The SPBA office was recently asked to answer some specific questions to briefly explain various types of plans TPAs administer and also give an insight into the duties of TPA firms. We recognize that each of these descriptions, below could be more completely done with a book unto itself. This is merely a once-over-lightly. In any case, this seemed like a useful review for SPBA members and training reference for new staff in your office. Please always keep in mind the caveats, below.
Caveat #1: The official response from the Department of Labor to a request for this kind of broad definitions would simply (but honestly) be, "It depends on the facts & circumstances of each situation." So, this is general guidance, not legal definitions.
Caveat #2: Every number or statistic relating to employee benefits, TPAs, health, insurance, etc. has a built-in 1,000% distortion factor. It is not because anyone is lying. It is because vocabulary for even the most basic terms have vastly different meanings for each person (though each person will adamantly claim his/her view is the true one). Thus, consider statistics as guidance, not numbers to compute...or else your accuracy & credibility will be thousands of percent off.
Taft-Hartley = Multi-employer jointly-administered union/management plans centering on workers covered by a collective-bargaining labor agreement. These were formed as part of the Taft-Hartley Act of 1945.
(Note the important difference between "multi" above and "multiple" below. They are often slurred or confused.)
Multiple Employer Welfare Arrangements (MEWAs) + Multiple Employer Trusts (METs) MEWA is the more modern & legal term. = any arrangement in which more than one employer not under the same management "control group" join together in a plan. The easiest examples are a plan sponsored by a trade association for its member firms. NOTE: Out of ignorance and because the laws have been very restrictive on MEWAs, there are a great many more multiple employer situations than the sponsors of them acknowledge. For example, some new types of plans such as HIPCs (Health Insurance Purchasing Cooperatives...and a growing alphabet of new names) as well as the vast number of names for provider-sponsored plans (in which a medical group contracts directly with various employers) are technically MEWAs, but try to deny it. The issue of "common control" is also a case-by-case decision. Buick & Cadillac are under "common control" under GM...but a firm owned by Dad + a firm owned by Mom + two firms jointly owned by parents & kids are usually not under "common control". The key is to apply the simple question of whether there are more than one unrelated employer in the plan. Even a multi-employer plan that brings in employers not covered by the collective-bargaining agreement turns the multi into a multiple. The other key is mingled funds. If a bunch of employers have joint administration, but each has its own totally-isolated funding trust for their funds, then those employers would probably be seen as single-employers (because of the single-employer funding, not the joint administration).
Public or Government Plans = plans in which the official sponsor is some governmental entity for its own employees & dependents, such as the XYZ County School District for its teachers & administrators. Public/Government plans are outside of ERISA. They are ignored in ERISA because it was assumed there would someday be an ERISA-like protection law for public plans, but it was aborted. Meanwhile, a government-sponsored health program for citizens is not based on employment, so it is simply outside the arena of employee benefits law. Occasionally, a plan seems to be sponsored by the government entity, but is technically sponsored by a union or association. Example: A town's police force is covered by a plan which is wholly-paid by the town's police department, and the employee handbook makes it sound like the police department's plan. However, the police union is technically the sponsor, so it is not a governmental/public plan.
Church plans = plans sponsored by a religious group for their employees, such as a church for it's pastor & staff. Care must be taken to see if the sponsor is truly the religious group. Just because a school might be called Saint Someone's does not automatically make it a church plan.
Single Employer Plan = what it sounds like...including firms under the same control group...such as Cadillac, Chevy etc. under GM. Since single-employer plans have had the most unhassled existence, many other types of plans try to rationalize themselves as single-employer.
Pension & Profit-sharing plans = a wide array of funding vehicles designed to have money for retirement. Among traditional pensions, there are Defined Benefit (DB)...in which the retiree will get a designated amount or percent per month when he retires. There are also Defined Contribution (DC) plans in which the retiree has a pot of money collected over the years and whatever is there is there. Profit-sharing plans (such as 401k) tend to be put in another category by pension purists, since they are composed (technically) of mostly money that the employee could have received during employment. Also, many profit-sharing and similar arrangements are accessible before retirement for other purposes.
HMOs = Health Maintenance Organizations, are either "closed panel" (a staff of doctors in house) or "open panel", (a collection of outside doctors who will serve member patients under the arrangements of the HMO). The key uniqueness of HMOs is that the patient/employer pre-pays a fee to cover the expected services for the month or year. This creates different financial incentives on the doctors & HMO company...which is the subject of the uproar in the media & Congress about "abuses". (See managed care, below.)
PPOs = Preferred Provider Organizations. This covers a broad range, of collections of doctors who agree to serve, at discount prices, certain patients who contract with the PPO. The original idea was a volume incentive discount (like discount tickets to a show if you bring a large group). However, today most providers are in one or more PPOs, and most patients are eligible for PPO discounts, so the purpose is becoming mainly a way to avoid dramatic rip-offs. TPAs working with PPOs are very careful to avoid seeming to give any endorsement on the quality of the medical provider in the PPO (to avoid having the TPA dragged into medical malpractice spats).
Managed Care = as many different definitions as people you ask. For example, HMOs think they are the true definition of managed care...but it could also apply to any arrangement in which there is some sort of gate-keeper or oversight on the medical care being given. Often it is pre-paid arrangements, but it can also be in forms of fee-for-service. Since TPAs have always been faithful to their ERISA fiduciary responsibility to keep a close eye on the plan-paid services patients receive and the finances of the client employer's plan, TPAs were the pioneer of the "managed" idea of managed care.
Provider-sponsored = Provider Sponsored Networks (PSNs) "Integrated" plans, Provider Sponsored Organizations (PSOs) and a whole alphabet & vocabulary of creative terms to describe when a hospital or group of doctors get together and decide to market health coverage (usually pre-paid) directly to employers or patients. As mentioned in the MEWA section, above, the minute they start dealing with an employer, they have entered the legal world of employee benefits, and dealing with more than one unrelated employer usually turns it into a MEWA. Too few of the medical folks pushing these plans realize that they are blindly blundering into a legal arena they do not understand. The good news is that SPBA has been trying to get that word out to provider-sponsored entities, and many are now hiring TPAs not only for their administrative efficiency, but also for their knowledge of government compliance.
Essentially, the TPA does whatever the client wants & needs. The types of services are subdivided and described several ways. Hand-holding and crying-shoulder are big parts, and about 40% of what TPAs do (in all of their various duties) is directly related to government compliance knowledge. (For example: Is this claim I'm processing possibly subject to MSP?) The term "administration" is interpreted by TPAs and others from being very narrow (such as just processing claims and nothing else)...to the whole range of dozens of services & duties. Therefore, let me approach this in two different ways:
(1). The departments & main function areas in a TPA firm (with one person often wearing several "hats") are normally: Senior management running the TPA itself + marketing (in-house, via-brokers, or combination) + claims processing + government compliance tracking, and then a host of optional services in-house or out-sourced, such as utilization review (UR), PPO, Flex/Cafeteria plans, dental, vision, prescription plans, government reporting & filings for clients, plan design, educating client employees, consulting, personnel-related services for the client, stop-loss coordination, etc. etc.
(2). TPAs tend to think of themselves by the primary types of clients they serve, such as Taft-Hartley, Single-employer, MEWA, Government plans, Church plans, fully-insured (in which the TPA does the administration, but the risk is held by an insurer), HMO, Provider-sponsored plans, etc. There tends to be more difference in a TPA's services & operation based on type of client than any other factor.
The most important reminder is that when you've seen one TPA, you can draw conclusions about only one TPA. There is no such thing as a "typical" TPA. TPAs give highly personalized service, so whatever the client needs is how the TPA adapts to serve (within the careful delineation of the administrative contract with the client and laws).
The biggest difference between SPBA TPAs and other entities who do something similar to TPA duties (such as ASO) is that SPBA TPAs spend tremendous time & effort to be smartest about the ever-changing government compliance requirements for clients. For example, a recent survey by a trade-press reporter found that 81% of clients of insurers and others (besides SPBA TPAs) were unaware of HIPAA on the effective date and/or had not been prepared for it. Some of the largest insurers were even incorrectly telling clients that it did not apply. For a previous law, it was 91% of non-SPBA-TPA clients who were uninformed. Meanwhile, SPBA was asked by the three government agencies to be the official "public input" for drawing up the regs, with much brain-storming & input from SPBA members. So, SPBA TPAs and their clients had 18 months of preparation. Government compliance is by far the greatest risk for clients (the laws are designed to cripple an employer for even innocent or unknowing goofs). Thus, SPBA TPAs can demonstrate that they are in the forefront of protecting their clients (and thus themselves) from the crippling liabilities that could be brought by government.