Periodic requests for third-party administrator proposals can benefit employersReprints
Last May, the City of Manhattan, Kan., began soliciting proposals for a third-party administrator to provide services this year.
With the exception of 2007, the incumbent for the city's group health plan had served the city from its Wichita, Kan., office since 1998 under various names and owners, most recently as Harrington Health Services Inc.
Tampa, Fla.-based HealthPlan Services purchased Harrington Health in March 2011. With the latest ownership change and subsequent staffing cuts, the city no longer thought it was receiving the same level of service and decided to seek new bids, said Cathy Harmes, director of human resources.
“It grieved me greatly to have to do it,” she said, but it had been five years since the city had considered a new TPA request for proposals.
Harrington submitted a proposal, but it did not make the final cut.
“We greatly enjoyed our relationship with them. We were definitely sorry when they decided to terminate their relationship with us,” said Larry Schmidt, vice president of claims, in Harrington Health's Westerville, Ohio, headquarters.
With several years of self-funding experience, Manhattan officials knew they wanted to preserve certain elements of their 800-member group health plan.
With its new TPA, Overland Park, Kan.,-based CoreSource, a unit of Trustmark Mutual Holding Co., the city retained its grandfathered health plan status and saved roughly $70,000 in fixed costs over 2012. The city also negotiated a new stop-loss agreement that will save $700,000 this year.
Harrington's proposal, by contrast, projected a 25% increase in fees for 2014.
CoreSource provided continued access to Cigna Corp.'s preferred provider organization network, minimizing employee and dependent disruption while keeping the city's wellness plan. It also continued the city's prescription program and manages direct contracts with local hospitals, physicians, surgeons and other providers — a critical element that yields “better discounts than we could have gotten through Cigna,” Ms. Harmes said.
“Do your analysis,” she advised employers looking to change TPAs. Pay close attention to provider discounts and make sure the service agreement language is acceptable before signing the contract, she said.