Best practices for selecting a top TPA

Effectively evaluating potential or current TPA providers first requires the employer to understand the company's current claims performance.

It is not possible to evaluate the current provider's performance—or identify the provider most likely to achieve the benefits of outsourcing claims administration—without understanding current performance.

Knowing a company's claim frequency, severity and loss rates are important, but that's only the beginning. What is really needed is to put that performance into perspective, for the company as a whole and as compared to other firms. Are frequency trends at the company rising or falling? Does severity vary by individual company operations? How do the company's loss rates compare to similar firms or key competitors?

The next step is to develop a classic SWOT analysis, documenting the strengths, weaknesses, opportunities and threats of the company's claims administration. The goal is to clearly define the successes and challenges with the current program and TPA.

Surprisingly, many companies that decide to search for a new TPA cannot clearly identify why they are doing so, or succinctly describe what they are looking for from a new provider. Are they getting the analytics they need? Are they capitalizing on return-to-work? Is there too much turnover at the TPA? How can key problems be solved if they are not understood and clearly defined?

Understanding the performance of the current program and vendor, and going through a SWOT exercise, will help the company and its broker define their ideal future state for the claims program, both in the short term and in the long run.

Selection: Build a Checklist

Develop a checklist to guide the selection of a new TPA partner. Key areas to

cover include:

• The company's specific geographic needs. Does the company have regional or national claims-handling needs? Is the program strictly domestic, or will it also have global reach?

• The lines of coverage needed. Managing general liability claims is far different than administering workers compensation claims. Does a potential TPA have the capabilities, resources and expertise to effectively manage the types of claims to be included in the program?

• Communication. Can the TPA provide regular updates on individual claims as well as the program as a whole? Is the information broad and general, or detailed and actionable?

• The best metrics for measuring the program's performance. What metrics will be tracked, and how will these be reported?

• The TPA's risk information management system. Is it secure? Is it supported by sophisticated data analytics? Is it a single view shared by all internal and external resources, including those at the employer?

Before jumping into the selection process, take a moment to review the way that process works and the internal resources required.

Remember there should be two phases to any search process. The first is to create a spreadsheet of various providers in order to select a smaller set of those best suited to meet the company's specific needs.

Look beyond the spreadsheet, however, to evaluate the intangibles that often drive program success. Visiting the claim operations of the short list of potential TPAs is often the best way to gauge these.

One of the key intangibles is the cultural fit between the company and the potential TPA. Do the company's corporate philosophy and culture focus on engaging and protecting employees? Or is the company more focused on complying with regulatory requirements? A vendor is more likely to succeed if its corporate DNA matches that of the prospective client.

Another key intangible is access to multiple layers of TPA leadership. Will the risk manager and his staff have regular interaction with senior medical, claims and risk control leaders? Such access predicts how involved these resources will be in the program, both on a strategic and tactical level.

In addition to understanding the selection process, set a realistic timeline.

The majority of requests for proposal indicate that a new TPA needs to be in place within 90 days. While possible, ideally the process should allow four to six months. This lets the client and broker more effectively lay the groundwork for a successful search and selection. It also ensures the involvement of the buyer's senior leadership in the process.

Management: Open Communication

The hard work of understanding an organization's needs and developing a checklist for evaluating potential providers will help select the TPA likely to best manage the total cost of claims, but communications and partnerships are critical to effectively managing a TPA and gaining the full strategic value of outsourcing claims management.

Regular meetings, held at least quarterly, should review program performance relative to established goals, objectives and metrics.

Larger employers with higher claims volumes should expect regular roundtable discussions, during which senior medical and claim resources discuss the best action to take on individual problematic claims and the small number of injuries that may ultimately drive total claim costs.

In addition, hold annual partnership meetings. These summarize the success of the program's full year, recognize key contributions at the employer and TPA, review possible program changes, and set goals for the upcoming year.

Effectively evaluating, selecting and managing a TPA requires that companies partner with their brokers and providers to achieve the full benefits of separating insurance paper from claims service.