What’s the Difference between TPAs and ASO Providers?
Many Taft-Hartley multiemployer plan sponsors have some confusion regarding the differences between third party administrators (TPAs) and Administrative Services Only (ASO) providers. There are significant differences that plan sponsors should understand particularly if they are considering a new resource to help with their pension and annuity administration; health, dental and disability claims management; and health and welfare fund administration. The way they serve their clients and their value propositions are like comparing apples and oranges in that they differ vastly.
The Difference is in the Details
TPAs are extremely diligent when administrating plans and processing claims on behalf of their clients. Thorough due diligence is integral to their offerings. TPAs serve plan sponsors as an extension of their clients’ businesses much in the way other trusted advisors do. They guide them and collaborate with them to make sure all data collected is accurate and documents are in full regulatory compliance. They are fully transparent with their clients, which is not the case with many ASO providers. For example, ASO carriers do not permit an employer to have claims paid by the ASO provider audited to determine that the payment is accurate and “reasonable.” This is despite the fact that ERISA places the fiduciary responsibility with the employer for protecting a plan’s assets, and therefore would expect an employer to confirm the accuracy of both provider billings and the administrator’s payments.
Flexible, Personalized Services
TPAs also are better able to accommodate plan sponsors. They are far more flexible in their processes and reporting. They also have the ability to cater to a plan in terms of providers and networks that best suit their members in terms of geographic territory and demographics. ASOs are typically limited to the networks contracted by their carriers. TPAs have strong relationships with many providers and insurers enabling them to tailor solutions to their clients. Furthermore, the leading TPAs have a suite of solutions that extend beyond the scope of benefits administration. These include such essential and related offerings as medical stop loss, utilization management services and specialty drug cost management services. This gives plan sponsors the advantages associated with a “one-stop shop” (i.e., lower costs, fewer points of contact, and higher levels of accountability).
TPAs have cost advantages over ASO providers. TPAs administrative fees are lower than ASOs. Looking at claims adjudication, for example, most ASO auto-adjudicate claims at high levels, paying them without the due diligence a TPA performs. You can see how this practice of auto-adjudication would drive up costs. Further, many ASO providers retain between 30-50% of the amounts they recover. Conversely, with a TPA onboard and the associated transparency, plan sponsors have far more control over fees. In addition, the contracts used by many ASOs include fine print delineating other fees that often go unnoticed by plan sponsors.
In sum, complex, multiemployer plans are far better offer being administrated by a high quality TPA with a proven track record serving Taft-Hartley plans and a comprehensive suite of offerings that can best accommodate plan sponsors and their members.