Industry statistics

Candor for members from SPBA President Fred Hunt

Fall 2007

I'm the guy who coordinates with the various government statistical studies and who has to tell the hundred-or-so  outside industry researchers each year that there are no apples-to-apples statistics.  Unfortunately, I also occasionally have to also be the messenger of this unwanted news to our SPBA member firms who want data for corporate planning.

Since no one likes to be told "no", let me share what SPBA does have available, and the background of why there are no numbers, and why we warn people about relying on any that you might find.

On the member-only website, in the "Tips for SPBA Members" section , the most direct discussion is in the subcategory "Operations & Ownership Tips".  The first item is "No TPA Operating Ratios or Staffing Standards".  A few items below that is "TPA Operating Ratios $$$$: A primer for TPAs and those asking them for this data". You are free to print out these two pieces for clients, consultants, or other outsiders who think there are simple numbers (but do NOT give outsiders access to the member-only website, because there are some delicate items you don't want  outsiders to see).

The culprit for this lack of reliable data is one word: vocabulary.  There is no official definition (and thus astoundingly broad application) of the word "TPA", "insurance/benefits", "costs", "claim", and even the seemingly-obvious word "life" is used to mean one person or a dozen.  So this disparity applies to almost every word used in any questionnaire, and each vocabulary difference can generate a numerical distortion of about 1,000%.  So that starts the chain of places where the vocabulary differences take place:  What did the questionnaire-writer have in mind?  How did the responder interpret the question (and how did his internal source of data tabulate)?  How did the response numbers & words get interpreted for the final report?

SPBA has also tried both formally and informally to collect this kind of information about internal TPA operations. Again, vocabulary is the culprit, because there are very different meanings for terms like "claim", "clean", "paid/processed", and the duties within same-sounding job descriptions vary tremendously.  For example, some "claims processors'" jobs are simply to do keyboard work of literally running a clean claim quickly through the system.  On the other hand, in many other firms. "claims processor" is the frontline of customer relations, and being sure that the medical, coverage, etc. aspects are all correct and coordinated.  So, the first "claims processor" would do hundreds of claims per day, while the second type of "claims processor" might handle only a few per day.

The same kinds of differences apply to TPA jobs in categories of customer service, marketing, operations, IT, and even CEO.  Unfortunately, there is equal (but not matching to amount of work) disparity in pay, and the pay issue often has the distortion of many jobs have some kind of performance-based (such as commission or bonus) arrangement in addition, and many TPA professionals actually wear more than one job-description (multiple responsibilities).  I only know this because we have an informal job-referral file here in the office in hopes of keeping TPA staff who become available "in the family", so I get to talk to them about their job & pay expectations.  So, on compensation packages for TPA employees, we have found that what is being paid by comparable employers in your geographical area has far more relevance for you and import to your employees than what other TPAs are paying elsewhere.

None of this is what you wanted to hear, so let me give some misery-loves-company.  A few years ago, the government appointed me a judge (for a day) to hear their Panel of Experts on the kinds of health benefits types, costs & operational factors.  The panel included about 20 of the most prestigious statistical agencies of the Federal government, such as the GAO, White House Office of Economic Advisors, Congressional Research Service, Bureau of Labor Statistics, Centers for Medicare & Medicaid Services (CMS), etc.  Into their studies had been placed about 25 basic questions, mostly relating to employee benefits operations.  Obviously, all the experts should have come up with the same answers from their nationwide studies.

Each group that came before me was very proud of its credentials and the methodology of their study.  However, by lunch time, the  answers were tens of millions of people different and tens of billions of dollars different.  The researchers were shocked, and I said the same word I gave you: vocabulary.  The only reason I tell this story is as a warning that just because a statistic comes from an impressive source, does not mean that it is "correct" or represents what you had in mind.

I am currently helping the Department of HHS (CMS) upcoming major study of health cost & operations statistics.  They are good folks, and SPBA has helped in these major projects for over a quarter century.  I have told them (each time) the information above, and they are currently trying to figure out a way to eliminate or minimize the vocabulary distortions. If there is some solution or useful information, you can be sure that SPBA members will be the first to know.

So...what IS the best (only useful) way to compare your internal operations data to what others are experiencing?  Networking at SPBA meetings, and following up those friendships and discussions made at SPBA meetings.  The Good News/Bad News Forum at meetings is a good time to stand up, make yourself visible, and say that you'd love to brainstorm with anyone about these kinds of operational performance statistics.  At the reception or later, the people will find you.  Also, the reason we have the round tables is so people can get to know each other.  Use the opportunity.  Also, sometimes the split session workshops are good venues to express your interest or ask how others get their information in these arenas.

Someone inevitably says, "SPBA should do a study."  Frankly, we have tried and failed, just like the experts.  The key to the face-to-face discussions is that you can clarify and define terms and understandings right on the spot.

Another technique some TPAs are using is to ask their SAS 70 auditor to also add in a review of the specific operational questions.  It does not answer the "what do most TPAs do?" question, but it submits your process to an independent look.  Events are making it so virtually every TPA is going to have a SAS 70 audit, so this is a cheap add-on.  On the member website at the very end, in the Meeting Handouts section, look at the Fall 2006 Meeting for some very good handouts on SAS 70.

I realize this isn't the answer you wanted, but at least you did not spend millions dollars doing the study, like the government agencies do each time.  Over my nearly 30 years with SPBA, I have found that the friendships method is the most useful, and, as very successful TPAs have expanded the old saying: "If it ain't broke, it's probably evolved into a system that fits your business model & client desires precisely, so don't feel that you have to change it just for the sake of change."  (And, I would add that small changes have a way of spooking or triggering dissatisfaction in clients.)

Fred Hunt - SPBA President