TPA incentives- what's permissible?

[Guest skier1]

I am researching what incentives are permissible to build into our contracts with our TPA vendors that administer our self-funded health plan. We have recently undertaken disease management and wellness programs. However, we need to ensure that our vendors are using/promoting them appropriately. At the same time, we are concerned that if we build in a utilization rate or incentive, the vendor may, as it approaches that target, start to deny participant claims simply so its numbers look good and it fits the metrics established. has anyone had any experience with this? your thoughts would be appreciated.

[Guest mat]

TPA's - there are some good and some bad! The good ones are few and far between. I can think of at least 4 TPA's that will slow down claim processing so they can increase their admin. fee's! I suggest paying unannounced periodic visits to your TPA throughout the year to audit the process. Check around to see what the average fee's are - some TPA's shoot for the moon and beyond without doing much work for the employer.

For the good TPA's, I applaud the wonderful work you do for your clients! Please toot your horn a bit more!

MAT

[GBurns]

The ONLY incentives that you need to give a TPA are:

1. Make them aware that you will consider use of a claims auditor or repricing service etc to ensure that they are doing an acceptable job.

2. Make them aware that you know that you can cancel their contract or change TPAs very easily.

[Guest skier1]

thanks to you both on your insight

[Kirk Maldonado]

I recommend that you retain competent ERISA counsel to review the contract with the TPA. I recently had the chance to review one that a major corporation had entered into with the involvement of an ERISA attorney and was aghast at what I found in it. The TPA will have a document drafted that favors them and not you. If you want to have any meaningful rights, you need to have the contract reviewed (and revised) before you execute it.

[mbozek]

Every TPA agreement I have reviewed includes one sided provisions that limit the TPAs liability for its own negligence and some require that the employer pay the TPAs legal fees if the TPA is sued for its mistake. Using incentives could lead the TPA to deny valid claims in order to meet the target set for the incentive.

[Kirk Maldonado]

I recently reviewed one that limited the TPA's liability to the amount of fees it received.

[mroberts]

It would be near impossible to build in any incentives for disease management or wellness programs. These programs are all theory - while it makes sense that implementing them will save you claims dollars in the long run, there is no proof that they will work. Unfortunately, you can't find two groups of 2000 people with identical demographics and medical conditions and have one utilize a disease management and wellness program while the other does not.

I would review what your TPA is doing on a quarterly basis in these areas with your broker. If you do it any less or don't pay attention at all, you run the risk of the TPA charging you a buck or two per employee per month for really not doing much.

The next time you market the administration of your self-insured plan, you may want to ask about each bidder's process when it comes to disease management and wellness programs. Get something very detailed and make sure that the administrator sticks to the plan. I've found that carriers tend to do a better job than TPA's when it comes to disease management, however, there's a lot of TPA's out there and I'm sure some of them do a great job.

[Guest skier1]

Thanks to you all. The contract has been reviewed by ERISA legal counsel - it is an ongoing process since we are negotiating still. I have 18 years in ERISA in private practice (it is remarkable the presumption I encounter that in-house are not experienced). However, we are struggling with actual language on how to motivate the TPA to effectively use its own touted programs and to come up with metrics that demonstrate this usage. As one of you stated, any incentive that operates to result in the TPA issuing denials to meet the targeted metrics is violative of ERISA and results in not only breach of fiduciary duty concerns but also a de novo review standard. Since we are in negotiations now, we have reached the following as strategies as we progress: 1) we construct a standard that has a penalty against their admin fees for not meeting the targets; 2) we construct a standard but no penalty- just use the metric for our own review with TPA and future negotiations (mid-contract review) or 3) if completely uncomfortable with this at signing time, we drop the provision in its entirety. The Last is unlikely.

[GBurns]

A suggestion.

I have found that many of the large public sector employers that I see, have very good performance clauses in their TPA contracts. Why not utilize the Public Records Law or just ask for a look at their RFP and contracts? You should be able to get some appropriate performance penalties wording. You should also note that most if not all have a simple built in incentive to ensure good performance.... If the job is not done right, penalties apply. In other words, the incentive for good performance is that the TPA gets to keep the fees and the contract. I doubt that you will find anyone who pays extra to get the job that they contracted for done in a competent manner.