COVID Proof your TPA Practice with SandMartin Offshoring Solutions

Outsourcing – A Key to Growth for US Third-party Administrators During the Crisis

Covid-19 has posed a new set of challenges for US Third Party Administrators. We recognize that TPAs are undertaking some difficult decisions regarding their workforce, claims administration and client consulting.  Overwhelmed with the influx of work related to new and existing benefit plans, administrators need a new playbook with quick-win initiatives that can accelerate their growth during the recession.

SandMartin has been evaluating how COVID-19 could potentially impact employee benefits and administration. We are sharing some thoughts around the impact of Covid-19 on TPAs and how they can weather the storm and revise their strategy for success during the pandemic and beyond.

Doing More With Less

Faced with today’s cost-conscious environment, Benefit Administrators are scrutinizing every aspect of their operations—including every financial decision—for ways to save money and operate more efficiently.

Administrators are swamped with surge in qualifying events being entered into the system, heightened mail activity, call volumes with questions about the COBRA, HSA etc. rulings, notices and how to enroll, increased payment processing volumes, increased volumes in carrier notifications and eligibility reporting etc.

An underlying concern is how to allocate limited company resources between functions that directly impact the bottom line (i.e., benefit administration) and functions that have a less direct—although no less significant—impact on profitability.

Staffing human resource (HR) departments and funding HR operations is an important example of an indirect cost. Benefit administrators that explore this area may determine they can reduce costs and improve delivery by better controlling benefits administration.

Third Party administrators need to answer these questions to identify their workforce concerns and to address profitability.

  1. Do you have the range of services that matches the firm’s needs?
  2. Does the geographic reach of the firm encompass your employer client’s footprint?
  3. Can you handle the volume of claims coming and the hike you expect in coming months?
  4. Can you manage the complexity of increasing employer needs?
  5. Can you react quickly enough to handle changes in benefits offerings resulting from union negotiations, Covid19 legislations or other changes?
  6. Do you provide reporting that meets clients’ expectations?
  7. Are there hidden charges or ad hoc fees that could end up costing more than budgeted?

If any of these questions arises any capacity or cost concerns, we may have the below solution TPAs are looking for.

What The Future Looks Like?

Job losses since February 2020 total 19.6 million in the US, against a backdrop of 164 million people with employer-based health insurance. This sharp contraction in market size means there will be more competition amongst third-party administrators.

In addition to causing job losses, the recession imposes budget constraints on many employers, which may result in employers needing to offer less robust coverage to make ends meet, injecting additional price pressures on TPAs

At the same time, we shall expect a great hike in number of claims after few months because of these factors.

  • Significantly more focus from employers on cost-cutting may drive them to adopt HDHPs/HSAs, along with strategies that increase enrollment and engagement.
  • New account-based opportunities will emerge as employers look for ways to protect employees through this crisis.
  • Requirement will increase for “gig economy” workers who are prime targets for ICHRA plans.
  • As new businesses replace those that go bankrupt, founders will have the opportunity to look at full-replacement HDHP (or ICHRA).
  • Participants will certainly file claims in later part of the year to exhaust their benefits.
  • Due to leniency provided by IRS on the run-out part, previous year’s claims will be coming throughout the year.
  • We have observed a hike in the number of OTC products claims in the few previous month’s after the new OTC eligibility as per COVID Stimulus Bill.
  • Citizens are spending a lot of money on the medical expenses to prevent this pandemic.

Outsourcing – a way for Resilience and Growth for TPAs

Third Party Administrators have to revise their strategy to adapt to the late breaking legislations and support their staff and clients to manage the impact of the crisis in the coming months or so.

Increasingly, Third party Administrators are outsourcing their Cafeteria Plan and Retirement Plan Administration work since outsourcing seems to be one of the viable approaches for them to deal with the increasing workload and cost pressures.

Below, we have listed some of the benefits TPAs can get when they partner with an outsourcing firm.

  • TPAs save time while providing better service. This can help free up HR and IT professionals to focus on other important responsibilities.
  • Outsourcing solutions provides TPAs with direct tangible benefits to immediately optimize their cash flow with significant savings.
  • Outsourcing helps TPAs to keep pace with compliance and navigate the risks associated.
  • Outsourcing takes care of the day-to-day aspects of administration, so that TPAs can concentrate on strategic planning.
  • Outsourcing provides excellent turnaround, helping TPAs provide frequent reports and updates on project status. And ultimately better service delivery to clients.
  • Outsourcing helps significantly reduce or eliminate errors in managing benefits administration.
  • TPAs leverage resources and expertise of their outsourcing partners in these unprecedented times to manage the workflow and focus on client advisory and compliance regulations.

Now is the time for benefits administrators to shift their focus and leverage new market opportunities. Administrators need to be adaptable to ensure the most productive decisions are made for all employers and raise the bar to cover all aspects of their insurance program.

Contact  to know more about our range of Cafeteria Plan and Retirement Plan Administration services for US TPAs can help them in making their practice healthier in both financial and operational terms.