In any service industry, the quality of service and price can be far and wide. While people say that I focus way too much on the workings on the third party administration (TPA) business, I do have more experience in that field as an ERISA attorney and former employee of a couple of TPAs.
People often ask whether as an ERISA attorney, I work as a TPA as well. I quickly state no, let the folks who know what they are doing do it. I have too much respect for the work of TPAs to be in that business, which I find gets too much blame and not enough credit, at least for the good ones.
However, looking at the TPA business, I always notice the wide difference in pricing, but more about the wide difference in service. For example, I have a client who clearly was taken advantage of by a TPA that is really in the business of selling insurance, with administration just being treated as an ancillary service. The clients were sold a couple of life insurance policies that the company could no longer afford with a special sub-trust that the Internal Revenue Service no longer finds special.
I have another TPA looking at the plan, which may or may not charge the same price, but offering an exit plan to get out of the plan that is a half million in the hole. The potential new TPA remarked how the plan should have winded down earlier and wondered why the current TPA/ snake oil salesman didn’t advise the same. It’s hard to when you really aren’t in the TPA business and are really in the insurance selling business because terminated plans don’t pay administration fees or pay premiums.
When it comes to finding the right TPA, the price is important, but the quality of service is the difference maker to me.