize population health management program initiatives in the form of HSA contributions – an employee engagement strategy that has been extremely successful in increasing wellness program participation.

Potential Changes in the Future

As a result of concerns expressed by organizations that the Cadillac Tax may impact their ability to help employees pay for quality health care expenses, many benefits professionals are advocating for benefit accounts to be excluded from the threshold limits before the Cadillac Tax goes into effect in 2018.  In addition, there is still hope that the United States Treasury Department and the Internal Revenue Service (IRS) will delay enforcement of the tax through extended transition relief.


More Employers Adopt On-Site Health Clinics as a Cost-Control Measure

On-site clinicsAccording to a recent article by Forbes, nearly 33 percent of large employers have opened onsite clinics within their corporate offices in order to increase employee access to routine and preventive care, and to reduce overall health plan costs. This trend comes despite the looming Affordable Care Act’s (ACA) Cadillac Tax which, starting in 2018; looks to impose a 40 percent excise tax on the most costly employer benefit plans.

Many employers that fear they may be subject to the Cadillac Tax are making proactive changes to their health plans to avoid the tax in the form of increased copayments and deductibles, and benefit reductions including the narrowing of networks. For employers looking to remain competitive in the marketplace relative to employee benefits, such changes can come at the price of employee acceptance and satisfaction. In addition, when plans shift costs to employees, some members become more inclined to skip routine, preventive, or event chronic medical care in order to mitigate their out-of-pocket costs. Such measures can ultimately lead to exacerbated health plan costs in the end, when a decrease in preventive or chronic care management results in a costly catastrophic event.

Some industry experts anticipated that employers might be less interested in establishing onsite clinics after the Internal Revenue Service (IRS) issued guidance clarifying that the cost of worksite clinics would be factored in to the total Cadillac tax threshold. Contrarily, many employers have been embracing the on-site clinic model as a means of offering an affordable way to bring convenient, routine, preventive, and urgent care services to their employees.

A recent study by Mercer, found that 29 percent of employers with 5,000 or more employees have successfully established on-site clinics. An earlier Mercer study indicated that the industries that are most commonly adopting the practice include health care facilities, municipalities, and manufacturing organizations.

Services offered at on-site clinics may include:

  • The management of preventive health and wellness programs to help manage health risks and maximize member benefits
  • The treatment of primary and urgent care needs
  • Dispensement of commonly prescribed prescription drugs to improve generic use and formulary compliance
  • Initial on-site mental health triage, counseling, and integration with employee assistance program (EAP) services
  • Traditional occupational health services, including those associated with work-site injuries, illnesses and exposure
  • Health coaching and care management services
  • Referrals to high quality community physicians and specialists when outside care is required
  • The administration of travel medicine
  • Vaccinations

The on-site clinic model is effective from a cost-containment perspective because not only are employees more likely to see a physician or nurse located right in their own office; they avoid scheduled time off and the need for unplanned sick days.

Additional benefits to employers of establishing on-site clinics include:

  • Improved overall population health
  • The ability to enhance a corporate wellness benefit offering
  • An increase in employee retention, recruitment, and morale
  • Enhanced management of employee health risk and chronic conditions

According to Mercer, the cost of offering an on-site clinic is usually in the low single digits as a percentage of the overall health care spend for an employer. According to a survey it recently conducted among employers that have implemented an on-site clinic, 49 percent of respondents indicated that their spend on the worksite clinic was only 5 percent or less of its annual spending on all active employee health plans and worksite clinics. From a cost-savings perspective, cost reductions come in layers. First, costs are reduced through the increased efficiency of an on-site health center as opposed to exclusive employee use of the retail health system, and then from a reduction in catastrophic claims due in large part to the wellness, disease management, and chronic care programs offered as a part of the on-site clinic model.

For more information on on-site/near-site clinics as part of an effective population health management solution, contact the benefit experts at POMCO today.


Catastrophic Conditions and the Benefits of Stop Loss Protection

Catastrophic Claims and Stop-LossA self-funded employee benefit plan offers customization and flexibility that inherently allow an employer to directly manage the overall costs of its plan. Such elements as case management, proper eligibility and coordination of benefits administration, and custom out-of-network claim negotiations are all elements of a successfully managed self-funded plan that can reduce costs without reducing benefits. Despite the very best plan management, however, no plan can avoid catastrophic claims. There are ways for self-funded plans to mitigate the impact of even these costly impacters, however.

A layer of stop-loss insurance can be added to a self-funded plan to provide this additional financial protection. Stop-loss is a product that provides protection for self-funded plans by serving as a reimbursement mechanism for catastrophic claims exceeding pre-determined levels. Stop-loss insurance can benefit groups that are not large to spread their financial risk across their full populations.

Stop-loss coverage may be purchased in either specific and/or aggregate policies.

  • Specific stop-loss provides protection for the employer against a high claim on any one individual.
  • Aggregate stop-loss provides a maximum limit on the total dollar amount payable for all eligible expenses that an employer would pay during a contract period.

An expert third party administrator (TPA) can work with an employer and/or its broker to review claims history, current diagnoses, and prospective plan costs using sophisticated predictive modeling techniques to determine the most appropriate stop loss protection needed for the plan year. A determination of necessary stop-loss coverage takes into consideration the estimated costs of catastrophic conditions and disease states, among other factors.

A recent report from Sun Life Financial reveals that cancer remains the costliest disease currently impacting self-funded plans in the United States. According to Sun Life Financial, cancer accounted for more than 25 percent of the reimbursements it paid out during a four-year research period. In addition to the high cost of cancer claims, according to Sun Life Financial, end-stage renal disease accounted for 33.5 percent of its total reimbursement costs during the same time period.

The report also identified the financial impact of intravenous medications. According to the report, in 2014 alone, intravenous medications accounted for 13 percent of total paid stop-loss claims, with the top 20 intravenous medications representing 65 percent of the total cost of intravenous medications administered for catastrophic claims conditions, many of which were used to treat cancers.

Patients whose claims exceed $1 million can be hugely impactful to employers of any size. According to the report, cancer, congenital anomalies, and premature births are the conditions that most frequently result in patients exceeding the $1 million claim level.

Self-funded organizations not currently protecting their health plan with stop-loss insurance should speak with their TPA to determine if specific and/or aggregate coverage may be a beneficial element of an overall cost-mitigation strategy. An analysis of current diagnoses and predictive modeling techniques can help to prognosticate the potential impact of such catastrophic conditions as cancers or end stage renal disease and can result in strategic recommendations for maximum protection.


The Cost-Saving Potential of Consumer-Driven Health Plans

Cost-Saving Potential of CDHPsOver the past several years, an increasing number of employers have been adopting consumer-driven health plans (CDHP) as part of a strategy to encourage a behavior of consumerism among enrolled members. CDHPs encourage plan members to use pre-tax dollars for out-of-pocket health care expenses. When coupled with a high deductible health plan (HDHP) that aims to shift a larger up-font out-of-pocket cost to members, CDHPs can offer employers a successful total cost reduction opportunity, while still offering an attractive benefit package to employees.

64 percent of large employers currently offer a CDHP, and that number is expected to increase to 76 percent in the next few years. Truven Health Analytics recently completed a study that confirms the potential savings implications for employers that implement CDHPs. The study, which monitored 183,000 continuously enrolled CDHP members over a period of three years, identified an annual savings of $457 to $532 per member per year – an almost 10 percent cost reduction.

The average savings was attributed to several factors including a reduction in overall benefit utilization, with particular decreases in use of radiology services. Significant savings was also demonstrated within the prescription drug category, as members enrolled in CDHPs increased their use of generic drug substitutions which reduced total plan costs.

While an overall decrease in utilization of services resulted in a positive reduction in employer plan costs, the study also identified that CDHP plan members demonstrated reduced use of preventive and chronic care services. It should be noted that the long-term effects of such a trend could negate some of the overall cost reduction benefits of employers’ CDHP strategies. Preventive services are necessary to identify risk factors so that appropriate treatment measures can be implemented before a health risk results in a catastrophic condition or event. Avoidance of preventive care could result in larger claim costs in the future. Member communications may be able to dissuade this trend, as under the Affordable Care Act (ACA) most non-grandfathered plans offer routine preventive services at no member cost share, therefore, members may need to be informed not to avoid preventive care out of a mistaken belief that it will result in increased out-of-pocket costs.

Similarly, patients who do not properly manage their chronic condition long-term by following a prescribed medical and prescription drug treatment plan may be more likely to sustain a catastrophic event associated with their condition. In the event of a catastrophic health incident, an individual could incur more costs associated with the treatment of the catastrophic event than were avoided in reducing his utilization of necessary maintenance services. For example, a patient with high cholesterol who attempts to reduce his out-of-pocket health expenses by not continuing his use of a costly prescription drug, may end up incurring greater overall costs if he suffers a heart attack and finds himself inpatient at a hospital than he would have spent taking his antihyperlipidemic prescription as prescribed and avoiding the inpatient stay.

While CDHPs are a strategic solution that can benefit both employers and employees reduce costs, the Truven Health study demonstrates the importance of member education in the implementation of a CDHP strategy. For example, members may benefit from communications that stress the importance of obtaining preventive and routine care, especially if it is offered at no cost share. In addition, members who are first time enrollees in a CDHP plan may benefit from guidance on how much of their own pre-tax dollars to set aside in order to pay for anticipated medical, dental, and prescription drug costs for the year. With proper communications, members will be prepared to maximize their CDHP funds in coordination with their health benefits, and obtain optimal care throughout the year.


Remember to Embed Your Out-of-Pocket-Maximums for 2016

Affordable Care Act (ACA), Out-of-Pocket-MaximumsSix years after the Affordable Care Act (ACA) was passed into law, employers are still addressing ACA requirements by modifying their benefit plan to meet pending mandates. Employers preparing for the 2016 benefit plan year should take into consideration their health plan’s out-of-pocket maximums. The ACA requires that health benefit plans limit the annual maximum cost sharing imposed on plan enrollees for out-of-pocket costs associated with essential health benefits. For plan years beginning in 2016, the maximum out-of-pocket cost limits will be:

  • $6,850 for individual coverage
  • $13,700 for family (or all forms of non-self-only) coverage

On February 27, 2015, The Department of Health and Human Service (HHS) mandated that the $6,850 maximum limit on individual coverage will apply to each individual irrespective of whether that individual is enrolled in self-only coverage or family coverage. Based on this requirement, an enrollee with family coverage would not be subject to cost-sharing for costs associated with covered benefits if one of two scenarios has been met:

  1. The enrollee and his/her enrolled dependents have reached a combined out-of-pocket limit of $13,700. Under this scenario, no members of the family would be subject to cost-sharing for covered benefits in the future.
  1. Any one of the family members reaches the embedded individual coverage maximum of $6,850. Under this scenario, only the member of the family that reached the $6,850 individual limit would not be subject to cost-sharing for covered benefits in the future.

On May 26,2015 it was clarified by HHS and The Department of Labor (DOL) that this mandate applies to all health plans, including non-grandfathered plans, large and small group plans, high-deductible health plans (HDHP), and plans that are both fully insured and self-funded.

Employers implementing this rule within their HDHP should take special care to clearly communicate this change to their plan members. The embedded out-of-pocket maximum requirement may cause confusion for HDHP members since the ACA maximum out-of-pocket limit is not the same as the maximum out-of-pocket limit established by the Internal Revenue Service (IRS) on HDHPs. In 2016, HDHP dollar limits are only $6,550 for individual coverage and $13,100 for family coverage. Therefore, for members enrolled in individual coverage in 2016 in an HDHP plan their maximum out-of-pocket limit for a particular individual will be $6,550 while the limit for individuals enrolled in family coverage in 2016 in an HDHP will be $6,850. These family plan members will also be subject to an earlier limit if the individual’s aggregate family out-of-pocket costs exceed the $13,100 family coverage limit.

Employers that currently do not have an embedded out-of-pocket maximum should begin working with their benefit plan administrator and broker now to make necessary plan changes and to build a member communication strategy, to be prepared for the changes to go into effect in 2016.


6 Predictive Modeling Techniques Your Benefits Administrator Should Use to Mitigate Plan Costs

6 Predictive Modeling Techniques Your Benefits Administrator Should Use to Mitigate Plan CostsThe benefits industry agrees that monitoring health plan claims experience retroactively is not enough to optimize an integrated benefit plan solution. Strategic benefits partners must synthesize known historical claims experience with predictive modeling techniques and data obtained through population health management services in order to truly synergize a comprehensive view of a population and its impactful risk factors.

An effective data analytics platform provides insight into an organization’s historical and ongoing claim costs to help determine and manage utilization and spending trends. It also supports the integration of key predictive indicator data obtained through biometric screenings, health risk assessments (HRA), on-site/near-site clinics, and case management notes. This aggregated data set allows for a comprehensive assessment of not only an organization’s at risk population, but the disease states and health risk factors impacting health outcomes and driving plan costs in the form of high services utilization and catastrophic treatments.

Below are six of proven predictive modeling best practices that should be utilized to optimize plan performance:

1. Properly structure the data – Prior to beginning the data mining process, data that lives in disparate systems must be extracted using the same file format and data nomenclature and fused together in a way that will maximize the value of the data. More data is meaningless if it cannot be woven together to provide insight.

2. Outline key goals – There are several different predictive modeling algorithms that can be successfully implemented either independently or in tandem to provide meaningful insight, but first you will need to determine what data is being used and what goals need to be achieved. For example, choose one of the following methodologies:

  • Concurrent modeling – Using data from a prior period to project medical claim costs for that same period
  • Prospective modeling – Using data from a prior period to project costs for a future period

3. Integrate neural network population management software – This type of advanced analytics tool looks for patterns in large batches of data to predict health outcomes before they occur so that medical interventions can take place. For example, the system can be programmed to identify patients who have been admitted to the emergency room and then obtained a cardiac stress test. Those patients can then be cross-referenced against health risk assessment data to see if any self-identified a personal or family history of heart disease. Pinpointing at-risk members in such finite terms will allow for proper interventions for those most likely to suffer a catastrophic cardiac episode.

4. Define pattern recognition models using time series analysis – Use known information about the clinical progression of conditions such as diabetes, heart disease, chronic heart failure, asthma, and chronic obstructive pulmonary disorder to recognize patterns and make better predictions about the progress of an individual’s disease. For example, identifying that a patient obtained a lipid panel, and then a stress test less than a year later, may be a predictive indicator of a future cardiac episode.

5. Include lab data in your analysis – Biometric data is essential in developing holistic predictive modeling techniques. Knowing that a lipid panel was performed on a patient, but not the actual values, is an example of data that is not meaningful. For example, evidence suggests that C-reactive protein is strongly predictive of future cardiac events. Being able to identify patients with C-reactive protein identified in their lipid panels, cross referenced with patients who have had a stress test and at least one emergency room visit within the past year, will most accurately identify those most at risk for a cardiac episode.

6. Go beyond identifying disease states and focus on non-compliance – Knowing a plan’s most expensive disease states is important, but it is not meaningful unless it is actionable. Research has found that identification of high cost disease states is less of a predictor of future cost than non-compliance data. Studies have indicated that noncompliance rates may be as high as 50 percent with certain prescription treatment plans. Predictive models that prospectively identify those individuals who are least likely to be compliant with a prescription treatment plan can be highly effective in identifying individuals for intervention.

To learn more about the key components of applying an effective data analysis strategy into your integrated health benefit solution to optimize performance and mitigate costs, contact the benefit experts at POMCO today at 800.934.2459.


TPA Transition Success

TPA TransitionA mid-sized, privately owned organization was concerned that its third party administrator (TPA) was not accurately processing claims associated with its employee health benefit plan. Compounded by service frustrations and limited reporting capabilities, the group worked with its broker to complete a formal request for proposal (RFP) process. The RFP compared the services and estimated claim and administrative service costs of the organization’s current TPA to several other regional administrators and insurance carriers offering self-funded plan options. The decision was made to transition to a new TPA. One year later, the plan was under budget, a claims audit proved 100 percent benefit plan compliance, and members and the management team were finally satisfied with their service. The story that follows is a true TPA transition success story.

The Problem
After five years of service, a privately owned organization was beginning to lose confidence that its TPA was accurately paying claims in accordance with the group’s customized benefit plan document. Also of great concern was a realization that many claims were being processed after the filing deadline
specified in the plan document. In addition, the TPA’s client service team structure had changed and the organization was no longer receiving timely responses to inquiries and proactive strategic guidance.

The organization had long been self-funded and appreciated many of the inherent benefits: plan customization, reinvesting unspent budget dollars, and avoidance of many state taxes and fees. Despite these benefits, the organization was no longer satisfied with its TPA’s performance and customer service. In agreement with its broker, the organization decided to re-evaluate the options available in the marketplace.
The Process
The organization’s broker completed a formal RFP and provided an analysis of both insurance carriers and TPAs offering self-funded administrative services. The organization’s top priorities were to identify an administrator that

  • Mitigate plan costs
  • Ensure proper claims processing and plan administration
  • Minimize member disruption by offering a strong regional and national provider network

The broker’s analysis resulted in a final recommendation for the organization to transition to a new TPA that demonstrated a proven ability to:

  • Offered a unique cost-containment strategy
  • Demonstrated a 98 percent claims processing accuracy across all its custom-designed benefit plans, as well as an average 99 percent financial accuracy rating
  • Offered a comparable regional and national network, ensuring minimal member disruption
  • Administer the organization’s existing benefit plan design exactly
  • Execute a client service model that included an integrated team of benefit plan strategists, administrative support staff, and a single primary point of contact for service needs
  • Execute a memer service strategy predicated on first-call resolution

The Payoff
By the beginning of its next plan year, the organization had fully transitioned to its new TPA partner. After a successful implementation the organization was confident that its members were being well serviced and that its plan was being managed by a truly strategic administrative partner. After the completion of the first full plan year administered by the new TPA, the organization was three percent under budget, despite the occurrence of unusually high large claimants. Both the client and the broker were pleased with the flexible and detailed experience reports that were provided by their client service team, and felt that their account manager was a true strategic partner with the plan’s best interests always top of mind.

Click here to learn more or to start your own success story with POMCO today.