Texas public school districts routinely employ third party administrators at no charge to act as a single source premium remitter with convenient online enrollment capabilities in return for the privilege of selling commission generating insurance products.
In these instances the TPA provides something of value in return for the promise of providing free Cafeteria Plan administration. “We will provide free administration along with an easy to navigate enrollment system if you allow us control of key products we select as your Agent of Record.”
There are some who believe there several problems with that…….
According to the Texas Department of Insurance – Commissioners Bulletin B-0004-08:
“The functions of the administrator are separate from the acts of an agent. These lines begin to fade during this process to the unsuspecting consumer. Administrators must separate the functions of the “enroller” from those of the “marketer.”:
“The language of the Insurance Code provisions set out in this bulletin prohibit an insurance company, insurance agent or agency with respect to the sale of health insurance from providing inducements to the sale that are not provided for in the insurance contract. Because many administrative services are not provided for in the insurance contract, they could constitute valuable consideration and an unlawful inducement or rebate in violation of the Insurance Code, regardless of whether they are provided directly or indirectly by regulated entities.”
A 1999 lawsuit involving a Cafeteria Plan administrator highlights some of these practices common among school district Cafeteria Plans:
“School districts, when considering policies to add to their cafeteria plans, will limit the number of options because of the administrative costs associated with collecting premiums and forwarding them to the various administrators.…….Thus, in marketing insurance (TPA) could approach a school district with the offer that they could forward all (TPA)-marketed premiums for them to organize and pay the insurers. In this way, (TPA) would be able to market a much higher number of products to school districts because school districts would not need to consider the administrative costs of managing premiums if they were to include additional (TPA brokered) products in their cafeteria plans. Generally in the insurance industry, marketing functions and administration functions would be performed by separate companies to avoid a conflict of interest from these functions.”
Texas public school districts would be wise to reevaluate their Cafeteria Plans and consider separating the role of administrator from that of the enroller of products.
There are independent TPA’s that will act solely as a single source remitter and Cafeteria Plan organizer with online enrollment capabilities who do not require products. Local independent insurance agents are thus free to compete for the business whereas most have been unable to do so in the past because of the TPA’s stranglehold on benefits tied to administration.
Region I Education Service Center has done exactly that by engaging an independent Cafeteria Plan administrator through a competitive RFP process, independent of products, with the goal of separating the role of administrator from that of the seller of products. Products were bid through a separate RFP process:
REQUEST FOR PROPOSALS
Date: April 27, 2024
Proposal Category: TPA SERVICES FOR CAFETERIA BENEFITS PLAN (IRC 125), 403B, COBRA, AND FSA ADMINISTRATION
Proposal Number: 24-0150
The Region One Education Service Center is soliciting request for proposals from firms (“Respondents”) for the selection of TPA Services for Cafeteria Benefits Plan (IRC 125), 403b, COBRA, and FSA Administration in accordance with the terms, conditions, and requirements set forth in the Request for Proposals (“RFP”) Statements for consideration by the Region One ESC.
Region One ESC Purchasing Department will requests for proposals for TPA Services for Cafeteria Benefits Plan (IRC 125), 403b, COBRA, and FSA Administration RFP 24-0150 electronically through the eBuyOne Bonfire portal: https://esc1.bonfirehub.com/portal/?tab=openOpportunities no later than 3 PM local time, Wednesday, April 24, 2024. Late submittals will not be considered.
Questions/clarifications regarding this RFP must be submitted in writing through the “Ask a Question” section located within the bid solicitation available through the eBuyOne Bonfire portal: https://esc1.bonfirehub.com/portal/?tab=openOpportunities no later than 3 PM, Friday, April 19, 2024. Questions/clarifications regarding this RFP will not be answered by phone. It is the Respondent’s responsibility to view the webpage regularly, or prior to submitting a response, to view any response(s) to question(s) issued for this solicitation.
Resources for Respondent’s regarding eBuyOne can be found at www.esc1.net/eBuyOne.
