A third party administrator isn’t, necessarily, a necessity for every business with a self-insured health plan or a retirement plan, but, for many businesses and business owners, using a TPA can be a cost-effective solution.
(Related: Advisors and TPAs Are Alike–and Differ)
When a business owner client is considering whether to use a TPA for a self-insured health plan, for example, the client should consider these three areas:
Analytics: Is the employer getting good data on enrollee health care trends?
Pharmacy costs: Is the employer doing a good job of containing specialty drug costs?
Wellness: Does the employer have a good program for preventing problems, and treating small problems, before small problems turn into big problems?
TPAs may not always have the answers themselves, but they have connections with the experts and vendors that do.
Another factor to keep in mind is whether an employer’s internal systems can handle the administration of a plan, and the tailoring need to meet the needs of each employee.
Going off some ‘one-size-fits-all’ software might initially relieve office stress, but, ultimately, that approach will probably fail to serve the best interests of the business.
A good TPA can customize a plan’s fit. A good TPA can also change the plan as the employer grows and changes, to make sure any employer or employee needs that develop will be taken care of.
A good TPA will also use customizable, adaptable technology, and work to keep the data secure from external threats and data breaches.
Finally, businesses and business owners must consider fiduciary responsibility, which TPAs are uniquely equipped to handle.
Complying with state and federal benefits administration requirements can be time-consuming at best, and the penalties for improper implementation can be hard on an employer’s bottom line. Now, Congress is working on a new round of legislation that threatens to turn everything on its head. Using a TPA is a good way for an employer to handle the uncertainty.
Zane Dalal is executive vice president of Benefit Programs Administration, a third party administrator based in Los Angeles.
— Read Are Retirement Plan Fiduciaries Required to Prevent Cyberattacks? on ThinkAdvisor.