TPA Administration Agreements

By Molly Mulebriar

The picture above (on Linkedin this morning) reminded me of an infamous Texas based TPA known for preying upon mostly rural, clueless employers by hiding turbocharged TPA fees on the claim side of the ledger instead of the fixed cost side of the ledger. These clueless employers don’t read their contracts………………or don’t know any better, or both.

For example, when quoting on a prospect the TPA will inflate the aggregate factors by $12-20 PEPM. Then when the sale is made, the aggregate factor decreases by the inflated amount and the difference ends up being called an Aggregate Expense Factor billed through the claim side of the ledger.

To add injury to insult, the TPA charges a per claim check fee of $7.50 or more much like a convenience store will charge to cash a payroll check. To turbo charge this per claim check fee the TPA will unbundle as many claims as possible into multiple claims to which the fee is applied.

All of this is on top of their declared TPA administration fee which, by the way, looks really good on a spreadsheet analysis of competing TPA’s.

The TPA also earns fees on everything else they touch, which is everything.

Under a recent Open Records Request we determined a 220 life Texas municipality was paying in excess of $250,000 in check cashing fees plus Aggregate Expense Factor fees and other fees. The total monthly PEPM TPA fixed cost exceeded $95 whereas a typical BUCA TPA administration fee is $35-$40 PEPM and a typical independent TPA fee is $15-25.

The city was unimpressed with our findings. “It’s how all the TPA’s get paid” they said.

The city finance director was adamant the fees were actually claims as that was where the charges appeared, not on the monthly fixed cost billing statement. “If it was a fixed cost, it would be on the monthly billing statement, not on the weekly check runs!”

Of course the city was pissed we asked for information under the Open Records Act in the first place. And, they were equally pissed we had exposed their fiscal irresponsibility and wanton squandering of plan assets. City staff came to hate us.

This is a classic case of Shoot The Messenger. It was quite effective as the city is still with the same TPA to this day.