Despite the yeoman and herculean efforts of the consultant and broker community to drive members to deepest discounts, we still see unacceptable cost increases. Could it be that the insatiable consumption drivers of care, new technologies, advancements in pharma, etc., have acted to counter the discount effect; or at least overshadow it? Mathematically, there is no dispute that lower prices lead to lower cost increases; but could the impact of lower utilization, consumerism, outcomes and health risk management lessen the importance of the lowest discount as the leading factor in selecting a medical administrator or carrier?

How have employers and their advisors selected administrators traditionally? Well, factors like network access, customer service, member disruption, administration fees, claim payment performance and discounts have been key measures. Also, consideration of managed care effectiveness and capabilities around improving health risk are part of the evaluation, but much more subjective and elusive to measure. Winning the day and being awarded the business comes to those with demonstrated superiority in networks, service and cost. This presumes that a host of other important performance aspects carry less weight in the overall performance of the administrator. The corollary is that how members engage the health system, are identified for health risks, are channeled to efficient providers and managed/coached through their episode of care impact outcomes, utilization and inevitably cost.

Despite the impact of these care components, many in the industry rely on discounts as king in the administrator selection process. The question remains if the delta of comparative discounts is big, not so big, or very big. Then will the self-reported, repriced or modeled discount results actually flow through to claims? When we drill down to mid-sized and smaller groups major carriers may not have the same comparative discount advantage at the small set of providers utilized in certain regions; e.g. most maternities go to one health center and the provider community has pushed back on major carriers squeezing their narrow margins.

If access to discounts alone were the only criteria for selecting an administrator I think the health plan map would be entirely Blue states (in a BCBS kind of way). Yet, TPAs and regional plans have continued to thrive and have a differentiated product from the major carrier solutions.

Purchased centrally and delivered locally is how we've described the employer-sponsored care model. Like for the retail food industry, where you buy your groceries and where they came from is important, so too is where your members seek care and for what conditions and to what end or outcome, and under whose guidelines/protocols. TPAs many times have the ability to get in your neighborhood and personalize the care experience in a way big carriers can't.

I visited with a TPA recently that as a practice put a full-time employee on-site of employers to deliver a better value – you won't see this from large carriers. If you surf the web, you'll find many TPA alternatives with sophisticated approaches for delivering outcomes, cost-management, reporting, and more. Can TPAs and their partners put together an integrated solution that makes sense for certain groups opposed to national carriers? Not sure we really know the answer.

We can leverage data to answer the question, but claim data is often deemed dated, or not real time, or biased, or fragmented or incomplete. Studies have been done at the episode of care level to identify cost drivers and cost-containment ROI, but then the "sameness" of diagnosis and health risk critics chime in with doubts about being able to make comparisons across populations. It's quite frustrating not to know what truly drives costs and what truly saves costs with all of this modern technology. The point is, when we look at care being accessed and purchased there are a host of factors beyond discounts at play. Major carriers have enjoyed the discount advantage and the technology gap to provide sophisticated models and tools – albeit not quite integrated (a sore spot for decades now).

With new technology and niche players in the market, maybe it's time to retest TPAs as a viable alternative and recalibrate the bar for major carriers in delivering the best value for paying and managing health care costs for employer sponsored plans.