This is Your Wake-Up Call
Three Trends No Longer on the Horizon ... They’re Here!

According to a leading authority on TPA market trends, we are about to witness the biggest change and opportunity in the industry since ERISA in 1974. Fred Hunt, Jr., president of the Society of Professional Benefits Administrators, says seismic shifts in healthcare are creating new client demands that TPAs must be ready to respond to—starting now. Hunt believes consumer-driven health plans (CDHPs), value-driven healthcare and stop-loss insurance markets will greatly affect how TPAs approach their business. And predicts that not all TPAs will survive the coming revolution. To be a player in the new era, says Hunt, you must be attentive, innovative and responsive.

Right about now, you may be thinking, “How can I respond to another wave of changes when I can barely keep my head above water from the last round?” True, many TPAs are so swamped with today's work they can't focus on the future, but the rapidly changing healthcare market won’t wait. Your clients are ready for a change. Are you?

Trend #1: Consumer-Driven Health Plans
Consumer-driven health plans (CDHPs) are health benefits plans that encourage people to choose their own healthcare providers, manage their own health expenses and do what they can to improve their own health—thus reducing costs and the rolls of the uninsured. Enthusiasm for CDHPs among employers is growing, and by 2011, 90% of health plans in the United States—especially those with 1,000 or more employees—will have consumer-driven elements such as health savings accounts. Even those with smaller employee populations are interested in CDHPs as organizations across the board struggle with rising health care costs.

TPAs must familiarize themselves with products such as HSAs (health savings accounts), FSAs (flexible spending accounts) and HRAs (health reimbursement accounts) and be prepared to offer flexible plan design, administration and regulatory and client reporting services.

Trend #2: Value-Driven Healthcare
It’s been more than a year since President Bush signed the executive order to help increase the transparency of America's healthcare system and empower Americans to find better value and care. This voluntary “Value-Driven Health Care Initiative” encourages consumers, employers, doctors, hospitals, TPAs, health plans, unions, government entities and others to commit to four cornerstone objectives:

• Utilizing health information technology
• Measuring and publishing quality information
• Measuring and publishing price information
• Creating positive incentives for high-quality, efficient healthcare

This energetic and widely accepted program will remove the long-held TPA grievance of phony medical pricing and discounts, which has caused an unfair competitive disadvantage in recent years. It may take a couple of years for Value-Driven Health Care to become the norm, but as it brings transparency to the process and pricing, TPAs will shine for the extra services they offer, such as personalization and attention to government compliance that other benefits sources can’t match.

The government is pushing Value-Driven Health Care with full force, the employee community is adopting it and TPAs must get up to speed to take advantage of the business opportunities it presents. For more information, go to http://www.hhs.gov/transparency.

Trend #3: Markets in Stop-Loss
Many believe a mix of government involvement and market competition is necessary to shape a new healthcare delivery system and a new reimbursement structure that supports individual choice and delivers value. This “market” environment where businesses are allowed to offer products and services that meet clients’ needs is coming to the forefront in stop-loss insurance.

As a result of Medicare Part D, the government has been successful in running a risk adjustment/reinsurance mechanism for private healthcare plans serving Medicare beneficiaries. Because plans attract healthy people receive far less from the government than plans with higher-risk patients, Medicare Part D is running 30-40% below original cost projections. Many policymakers believe collaboration between private sector companies and the government is the reason for success, and they are looking for ways to expand this concept into other insurance markets. This line of thinking could present an opportunity for the stop-loss community to shape the future.

Stop-loss companies are encouraged to get creative and come up with industry-wide risk adjustment mechanisms that would protect individual companies that take on high-risk individuals. This would spread the risk throughout the industry and eliminate the need for underwriting groups. If the private sector fails to come up with such a solution, the government will likely initiate a joint effort. Short of that, Uncle Sam will dictate, which could lead to other problems.

The Bottom Line
“There is no question healthcare is undergoing significant change,” says Fred Hunt. “But fortunately, these changes are positive for TPAs—provided they take action.” Hunt stresses that improved efficiency, quality and price transparency are all areas in which TPAs can thrive. He is also convinced TPAs are positioned to profit from CDHP products and services and from actively supporting the concept of markets in stop-loss insurance.

What can you do to help ensure you get your fair share of the new healthcare pie? First and foremost, pay attention. Listen to what your clients and peers are talking about and be prepared to answer their questions. Second, be innovative. Yesterday’s solutions won’t fly in this ever-evolving era, so you must proactively seek new products and services to offer. Be sure you’re actively promoting your expertise in these areas to you current clients, prospective clients and brokers. Don’t wait for them to ask—they might assume you don’t offer these solutions. By educating them about their options, you’ll be the expert.

Finally, you must be responsive. The future of the TPA industry is bright, but only for those who are willing to invest in tomorrow while continuing to offer the personalized service clients expect.