TPA’s Can (and sometimes do) Control Retention Through Stop Loss Threats

Self funded employer groups sometimes find themselves held hostage by their TPA via stop loss insurance policies. The intended result is that the employer is unable to find competitive alternatives.  Fear of lost coverage drives the buying decision to the advantage of the incumbent TPA. We have seen this more than once, more so with certain TPA’s operating in Texas.

For example, we assisted a Texas county in evaluating their  self-funded health plan recently. The county had been with the current TPA for many years and had not competitively bid out their cover for some time. Data provided by the TPA was less than good, and pulling data from the TPA was tantamount to asking the Pope for a condom.

The TPA provided the stop loss carrier’s renewal on the TPA’s letterhead, with no supporting documentation. When asked to provide the underwriter’s notes, the TPA refused, stating that they (the TPA) were the underwriters and only they could bind coverage. “This is how we do business” was their response.

We knew this was not true.

Their stop loss “renewal” offer was firm, with no conditions or contingencies despite the TPA’s representations that the case was running “hot” and there were nine (9) potential large claimants. The TPA warned the county that going to bid would jeopardize the stop loss carrier’s renewal with the possible  loss of a firm renewal and potential lasers to be placed on the identified potential large claimants.

“The county is really getting a good deal, just don’t jeopardize it” warned the TPA’s broker.

The TPA gravely warned that any other competing TPA/Stop Loss carrier would most certainly laser some individuals to the detrement of the county. The TPA and the local agent representing them met with each county commissioner individually to warn and caution them. They even provide each a formal letter attesting to their representations.

The TPA provided a claim report indicating the identification of potential large claimants as proof. Certainly this “evidence” was not doctored, or was it? 

Why would the stop loss carrier offer a firm renewal, with no lasers, with very low and fair rates if the case was running “hot?” You would think, and common sense would dictate, that the carrier would rather lose the account than to keep it. After all, aren’t insurance companies in the business to make a profit? Does the Pope abhor condom usage? Is the Moon round?

We were suspicious. When told we could not contract the carrier’s underwriter to discuss the renewal, and to verify it, we picked up the phone and called the stop loss insurance company directly. This company is a well known household name carrier with a fine reputation. We knew some of their underwriters. There was no indication other than our innate suspicions that our call to them would produce information contrary to the representations of the TPA.  Trust but verify should be everyone’s business model. 

Our conversation with the chief underwriter was eye opening. No, there were no indicated large claimants. No one was in large case management. No one in the group attained 50% of the specific level. The renewal called for a modest trend increase and no lasers. Run-in claims had no limit. A great renewal for a good risk it seemed. And, they were willing to negotiate an even better renewal too. (Hmmmmm, lower premium = less commissions?)

Here is a case where an employer was advised by the incumbent vendor  not to bid out their cover as it would jeopardize their covered risk. Documentation was provided to convince the employer that it would be in the best interests for all to maintain the status quo. However, it became apparent that the intent was to hold the county hostage and retain the account for another contract year.

Using documentation provided directly by the stop loss carrier, the county successfully bid out their self funded plan. A change in stop loss carriers provided savings to the plan. The TPA was fired and a new one retained.

Editor’s Note: Unfortunately, this story is not too uncommon. The severity of this one is. Has your group ever been held hostage?