The US healthcare system is plagued by problematic cost structures and misaligned incentives, which directly impact the ability of CEOs, CFOs, and Rewards Executives to understand and manage healthcare costs effectively. The prevalence of opaque pricing, inconsistent billing practices, and convoluted negotiation processes has fostered an environment where hidden fees thrive and true cost savings remain elusive.
While TPAs and ASOs are valuable strategic partners in administering medical benefit plans, they have gradually become entangled in these systemic issues, hindering their ability to provide complete transparency.
Weekly claims reports, a cornerstone of collaboration with TPAs and ASOs, can vary wildly in detail. Some provide basic data like total claims processed, while others offer more detailed information with member IDs, service dates, payment details, etc. Ideally, they should offer a comprehensive breakdown, including service types, providers, billed amounts, claim statuses, and more.
Unfortunately, even the most detailed weekly claims reports do not reveal the whole picture. They often include hidden fees structured as a percentage of reported dollars, but not necessarily validated savings. These fees are not negligible amounts; they can be substantial and accumulate, creating a silent financial drain that inflates your claims costs every week.
Common hidden fees inflating your weekly claims
Shared Savings Fees
Shared savings fees are fees an administrator charges to secure a reduction in reimbursement within the claims process. This typically occurs when a plan member uses an out-of-network emergency room or medical facility, resulting in a high bill. The TPA then negotiates a discount with the provider and, depending on the contract, receives a percentage of the savings.
On the surface, this sounds appealing and can lead to significant cost savings for the plan. However, savings fees can be as high as 50%, and contracts are often vague in describing what percentage TPAs will take. Another more contentious example is the overpayment recoupment fee. This occurs when a TPA makes an error and the plan sponsor ends up paying a percentage of the savings generated when the mistake gets corrected.
Prior Authorization Fees
Prior authorization fees are another hidden cost. TPAs levy these fees for processing pre-approval requests, which health plans mandate providers obtain before rendering certain services to a patient to qualify for reimbursement.
These fees are rarely itemized in your weekly claims reports, obscuring the actual cost of this essential service. Beyond this, employers are paying extra for a service that TPAs are obligated to perform as a core function of plan administration.
Pre-Payment Integrity Fees
TPAs impose prepayment integrity fees to screen processed claims for basic errors before issuing payment. Ostensibly, these fees are meant to ensure the accuracy of claims by checking for coding errors, confirming medical necessity, identifying duplicate billing, and negotiating provider rates. If such activities are fundamental responsibilities of TPAs in their role as claims processor, these fees might feel gratuitous.
Additionally, the fact that approximately 85% of claims are auto-adjudicated impacts the level of human review each claim receives. How fees are structured may also result in TPAs conducting less rigorous reviews, primarily because there’s a financial benefit to correcting errors post-payment—as seen with overpayment recoupment fees.
Post-Payment (“Pay & Chase”) Integrity Fees
TPAs charge pay and chase fees to address overpayment issues after the provider has been issued payment. Errors include duplicate billing, overutilization, unbundling, upcoding, etc. When TPAs detect these overpayments after the fact, they recover the overpaid funds from the providers and charge a fee for this service. Unfortunately, this fee is often not transparently disclosed in your weekly claims run.
Using an auditor to scrutinize the accuracy of claims and verify your TPA’s self-reported results presents its own challenges. Auditors are typically pre-approved vendors of the TPA, which could compromise their independence and objectivity and be problematic from a fiduciary standpoint. Moreover, while auditors might successfully identify and recover overpayments, the fees can rival the amounts recovered.
TPA Claims Review Fees
Administrators typically charge this fee to cover their process of adjudicating the validity of claims. However, these fees are often not clearly itemized on individual claims, making it difficult to assess their impact on overall healthcare costs.
A significant concern with these fees is that most administrators auto-adjudicate 85% of claims using software rather than conducting a thorough human review. While this approach enhances efficiency, it often relies on legacy software and inaccurate data to identify errors around eligibility, prior authorizations, coverage, plan design, and member liability. This reliance can lead to missed errors, further inflating your claims costs.
Medical Claims Spread Pricing
Medical claims spread pricing is a practice in which TPAs charge plan sponsors more than what they actually pay healthcare providers for medical services or prescription drugs. The difference between what the TPA pays and what it charges, known as the 'spread,' is retained by the TPA as profit.
Typically, the claims wire will list the billed amounts and provide some details about the services rendered, but it won't disclose the actual negotiated rates paid to providers. This lack of transparency means that the spread—the difference between what your TPA pays to providers and what your company is charged—remains hidden or, at the very least, obscured within the overall billing. As a result, detecting and understanding these additional costs that inflate your claims expenses is challenging.
Stop the drain - catch and prevent hidden fees in your weekly claims wires with Bluespine
Weekly claims wires no longer need to be a “black box” of hidden fees. With Bluespine, you can uncover and prevent overbilling errors while eliminating costly pay-and-chase scenarios - without expanding your team or dedicating countless hours to oversight.
When integrated into your TPA’s workflow, Bluespine leverages advanced AI to provide real-time claims analysis during the prepayment phase. This proactive approach identifies and stops overbilling errors before they occur, effectively eliminating the need for pay-and-chase scenarios. By extracting, cross-referencing, and synthesizing data from all plan assets, Bluespine tailors its analysis to align with individual plan documents and negotiated pricing, ensuring a high level of payment accuracy for plan sponsors.
Bluespine serves as an independent third-party claims reviewer who is incentivized to accurately detect errors and prevent overpayments. Unlike TPAs that operate on a per-employee-per-month (PEPM) model and may benefit from oversight lapses, Bluespine earns fees only when mistakes are identified and rectified. This fee structure means Bluespine is fully incentivized to handle claims adjudication with maximum diligence, transparency, and integrity, directly supporting the financial health of plan sponsors.
Take the first step towards smarter healthcare cost management. Contact us at info@bluespine.io or book a demo.
Start Saving Money Now
