"How TPAs want MGUs to Market to Them"

By Lawrence Thompson
President, Glacier Insurance Administrators, Fresno, CA
Written: February 1999

 Preface: At the SIIA MGU Conference in San Antonio in February 1999, Lawrence Thompson, president of the TPA, Glacier Insurance Administrators conducted a session entitled, "Under Siege: TPAs and MGUs in a Competitive Market." After his presentation, it was felt the title, "How TPAs want MGUs to Market to Them" described his session better. Mr. Thompson's outline is provided here along with some (comments in italics) he made orally.

 

I    What is the TPA's Role Today?

    1. The TPA is a central point of communication between many players. (The ERISA fiduciary responsibility is taken seriously. When A TPA looses the position of being at the center of communication, mistakes are made.)
    2. The TPA can influence many parties but does not make the final decisions.
    3. Some TPAs have more control than others do. (Broker driven TPAs have less control than TPAs with in-house marketing.)
    4. The TPAs face tremendous competition from various sources:
    1. Other TPAs
    2. HMOs
    3. Fully Insured PPO/EPOs
    4. Union Plans
    5. (Their own brokers if the originating broker moves the business.)
    1. The customer is smarter about our business than before. (After a decade of self-funding, the self-funded employer knows the mechanics, knows the suppliers, (stop loss carriers, etc.) and knows how to optimize their purchases.)

II     What Drives the Market?

    1. The primary factor is -- PRICE. (Total price of hard (stop loss, admin fees) and soft (future claim) costs. Don't forget it because the customer (self-funded employer) won't.)
    2. Service and ease of use are next
    3. Cost management and plan design are next
    4. Reinsurer is next.
    5. Outside vendors are last

III    Who Controls What?

    1. Ultimately, only the customer (self-funded employer) has control
    2. The next most influential party is the one that has the best relationship with the customer. (It could be a brother-in-law agent or another strong relationship. The relationship will overrule in the majority of decision making.)
    3. Sadly, customers are more fickle than we think. Loyalty is limited.
    4. Customer politics plays a big role and should not be overlooked. (A new HR Director can disrupt a long term relationship in his/her effort to "establish" themselves")
    5. A good TPA has the opportunity to influence reinsurance decisions but only if they have earned that right throughout the contract period.
    6. All customers want to feel they got the best "deal"! (If the stop loss price is above the market, there must be other value-added components to justify the "total picture".)

IV    How Can TPAs and MGUs Work Together?

    1. Understand each other’s business - goals, niche markets, special skills, long-term objectives and "who is who" at each firm. (Pacific Mutual has an 8-page TPA questionnaire that each PM stop loss rep must review before visiting a TPA.)
    2. Understand the customers (self-funded employers) - their industry, their goals, their needs, their idiosyncrasies, and their personnel (The study goes beyond TPAs to the TPA's customers. Sweat the details.)
    3. Understand the agent/broker - their agenda, their history, their loyalties, their influences. (Study the broker in as much detail as the TPA.)
    4. Recognize the price is paramount but find ways to add value
    5. Analyze the competition - review contracts, ratings, features, renewal history, niche markets, financial background.
    6. Develop trust - it does not take long to see the TPAs that are not customer advocates
    7. Recognize and support the TPAs entrepreneurial.

V    A Look at the Future

    1. More TPAs will find niche markets and dominate them
    2. More TPAs will market directly to the customer
    3. More TPAs will form alliances or merge with MGUs
    4. More large brokerage firms will buy or create TPA divisions
    5. TPAs will continue to innovate to meet customer needs
    6. States will regulate more of the self-funded market
    7. ERISA preemption’s will slowly erode
    8. Providers will take more risk and buy TPAs