The situation: The Alagassi Companies use a broker for their insurance needs. The broker chooses where to submit the business – sometimes it’s directly with the carrier, but many times there is a third party intermediary such as a wholesaler or a third party administrator. There is no difference in cost for the company purchasing the insurance. A broker chooses either a wholesaler or a third party administrator (TPA) based on additional services that can be received from that organization. A wholesaler typically does not remit payment to the insurance company because the insurance carrier bills the customer directly. The organization processes renewals, runs quotes, and handles problems on behalf of the client.
A TPA typically submits payment to the insurance carrier on behalf of the client, thus creating another level between the client and the carrier. In fact, it would not be unusual for the TPA to do the billing, rather than the carrier.
The problem: In this case, the Alagassi Companies were using a TPA through their old broker, thus submitting payment for their health insurance premiums to the TPA. The TPA unfortunately was not remitting payment to the carrier, so the employees all received a notice that their coverage was canceled. The client was embarrassed – and furious.
The solution: If this is the process your company uses, make sure you ask your broker if they use a wholesaler or a TPA. It is always better to submit directly to the carrier to avoid these potential issues. With online technology, direct debit payment availability, and other useful tools, there is no need to have an administrator collect the money. You want broker representation without multiple layers.
If we were the health insurance ambassadors: We would not allow third party billing and collection of premiums. All insurance carriers should be paid directly from the customer, thus alleviating cause for delay and loss of money.
The painful truth: If you are submitting your payments through a third party vendor, do not assume that your premium payment has reached the carrier – even though you have a canceled check. Yes, it’s sad, but true.
We encourage you to share your insurance nightmares with us! Send an email to firstname.lastname@example.org.
Stephanie Cohen and Scott Golden are the co-owners of the health care benefits firm Golden & Cohen. Cohen can be reached at email@example.com. Golden can be reached at firstname.lastname@example.org.
Want more? Check out past chapters in this series: