22 Jun EVERYTHING YOU WANTED TO KNOW ABOUT TPAS BUT WERE AFRAID TO ASK
Very important statistics warning:
Everyone reading this probably hopes & expects to find precise statistics to compile & process. The truth is that every number & statistic related to employee benefits, health, insurance (and seemingly everything else) has an automatic 1,000% distortion factor because of vast variations of uses of basic vocabulary & terms. For example, “per life” sounds obvious, but is variously used as one human being…or worker + spouse + many children…or some other description. Similarly, many marketing terms have come into use which are often knowingly or unknowingly counted as separate or together. For example, ASO (Administrative Services Only) was a marketing term invented by insurers for their fast-growing self-funding market. “Minimum Premium” & “Experience-Rated” are also marketing terms and can have various meanings & legal status depending on the fine print of the plan language. Almost every basic vocabulary term has multiple meanings (just as most people count their personal truck as a “car”). So, when a survey question is asked, the asker has one idea of what the intended term (such as “per life”) means. The responder may have a differing meaning in mind and/or the researcher or source data-collection of the responder’s statistic may be different. Then, the response collector may have a different idea, adjustments, or way of collating results, and, finally, the presentation of the findings report often has a desired spin or comparison. Most people who see the (flawed) statistic tend to add, subtract, multiply or divide it with other statistics which almost certainly each have vocabulary distortions, thus vastly expanding the distortion of the final numbers. So, use statistics as general guides, not gospel. Also, for your own credibility & reputation, give caveats, because you can be sure that other well-intentioned & careful data-collectors will have come up with very different answers.
This is not what you wanted to hear, and you want to disbelieve this warning. If it is any comfort, the U.S. government has twice appointed me as lead Expert to assist the major number-crunching agencies of government (GAO, CMS, CBO, BLS, White House Office of Economic Advisors, Congressional Research Service, etc. etc.). These fine statistical researchers (not to mention hundreds of prestigious private institutions) frequently come up with very different numbers (or differently described) for the same thing. Uncle Sam wanted to know why the disparities. The very candid meetings proved the vocabulary problems described above, and that is why I warn you not to rely on a statistic from even a very prestigious source. It is infected with the voaculary distortion.
So, in this piece, I will refer to numbers that meet the common sense and some cross-checking testing, but should be seen as guidance, not gospel.
How big is the TPA market?
Keep in mind the vocabulary warning above, but the common-sense cross-checking range is that about 60% (and growing) of U.S. workers with non-federal health employee benefits are in plans using some degree of Third Party Administration (TPA) firm, including those who use the insurer marketing term “ASO” for their TPA duties. In fact, an astoundingly large percent of the total business for many large insurance companies is ASO (acting as a TPA) self-funded plans. A survey several years ago found that 91% of employers outsource their health & insurance to a third party. 30% do so “completely” and 61% partially. (That question is especially prone to misunderstanding, since, legally, the “self” of self-funding names the employer/plan sponsor as the official “Administrator” in the plan document….much as you are the “taxpayer”, even if someone else did all the forms). Another survey of employers that have in-house benefits managers reports that 79% of employers use TPAs. As different as those statistics seem, when distilled down to bare facts, they support a similar picture that TPAs (whatever vocabulary is used for the fucntion) handle over 60% of workers in non-federal health benefit progams.
It is estimated that of those TPA service providers the vast majority are SPBA members or affiliated. (Even this statistic is subject to the vocabulary distortion dilemma, since most insurance company ASOs have their TPA-named branches as SPBA members.) The net point is that SPBA is the main focal point for TPAs.