How to carefully evaluate third-party administrator pricing

TPA pricing ranges from a single administrative services fee to a menu of services with separate prices, making it difficult to make side-by-side comparisons.

“It's like going to the grocery store and looking at the fruit stall: apples, oranges, peaches, pears,” said Fred Hunt, active past president of the Society of Professional Benefit Administrators, a Chevy Chase, Md.-based national TPA association.

Donald Mollihan, a partner at Phoenix-based Arizona Benefits Consultants L.L.C., has seen TPA prices for claims administration as low as $14 and as high as $25 per employee per month.

Depending on its size, an employer group could be charged $30 to $50 per month per employee for all administrative, network and care management services, said Carol Berry, Woodland Hills, Calif.-based chief operating officer of the Health Care Administrators Association, whose members include TPAs.

Adam Russo, co-founder and CEO of The Phia Group L.L.C., a Braintree, Mass.-based cost-containment and consulting firm, said price should be the last thing employers consider.

One TPA may have a lower administrative fee, but if it relies heavily on computer software to pay or deny claims with little human intervention, a company may end up paying more on claims than it should, he said.

“I would rather be with an administrator who's a little bit pricier for admin fees, but I know they have checks and balances in place,” Mr. Russo said.

He also thinks employers focus too much on provider network discounts.

“Thirty percent off a number — and you don't even know what it is — may or may not be better than 10% off another number,” he said.

Mr. Mollihan asks TPAs for a breakout of costs and compares options using a spreadsheet. “You have to look at what's included in their fee structure,” he said.