RIMS 2015

Changing Third Party Administrators Requires Careful Navigation

One company’s changing of TPAs provided valuable and unexpected risk management lessons for others to glean from.
By: | April 13, 2015

Changing third party administrators provides an opportune time for employers to improve their vendor service instructions and request additional workers’ compensation claims data for satisfying needs not addressed by their legacy TPA.

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“With the new TPA you are the golden child,” Linda Hoenshel, senior claims manager risk management for HD Supply told the Risk and Insurance Management Society Inc.’s annual conference held April 26-29 in New Orleans.

TPAs will work to meet a new customer’s requests if it is within their means to do so, she added.

“You don’t just one day think you are going to change TPAs and everything falls in line,” Paulette Harris-Rogers, director risk management for HD Supply

But there are also many transition timeline and budgetary issues for employers wanting to change TPAs to address.

“You don’t just one day think you are going to change TPAs and everything falls in line,” said Paulette Harris-Rogers, director, risk management for HD Supply, a company with 15,000 employees and 700 locations.

HD Supply changed TPAs in 2012 and took advantage of the transition to ask its new vendor for information it didn’t previously receive, such as litigated claims data. It plans to use the information to evaluate the performance of defense firms it contracts with as well as the plaintiffs’ attorneys it faces.

One of the biggest considerations for employers is whether to change TPAs at renewal time for their workers’ comp insurance policy or during an “off cycle,” Harris-Rogers said. Factors such as insurer involvement, workers’ comp program size and complexity, and claims frequency, will impact that decision.

For HD Supply, it didn’t make sense to change TPAs during renewal time.

Many TPAs will need 90 days to get a new program running, Harris-Rogers said. Meanwhile, a legacy TPA contract may require the employer to provide a 60-day termination notice. But a transition timeline of 60 days likely won’t provide the legacy TPA sufficient time to fulfill its duties.

The legacy TPA will need time to manage its arrangements with the employer’s insurer, which will have its own timeline and needs for practices like system mapping and claim test runs.

“It’s true, the new TPA can take 90 days to work a program and get you started, Harris-Rogers said. “However, the legacy TPA needs considerably more time. Sixty days is not enough. So if you are thinking you are going to serve a notice of cancellation to your TPA in 60 days, that is fine, but there is a lot of work that needs to be done before that time.”

Other considerations include a review of medical-provider arrangements to help ensure employees’ existing providers will not be cut off mid-treatment, notification of the employers’ payroll and financial departments, and a need to hold claims reviews with two TPAs.

There are also costs to consider such as expenses paid simultaneously to two TPAs, including fees for continuing to access data maintained by the legacy TPA and charges for the legacy organization to run off existing claims.

Changing TPAs other than at renewal time may cause the insurer to conduct a collateral review or charge a fee for a mid-term change. The claims closure rate may also drop at first, because the new TPA’s adjusters are not familiar with the employer’s claims.

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But when transitioning to a new service provider, employers can benefit from the resources some TPAs have invested in technology and risk systems that provide report reviews and claims trend analysis.

It’s a great time to fill existing claims information gaps or address requests for information demanded by upper management, the speakers said.

“If there is anything out there that you think you want, now is the time to ask,” Hoenshel said. “If the answer is no, ask again. You never know what can open up.”

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

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The R&I Editorial Team can be reached at [email protected]