AH101 - Health Benefits 101: What's a Third-Party Administrator (TPA)?

Transcript

Lightly edited for clarity.

[00:22] Justin Venneri: Hello everyone, and thank you for joining us for a new episode of the Astonishing Healthcare Podcast. This is Justin Venneri, Senior Director of Communications at Judi Health, and I've got two of my colleagues in the studio today for another Health Benefits 101 discussion. Before we get into it—and forgive me, guys, bear with me for a second—and for all the podcast purists out there that are like, "It's gotta be weekly," we are trying out every other week for a bit here. If you don't love that and you want the new Astonishing Healthcare Podcast, hit me up, let me know, and I'll see what we can do.

But once we hit 100, and given how busy things are to start the year here, Keith, Laura, Jackie, the team, and I were like, "Let's just take a minute and figure things out." We gotta try some other new stuff out. And here we are. So this episode, welcome Mike Tate back to the show. You were our guest for episodes 66 and 78. 66 was welcoming you to the company, really. And then 78 was more about Judi Health and the unified benefits experience with Dr. Sunil Budhrani. And so that actually flowed really nicely with what we're doing here.

And Mark Pearce is with us too, Director of TPA Operations. So perfect for this episode. Mark, thanks for joining us.

[01:25] Mark Pearce: Of course. Great to be here.

[01:27] Justin Venneri: Mark, since you're new to the show, you get to go first. Please share a bit about your background. What was your path to Judi Health like? And then just tell us a bit about your role.

[01:35] Mark Pearce: Yeah, so I had a little bit of an interesting path here. I actually spent the better part of 12 or 13 years in the finance industry. I worked in asset management. I worked in the hedge fund space, the PE space, and private wealth management. Mid-2000s, I ended up jumping off, moving over to the healthcare side. I was always a bit techie, worked on the product side, and got into the TPA space. I love it. I thought it would be a little more simple than private equity. Turns out I couldn't have been more wrong. Healthcare is really complicated, so it always keeps you on your toes. And I had heard about Cap Rx and I heard they were wanting to build out the medical side of things and build out a system to adjudicate claims and to manage medical benefits. I jumped at that opportunity, and now I'm here a year later, and we've launched two clients now and have been running our own plan for over a year.

[02:36] Justin Venneri: Thus Judi Health. Welcome, Mark, glad you're here and definitely share some of that experience with you. I echo that. Coming from financial services into the PBM space, I was like, "Wow, this is more complicated than I had thought it was." But it's been fun.

[02:50] Justin Venneri: And Mike, quickly, in case anyone didn't know you or doesn't know you or didn't listen to your episodes, give us a quick background story.

[02:57] Mike Tate: My background is really a little bit different than Mark's. You know, prior to Capital Rx coming here about a year ago, I was with a couple of the Blues plans based out of California and had the opportunity to be there on the national account side. Prior to that, I've had a unique journey kind of seeing healthcare from multiple different lenses and angles. Stop-loss, ran a TPA for a few years on a national level, and you know, had the fortunate opportunity to learn this business from the consulting side. So from the frame and lens, I'm able to really kind of apply a number of different viewpoints to where we are today with Judi Health and Capital Rx, looking at it from a PBM perspective, from the Judi Health and medical side, and kind of how we bring all of it together here in a very unique way for our market and for our clients and consultants and brokers. So excited for the conversation today.

What is a Third-Party Administrator (TPA) in Healthcare?

[03:45] Justin Venneri: Likewise. So Third-Party Administrators, TPAs. And I know it's funny with these 101-level discussions we always try and make them a little bit entertaining, educational, but also have some stuff for the more advanced listener in this case—or reader if you're going to check out the transcript on our insights page. What is a TPA is the softball to start this one off. Which one of you wants to take that? Mike, how about you since you ran one, want to go with that? What is a third-party administrator?

[04:10] Mike Tate: Yeah, sure. You know, I think in the most basic form or basic definition, a TPA in the healthcare space—their responsibility is to deliver administration for a self-funded employer of their healthcare plan. To bring in claims from multiple different areas and to administer that claim and see that that claim is properly paid, right? Properly flows from the network, properly applies employee, employer, copays, deductibles, coinsurance, all of the elements that come into play there, and that the financial health and well-being of the plan is upheld. And so a TPA's role is as the enforcer, I would say. That's a little bit of an aggressive term, I suppose, but it's the enforcer of the employer's plan document. The employer defines what their plan is, hires the TPA—and there are multiple different types of TPAs, I think Mark's going to take that one on—but hires the TPA to administer and enforce the plan document that they define. And then they bring together the multiple different elements of their healthcare plan, maybe the network and Point Solutions and Stop-Loss and PBM and all of these other components. They bring them together to activate those decisions and those partners to make them all work together.

Are there different types of TPAs?

[05:28] Justin Venneri: I like the way you describe that because I think when I think about it, when I got here, oh, there's a pharmacy benefit manager (PBM), there's the health plan. And then you have this other middleman. When you do the search online, you see TPA is another middleman and it's like, okay, national-level independent. Mark, talk to us a little bit about the different types of TPAs that are out there for self-funded employers.

[05:49] Mark Pearce: I would say there are two major categories of TPAs. There are in-house TPAs or ASO offerings. So any of your larger networks, right, they can go sell directly to any employer and say, "Hey, we will help you build out your plan, we will allow you access to our network, and we will process your claims." When your members have a question, they'll call us and really just kind of facilitate that entire relationship. And it's a branch of the network that is actually functioning as the administrator as well.

The other side of that is there are independent TPAs. So TPAs that can go and work with one or any number of networks and say, "Hey, we have a set of clients that we want to provide administration for. We would like to give them access to your network." And in that case, and that's really what we're doing on the Judi Health side, is we do work with different networks, we work with different clients. And depending on where you are, there's not one right answer as to which network will work well for you or your employees, especially when you have employees that are spread out across the nation. But we get those arrangements set so that we can offer access to that network. And then instead of, let's say you're on a Blues plan—if you are on a Blues plan and you are through an independent TPA, when you have a question, generally you're not actually calling into the Blues plan to get your answers, you're calling into the TPA.

So we adjudicate the claims, we provide the customer service, we provide the actual member apps and those portals where you can go, you can see your benefits, you can track your care. And depending on how involved they are, some TPAs do facilitate provider payments. Some TPAs also get into the eligibility side of things and actually collecting premiums, managing your COBRA enrollments, FSA, HSA. So there's a very wide net of what a TPA can do, and so much of that is intertwined with, "Is this going directly through a network which is more the strict medical focus versus more of a holistic benefits platform?"

How important is technology to - or for - a TPA?

[08:17] Justin Venneri: That's really interesting when we talk to former plan sponsors or when we're talking to our clients and we say that we understand that you're busy and you have a lot of different pieces of the benefits puzzle. This TPA function, this third-party administrator is kind of trying to help aggregate everything. Talk to me a little bit, Mike, about the underlying way they do that, the technology, if you will. Does having a modern tech stack help or does the technology that all these platforms run on differ?

[08:44] Mike Tate: Technology, much more now than when I was on the TPA side, I think has become far more prominent and I think has become more relevant in the market and in decision-making for plan sponsors than it ever has. When I was on the TPA side, plan sponsors didn't think anything about a claims administration platform. Right? It was just kind of a function of the platform that the TPA used. Today, it is a core element for plan sponsors because it does drive many other aspects of administration. It drives customer service, it drives the ability to be more efficient in terms of implementation, benefit changes, and plan designs, or plan design administration makes it far more efficient than it was before. Activation of point solutions, right? There's a fatigue of point solutions. There are a lot of them out there; the ability to actually bring them together, data activation—all of those things 10 years ago, while they were important, were very much emerging.

Today, what is happening with many TPAs is you have kind of end-of-life claims platforms. They're very old and they are starting to evaluate what is next. And so they're starting to look at what are modern claims platforms out there. And that is where Judi® is designed to potentially support those TPAs in evaluating and, you know, can Judi be a claims platform that could take them into the next stage of modern administration optimization? Being able to take their internal operations from a tech stack perspective forward and continue to move forward into the future, activating technology, activating elements like care navigation and member engagement that are becoming far more critical in decision-making for plan sponsors. As they are not only making decisions that are financially driven in terms of claims, in terms of network discounts, in terms of some of the plan designs that impact financial outcomes, but also looking at affordability and total cost of care elements. And those are all of the other aspects of healthcare that also impact the financial outcomes as well.

[11:04] Justin Venneri: I was kind of nodding along with you there as you were explaining that. And I'm curious, Mark, how are TPAs and their clients limited by those platforms? The way Mike was just describing the way that technology helps things kind of come together and as part of that, if you don't mind, you both brought up the network a couple of times. Is the network really like the core thing that the TPA brings to the table? Or what are the maybe one or two core things that a TPA really does? AJ always talks about the hundreds of little things that a PBM as an administrator does on the back end to make sure that the benefit runs smoothly and they can actually use their benefits and that everything works together.

Related Content

• AH080 - Health Benefits 101: The Importance of "Smart" Care Navigation, with Andy Kageleiry
• Replay: The Future of Health Benefit Design: How Judi® Powers Seamless Care and Better Outcomes
• Judi Health™ Earns Best Healthcare InsurTech Solution in the 9th Annual MedTech Breakthrough Awards Program

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[11:43] Mark Pearce: I would say the network isn't the thing that a TPA brings to the table. It's kind of the table stakes. It could be a Ferrari, but if you don't know how to drive, then you're going to crash. And the TPA I think mainly functions as the organization that can put together the right workflows, work with the client on the plan design, on the access, on areas where you may want to look at additional coverage or specific coverage.

Like for instance, I've been doing this a while. If you have, let's say, a video game development company, they may have some very different needs, plan-wise and utilization-wise, than somebody that is say in like agriculture or manufacturing. And I think one of the biggest things that limits TPAs and what they are able to do for clients on these legacy systems is the ability to build a customized plan. It's almost like playing with Legos, but you're only given a couple of different size bricks so you can only rearrange it so many ways. A lot of the legacy systems would allow for say a multi-tier network where you have a tier one which is your kind of preferred providers and that may have come from the network itself. It may have come from a subset of that network. "These are who we think the best providers are and you'll get a lower rate if you go here." Then you have your regular network and you're out-of-network.

Now most of these older systems, that's all they can really handle. And they're not able to go and configure plans where you can easily track, say, visit limits or you can easily track lifetime spend limits or be able to configure Centers of Excellence for specific types of care. And really pull together not just, "Hey, here's overall who we think the top 5, 10% of our providers are," and then there's the rest of them. It's looking at, okay, let's zoom in on cardiac, let's zoom in on bariatric, let's zoom in on dialysis and cancer care. Well, we can zoom in on all of those and we can pull, "Here is the top 10% for those specific high-touch, high-consequence conditions," and pull those into a network itself. Instead of looking at things broadly. And really with that capability, as you look at the way that technology is expanding, not only can you be more transparent about it, but you can weave together national networks and build a plan based off of those. That's not only going to save the plan money and the member money, but it's also going to be a better experience and you get better outcomes.

[14:39] Justin Venneri: It sounds like it would be better for the providers on the other end of it too. Things move more quickly through and are more integrated. It seems like a win-win.

[14:46] Mark Pearce: It is. That's a big piece, Mike. I know we've had come up a couple of times of where do the providers sit in all of this. I feel like they are ignored quite a bit.

[14:55] Mike Tate: Yeah, I mean, I think healthcare is different and unique for everybody. It's different for every employer; inside of every employer is different for every member and user. And it's our job to make that experience for each employer, our client, and every member the best that we possibly can. And I think to Mark's point, the network is an element of healthcare and it's our job to ensure that the network works in the best possible way for the user and to bring that to life. The Judi platform enables us to bring that to light. Judi is the engine. Judi Health are all of the services that we can wrap around Judi - whether that's the medical services, the PBM, all of the customer care and clinical that we can bring to an employer, a payer, any of the multiple different types of clients and markets that we can work with. And that is unique for Judi Health. It's not just the employer. We can partner with payers and health plans to support their needs as well.

Questions to Ask When Evaluating a TPA

[15:59] Justin Venneri: If someone's looking to understand, like going a little deeper on TPAs, try not to get too sales-y. And I know you're just trying to explain what we're doing, which is great because I think it's interesting, I didn't really understand. And I'm wondering what you guys would tell someone. Like, hey, there's one or two things a TPA does that if you're evaluating a TPA you should ask about because there it's like an important or underappreciated aspect of what the TPA brings to the table. What would you say, Mike? What's one thing a TPA does that someone might not realize a TPA does that you think is important?

[16:25] Mike Tate: I think every single TPA has one or two things that they really, really lean on hard that they have kind of built their "why" on. Whether that is the customer experience and kind of the digital front door, whether that is data and analytics. You know, for us, we want to be a great administrator. We want to ensure that claims are administered well, that we deliver to the financial outcomes and the outcomes that the client has hired us to deliver on. And that is bringing together and coalescing all of the elements that we were just chatting about and that Mark was elaborating on as well.

So I don't know, quite frankly, Justin, that there's one thing that I would say every TPA does necessarily well. I do think when evaluating a TPA and looking at what TPA makes the most sense, the question you have to ask is: "Does this TPA understand my need? Does this TPA understand what I want to accomplish and at the end of the day enable me to get there so that when I do get there, the outcome is, did I make the right decision?" Do I have the information to be able to make an informed decision going forward? And is that a long-term partnership? Not every TPA can do that or does do that. Our goal is to be the long-term partner.

[17:44] Justin Venneri: Is that because you were describing how the populations can differ or is it just a function of alignment or is it something else that's missing?

[17:52] Mike Tate: You know, Justin, it's a great question, man. I think, as Mark said, the TPA space is very broad. You have carrier-owned, you have independent, you have large-market focused TPAs and small-market TPAs. Right? And so I think an employer plan sponsor also needs to decide what type of TPA fits best for them and really kind of do that analysis of what are the important elements of that TPA that checks those boxes. And look, there are other key variables that are also involved. Right. You have the TPA, you have generally a consultant and a broker. You have the employer or the plan sponsor that are also involved in that conversation.

[18:33] Mark Pearce: Yeah, I think there's one thing that a lot of people would probably be surprised to learn that is one of the core functions of a TPA. So we've talked a lot about the TPA's relationship with the plan sponsor and the TPA's relationship with the member. But the TPA is also the one that is taking the calls from providers. And when you go to the doctor and they're trying to check "is this covered, is this not covered," that's who they're calling. And that's also who they're going to call if you have a service that's denied or if you have, say, a prior authorization didn't come through. Right? The TPA is the one that the provider is going to call as well.

So just as much as the members are what I would consider our clients or our members, providers are too. And we have to make sure that they're getting the support they need so that the provider is not coming after you for something that was denied, that shouldn't have been denied. So there's a lot of pieces, I think, on that side and it's really making those things work in concert where you understand what the needs of the employer are. And there are employers who, you know, you're looking for the cost savings, you're looking for the widest coverage. Maybe it's something where you have an employer who is really, really concerned about preventive medicine or about mental health. And being able to take those pieces and work with them on, "Okay, well, you know, you're in a very, very high-stress industry. If you want to really like beef up that mental health support, here's some different options we could look at." Whether that's in-person, if it's telemedicine, an interactive case management kind of program where there are partners that are available that will work with them for that same thing, for things like fertility, for things like cancer treatments and screenings and genetic screenings. All of these pieces are options and it's really up to us to work with the client on obviously, what are those cost goals? Healthcare isn't free. We all know it's not free. We all know it's pretty expensive nowadays. But there are ways to achieve those savings and still do what is right for their employees and make their employees want to stay there and genuinely love their benefits.

TPA Pricing Models and Fee Structures

[21:11] Justin Venneri: Do all TPAs charge the same sort of prices? Like how do you evaluate the fee structure or how you're paying your TPA for the services they provide? Mike, you want to take that one?

[21:23] Mike Tate: I think most have similar models. Most charge on a PEPM (Per Employee Per Month) basis. You know, it'll vary depending upon if they're a TPA that is aligned with a carrier versus others. And there are different models and how they'll price out their services. But in general, most TPAs have a similar pricing model. When doing an analysis in terms of fees, it's very much all over the board, dependent upon the size of the client, dependent upon the types of services that a client may be looking for. Some are very a la carte, some are very kind of total, all-encompassing. Our model is more on the all-encompassing side, you know, very similar to our PBM practice where we just want to be transparent. Admin fee. This is what you get for it. We just want to be very clear and direct in what we charge.

Astonishing TPA Stories

[22:12] Justin Venneri: That's great. And Mark, I got one more question for each of you guys. I'm going to go right to the last question. You've been generous with your time. Appreciate your insights here on understanding what TPAs do, how kind of how they work, and how to evaluate them a little bit. Mark, what would you say is one of the more astonishing things or surprising things you've seen in helping people set up these workflows, connect with all these vendors? Tell us a good story or a surprising thing about the TPA space that you think plan sponsors out there, or another TPA that might be listening or a broker or consultant, could take away from this call just to help them kind of work their next process better.

[22:50] Mark Pearce: I would say I think probably the most interesting plan I was ever part of the implementation for, it was a toss-up. Going back to that—everybody obviously wants to give good benefits, but we also have to stay within budget for this plan. And we were able to go through and construct the, we'll say the network arrangements, in a way that did not result in any higher premiums, actually resulted in wider access and greater ease of access to care, looping in different specialty centers and really taking a focus on the preventive care and engagement.

I think that is two massive pieces. When people talk about preventive care or point solutions or these different programs that you add on, I don't know that there is a program out there that I could say is not a good program. I think where those fail is getting the engagement from members and getting to the right members. And when you're on a modern platform, the best thing we can do is we can integrate with them. We can share information. For instance, on the Judi Health™ side, we have the pharmacy claims, we have the medical claims, we can share those out with these different partners. So let's say there's a point solution that is doing diabetes management. They're able to see what medications are being dispensed on the pharmacy side and what care is happening on the medical side, as well as being able to track has there been progression, are there maybe events that are related to this where we can jump in and help guide that member through it so that you don't have the higher cost later.

It's always easier and cheaper to prevent a disease than when you get to an ongoing spend once that's taken hold. I mean, even just looking at type 2 diabetes, that's a few hundred bucks a month minimum to manage once it's gone there. But if you can share that information and if you can engage members and make sure they know that these programs are available, then you don't go from the obesity to the pre-diabetic to full type 2 diabetes. You can catch it earlier on and it just, I think, improves people's lives in general. One of the other pieces about some of these legacy systems is there are still systems out there that people are using today that have not gotten an update in over 20 years. There's one that hadn't been updated... the last one was for Y2K. So there's a lot of just inherent limitations of it may be functional, but it was functional 26 years ago and hasn't changed since.

The "hundreds of little things" in health benefits administration.

[25:43] Justin Venneri: Yeah, that, that is truly astonishing. All right, thanks for sharing that with us, Mark. Mike, same question to you. Send us off with an astonishing story of sorts or tell us just a surprising or interesting take on TPAs.

[25:55] Mike Tate: Yeah, I think you mentioned something earlier that AJ has said before and I think it really applies here. Right. Healthcare is a hundred little things that happen. AJ says it on the PBM side and I think it applies equally on the TPA side and it applies equally on the healthcare side. It's a hundred little decisions, it's a hundred little things that happen. It's a hundred small little elements and big little elements that have to happen, that have to come together to make it work. What makes Judi Health so unique and so powerful is the ability to bring all of those little and big elements and decisions together and activate them and make them work. Simplify all of those things for the plan sponsor and the member so that on the back end they can understand why did they make the decision that they did? Why did the claim happen the way it happened? Why is the data telling us what it's telling us? And then they can make decisions going forward for the next hundred.

And I think that's the power of Judi and that's the power of Judi Health and that's the ability for Capital Rx to bring the PBM element together and that's the uniqueness of Judi Health in bringing the unification of medical and pharmacy together. It's those hundred small things on the PBM side and those hundred small things that happen on the medical side and bringing them all together and not preventing all of those things from happening because they are going to happen, but distilling them down and simplifying them for the plan sponsor and the member so that healthcare—because it is really complicated and it is really disruptive for all of our lives, right? Totally. But simplifying all those down so that when it does come time to evaluate and we all have to have a moment in a year, a quarter, a month to evaluate, we can make really quality, informed decisions on what the next hundred are.

[27:48] Justin Venneri: It is definitely a more complicated thing than this discussion and you know, thinking about unbundling and bundled all the different options that employer plan sponsors have, and we talked about some of that with Kristen Begley last year too [on AH067 - Aligned Health Benefits and the Freedom to Unbundle, with Kristin Begley, PharmD]. You know, really thinking how things come together to make better decisions for the members is what it's all about. So thank you guys both for your time and explaining what a TPA is, what a TPA does. And I look forward to staying in touch and hopefully having you back on when we have more data and examples of how things work or can work.

[28:17] Mike Tate: You're welcome. Thanks, Justin, for having us.

[28:19] Mark Pearce: Thanks.

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