How Do You Evaluate Cost Plus Insurance Through Competing TPA’s?

mulebriarBy Molly Mulebriar

Two competing TPA’s are quoting Cost Plus / Reference Based Pricing / Medicare Plus for ABC Fence Company in Brownsville, Texas. How does one evaluate these offers to determine  best value?


Since claims account for +80% of plan costs, let’s start by evaluating network PPO “discounts.” Oh, but wait, there are no PPO “discounts” to consider since ABC Fence Company left the managed care world several years ago, employing  cost plus strategies in reimbursing medical care givers instead.

Ok, then let’s compare claim reimbursement “discounts.” Which TPA has the best claim pricing under Cost Plus? Wait a minute! Both use CMS reporting to establish cost. Hmmmm……then let’s compare which TPA has the best Medicare pricing! Oh No, can’t do that  either can we! A claim is a claim is a claim and Medicare reimbursement rates are the same for both TPA’s. So is cost-to-charge ratios as reported to CMS.  A hospital claim billed at $100,000 re-priced under Medicare to $15,000  produces the same number for both TPA’s.

Neither TPA has the cost advantage relative to claim values. I guess we will have to compare fixed costs to determine which TPA has the best value.


TPA’s are record keepers, nothing more. TPA fees, industry wide, average $20-$25 PEPM. Such a small cost element when considering overall spend. Hmmmm………..what other fixed costs can we examine?

How about audit/ legal indemnification / patient advocacy fees.

Hospital claim audits are core to the success to any cost plus plan. How do audit fees stack up?  Both TPA’s outsource audit functions to third parties. One TPA’s audit partner charges 12% of gross billed charges for hospital audits (25% of fee kicked back to TPA as a commission), while the other charges significantly less. Based on last year’s audit fees alone, ABC Fence Company would have saved over $100,000 for the year.

Since audit fees are so low with one proposal, or too high with the other, what differences, if any, are there in services to be performed? Now it is time to look at the contracts.


An experienced lawyer can be an important resource in analyzing contracts.  So we employed one. The findings show that each contract was significantly different in key areas, primarily related to Plan Sponsor liability. In this case, the proposal with the highest cost was the proposal with the weakest contract – this double whammy mark compared against the other proposal made choice between both offers an easy one.


There are other considerations to review in evaluating these proposals that can be just as important as the areas discussed above.  An expert independent fee based insurance consultant can assist a Plan Sponsor in the evaluation process. It is always in one’s best interests to consider quality options.

Editor’s Note: Molly Mulebriar of Waring, Texas  is an independent forensic auditor, free-lance reporterette, seasoned private investigator, and second runner up in the 1985 Miss Texas Beauty Pageant. She was Texas state champion in the pole vault at Myers Stadium at the Texas Relays of 1986, setting the women’s pole vault record in the Southwest Conference. Mulebriar is a frequent contributor to this blog. Visit her website at . For additional information on Cost Plus Insurance ( )  type in “Cost Plus” in the search box on this blog to review postings such as