Archive for July 10th, 2009

TPA Maximizes Revenue Stream

Friday, July 10th, 2009

A Texas based TPA has fine tuned the art of maximizing lucrative revenue streams on unwitting employers. They employ a strategy of disclosing low administrative fees to gain the business, while hidding other fixed costs on the claim side of the ledger. Their contract includes a claim transaction fee on top of a pepm administrative fee, which is highly uncommon in the industry. Claims are unbundled as much as four fold and the claim transaction fee is applied to each. An “aggregate expense factor” is billed by inflating the aggregate factor in their proposal, then upon the sale they lower the agg. factor by as much as $12.50 and call that an “aggregate expense factor.”  When you add up all the fees, this TPA earns as much as $50 pepm and as much as $90 for each family unit per month. This, compared with the usual $15-$25 typical TPA fee, is outrageous.

The PBM contract is between the TPA only, with spread-pricing  which drives the group’s Rx costs up by as much as 62% (we documented this on one case).  Duplicate claim processing is charged at $25 per claim, in addition to the other fixed costs within their contract. And finally, upon renewal, the TPA presents a new administrative contract with a TPA name almost exactly the same but it is actually a different Texas corporation. The new contract states that they are not liable for anything the prior TPA may have done wrong.

This TPA preys on political subdivisions. They have brought the art of politics to a new level within the insurance industry.

PPO Fights Back Against Cost Plus Scheme

Friday, July 10th, 2009

A well known PPO network, concerned about their relationship with network hospitals, has decided to boycott any group that implements a cost-plus hospital reimbursement methodology. Notice has been given that any existing group that has implemented the cost-plus scheme must make one of two decisions: 1). drop the cost-plus scheme entirely or 2). PPO network will cancel their contract with the employer.

One wonders who the PPO network really represents? Do they represent the employer, or the hospitals that apparently can “make or break” them?

We think this PPO is short sight at best. Competing PPO networks are joining the fray, agreeing to work side-by-side with employers who use the cost-plus approach.