Take a moment and try to name a product or service whose price hasn’t increased in recent years.
Trouble thinking of one? Odds are you’re not alone. “This trend is prevalent across various service sectors,” said Michael Becker, senior vice president and chief client officer for Broadspire. “As time passes, factors such as inflation, increased operational costs and market dynamics contribute to the gradual rise in prices for services rendered.”
The trend of rising prices for goods and services, of course, applies to insurance claims. The increasing complexity of newer, tech-savvy vehicles has caused commercial auto claims costs to increase. Medical inflation has increased workers’ compensation costs, especially in states without fee structures.
With claims costs on the rise, many insureds are looking at their bills from service providers such as third party administrators (TPAs) with increasing scrutiny. They want to know what these fees are paying for and, in some cases, are considering unbundling their TPA services.
“When consumers see a fee on their bill, their immediate reaction is often to question what it is,” Becker said.
These fees often cover critical services, like vetting medical vendors, managing contracts, conducting background checks — and all of the other administrative tasks that go into coordinating care and managing claims. By unbundling services, insureds could open themselves up to higher workloads and increased Sponsored Content by Broadspire - A Crawford Company exposures. Instead, TPAs and insureds need to work together to understand why a fee exists — and why these services save money in the long run.
“If the fee can be explained to the consumer in a civil and clear manner, it can make the entire situation much easier to understand and accept,”
Becker said.
“Transparency and effective communication are key in these situations.”
Debunking “hidden fees”
Most people, when discussing an unexpected cost on a bill, will refer to the charge as a “hidden fee.”
With TPAs, these costs are rarely hidden. They’re usually charged on a per-use basis. So if an insured uses a particular service from a medical management vendor who partners with the TPA, then they might receive a charge with a fee built in. Becker likened it to purchasing a burger at McDonald’s: When a customer walks up to the counter, they don’t ask how much the bun, patty, cheese and lettuce cost. They ask for the price of the burger.
“The costs are typically embedded within the presented figures,” Becker said. “The insured or risk manager sees the full cost but may not know the specific breakdown.”
These fees cover much of the administrative costs of managing the relationship between the TPA and the vendor. Expenses associated with vetting, developing contracts that make certain insureds are protected, assessing their security and other critical measures are paid for with these dollars.
“A lot of work goes into what’s behind those fees,” Becker said. “The purpose of these fees is to cover the costs of ensuring the vendor’s security, both in terms of cybersecurity and background checks, as well as managing the contracts and the overall arrangement.”
An insured could choose to unbundle these services from their TPA, but then they’d have to find and appraise vendors on their own. As Becker explained, “When a client chooses to unbundle these services, the responsibility falls on them to handle these tasks.” Vetting service providers for various exposures also falls to insureds when they unbundle their TPA services — something that can leave them vulnerable to data leaks. Many service providers handle sensitive medical information associated with claims, some of which is subject to HIPAA protections.
“Security, especially regarding personally identifiable information, is a major concern given the current cybersecurity threats,” Becker said. “In my role, I work closely with our IT team to ensure that potential vendors meet the necessary thresholds for viability and protection against cybersecurity threats.”
Increasing transparency and communication
Despite increasing claims costs pushing insureds to look at their bills more thoroughly, fees have remained stable. “When comparing service fees charged by TPAs for claims today to those from a decade ago, the costs have remained relatively flat,” Becker said.
Part of this is attributable to competition amongst TPAs for business. TPAs want customers, so they’ve kept fees low to compete with one another — even when doing so hasn’t kept pace with inflation or taken into account the rising costs of talent.
“We’re losing a lot of institutional knowledge due to retirement, and backfilling those positions is proving difficult. This is driving up salaries and prices to attract talent,” Becker said.
“Clients are looking to maintain stable costs or even decrease them, creating an interesting dynamic in the industry. The challenge lies in balancing the need to attract and retain talent with the pressure to keep costs in check for our clients.”
That’s part of why TPAs are working with their clients to help them understand the value that goes into the fees. If an insured has a bundled program with their TPA, adjusters will be able to quickly refer claimants to medical management vendors — hopefully allowing for swifter closures.
“If an adjuster can automatically send a referral for a nurse through our system, it saves time and provides efficiency,” Becker said.
“If services are unbundled to an outside provider, the adjuster must remember which specific provider to use for each account, go outside the system, fill out a form and send all the necessary information. This extra work can take valuable time away from investigating claims, reaching out to employees and discussing benefits.”
One way TPAs are doing this is by explaining to their clients what the fees are covering. Another way is by helping them understand the savings of partnering with a TPA and using a bundled approach — even with the fees.
“We typically show them the savings first. Then, we present the net savings after accounting for our costs,” Becker said. “It’s essential to be transparent about the costs involved while emphasizing the net positive impact on the bottom line. By doing so, you can effectively communicate the strategic advantages of the proposed solution in a competitive landscape.”
Strong relationships, tailored solutions
In a time of increased claims costs, it’s essential for TPAs to collaborate with insureds and ensure they get the most value from their program. Broadspire strives for transparency and honest communications so it can best meet the needs of its clients.
It strives for transparency when it comes to administrative fees and truly works with insureds to ensure they’re seeing value from the TPA partnership.
“It’s not just about the tangible results, but also the trust and rapport we establish with them,” Becker said.
One way Broadspire provides top-notch service for its clients is by working with them to create solutions tailored to their program goals. The company’s goal is to be a TPA partner for years to come.
“Our team will collaborate closely with you to design and build out a comprehensive plan,” Becker said.
“We understand the nuances of each client’s needs and strive to deliver tailored solutions for them. Being transparent about the costs and the value we provide is essential to building trust and long-term partnerships.”
To learn more, visit: https://www.choosebroadspire.com.
