Excerpts from Employee Benefit News Article
(Written by EBN writer, Lydell C. Bridgeford)
Featuring comments from Patton COMPLIANCE (FORMER) President Joe Patton
Flexing their muscles: TPAs serve up flexibility for midsize employers
"From a licensing compliance standpoint, we are seeing both employers and their administrators struggling with state law definitions of what constitutes a third-party administrator for licensure purposes in the context of the administration of employer-sponsored health and benefit plans."
Industry analysts generally define the middle market as employers with 200 to 5,000 workers. About 52% to 55% of nonfederal U.S. workers with health employee benefits are in plans using some degree of TPA, according to the Society of Professional Benefit Administrators.
"We seem to be seeing more TPAs that are entering that market, or in some cases they are expanding the number of states in which they provide administrative services," says Joe Patton, founder and (former) president of Patton Compliance (formerly CRS Licensing), a Florida-based firm that provides licensing and compliance consulting services to third-party administrators and employee benefits administrators. "That would suggest to me that the mid-size employers are outsourcing administrative functions more frequently," he adds.
State compliance and stop-loss coverage
Patton of Patton Compliance (formerly CRS Licensing) says many of his TPA clients that administer for midsize and small employers tend to be centered more geographically in particular groups of states, such the West and Southeast, as opposed to having a countrywide presence, but not in all cases.
Generally, most states define a TPA as a company that collects premium and/or administers claims on behalf of residents of the particular state with respect to life or health insurance plans, Patton notes.
"This definition varies from state to state, but that is a general definition that most states use to determine whether a TPA has to be licensed," he explains. "From there, some states allow exemptions from TPA licensure for administrators that solely administer self-funded employer plans where no insurance carrier is involved, while other states do require TPA licensure of those same administrators in their states."
Patton continues: "From a licensing compliance standpoint, we are seeing both employers and their administrators struggling with state law definitions of what constitutes a third-party administrator for licensure purposes in the context of the administration of employer-sponsored health and benefit plans."
The impact of ERISA licensing preemptions, COBRA administration, stop-loss insurance and other factors can affect whether a particular TPA is required to be licensed in a given state. Patton adds that regulatory and insurance mandates, which are constantly changing, tend to be the areas where many TPAs have questions and concerns.