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ATLANTA-Third-party administrators are fighting for survival in a shrinking and highly competitive marketplace.
The Health Insurance Portability and Accountability Act isn't helping, with rules that could eliminate the need for some TPA services.
To stay alive, TPAs are going to have to diversify their services and find ways to overcome HIPAA's impact, according to Dorothy M. Cociu, president of Advanced Benefit Consulting in Fullerton, Calif.
"It's time to start marketing yourself," Ms. Cociu advised, because employers are going to want more than the administrative functions TPAs traditionally have provided.
Ms. Cociu, a former TPA, pointed out during her presentation at the Self-Insurance Institute of America Inc.'s conference in Atlanta that the number of employers needing TPA services is decreasing, particularly in the midsized market.
"It used to be easy to have a 150- to 200-life client," she said. "And we've noticed a decrease in those size clients who are self-funding."
That's partly because of competition from health maintenance organizations luring employers to leave self-insured arrangements or decline to self-fund, Ms. Cociu explained.
A lot of administrators who made a good living in that size market are hurting today, she said.
That market has been "drastically affected by HMOs," Ms. Cociu remarked.
Larger, more sophisticated cli-ents have taken on the administrative burden themselves, further stripping business from TPAs. "They're saying, 'We don't need you anymore; we can do it ourselves,' " Ms. Cociu noted.
Market factors such as insurer consolidations also are taking a toll. As the number of insurers decreases, they need fewer TPAs to provide services. And some employers choose to contract directly with insurers for administrative services.
A major challenge facing TPAs is to unravel the regulations in HIPAA.
"Read it," Ms. Cociu told TPAs. "Especially the parts that pertain to electronic data exchange and administrative simplification."
Those two sections of the legislation emphasize its attempt to eliminate claims administration by third parties, she said.
"The government's goal is to eliminate paper," Ms. Cociu explained, and the easiest way to do that is to change the administrative process. HIPAA calls for electronic submission of health care claims and other information, which will reduce the need for TPAs who handle paper submissions.
"If you're not ready to move into the electronic age, you had better think twice," Ms. Cociu warned.
Under HIPAA regulations, the Health Care Financing Administration must develop standards for electronic submissions by February 1998.
Because HIPAA encourages health providers to submit claims directly to insurers, fraud could become a problem without TPAs' monitoring efforts.
Doctored electronic submissions are harder to detect than paper claims with different type styles or information that has been altered with correction fluid, Ms. Cociu pointed out.
What can a TPA do to overcome some of these survival threats?
"Talk to your legislators," Ms. Cociu urged. "They need to know the dangers of oversimplification."
TPAs will have to diversify their offerings, "providing more services to keep clients happy," she said. "Employers are going to need more from you in the future."
HIPAA won't eliminate TPAs if the TPAs can provide services related to the legislation, she said, marketing themselves as full-service HIPAA administrators.
While electronic claims submissions could cut into TPAs' business, they still can provide administrative functions related to certificates of coverage required under HIPAA or administration of COBRA benefits.
Ms. Cociu said other administrative services TPAs should consider, if they aren't already offering them, include those related to disability management, 24-hour coverages, vocational and physical rehabilitation, return-to-work programs, employee assistance programs, mental health and crisis management, benefit design and plan document preparation.
Employers increasingly are outsourcing human resources functions, providing a need TPAs can fill. "I've seen human resources departments go from 12 people to three people literally overnight. . .
They're having to outsource. Who is in a better position than their administrator to step into some of those HR functions?"
Ron Woods, president and chief executive officer of Healthcare Solutions Group in Muskogee, Okla., moderated the session.