TPA Administrative Services Agreement

By Bill Rusteberg

Yesterday we reviewed a TPA Administrative Services Agreement. It was same old same old until we got to page 13.

Page 13 disclosed fees to be paid to the TPA and vendor partners. In flabberghastation, I quickly went to the signature page to see if the Plan Sponsor had signed it. Surely I thought, no one in their right mind would ever, ever agree to these egregious fees.

I was wrong.

The only good thing I can come up here with is……….at least it’s transparent!

There are fees to be earned here, there and everywhere. Here are a few examples:

  1. TPA admin fee of $73.95
  2. TPA earns $756 on every specialty drug and $144 on every brand name drug
  3. TPA earns up to $20,000 for organ transplants
  4. TPA earns 15% of total revenue earned by RBP vendor (enormous)
  5. RBP vendor earns 12% of gross billed charges
  6. TPA earns 3% stop loss insurance override
  7. Broker earns $35 pepm

This reminds me of a case we acquired some years ago. It was a family owned bank in north Texas. They were with a New Jersey broker who had put them with a Texas based TPA. You wonder why a New Jersey broker was working with a Texas rural family owned bank? (You can’t get there from here). The broker and owner had met on a cruise off South America. He impressed the banker so much that next thing you know they were doing business together.

But after a few years things just didn’t seem right. We were called in to examine their plan and provide recommendations. The broker had loaded up fees everywhere he could particularly in the TPA’s admin fee. That fee alone was $45 on top of the TPA admin fee. On a 350 life case that can add up to a nice residual income. Certainly enough to finance another cruise somewhere.

The TPA Administrative Services Agreement we reviewed yesterday was a deja vu moment.