Third Party Administrators Other Than MESSA and SET

TPAs other than MESSA and SET played a small role in schools prior to the 1994 reforms-too small to usefully evaluate their presence. For the most part, they could not command discounts sufficient to produce cost savings.

One TPA, however, Michigan Employee Benefit Services, Inc. (MEBS), has successfully used a dual-funded approach with non-MEA union bargaining units in schools. MEBS was the exclusive TPA for the Public Employee Trust fund (PET), which was established by five AFL-CIO unions for the benefit of AFL-CIO members.

The labor trustees of PET developed the fund to provide high quality employee benefits for its member at lower costs. They use BCBSM as the exclusive underwriter for their health care products. Smaller groups of education employees enrolled through PET are in the BCBSM education area industry-rated pool. Larger groups of more than 100 employees are rated based on their own claims history data through the BCBSM experience-rated system with PET holding the risk.

The MEBS dual-funded approach program has provided an excellent balance of savings and quality benefits, according to districts that have used it.

MEBS has met the needs of education employers with this concept as well as many other private sector employers that have been interested in self-funding their employee benefits. Many of these employers have been reluctant because of concerns regarding their group size, comprehensive benefit levels, and potential risk. This is particularly true if claims history data are not available, or there is a concern about the lack of cost containment in a self-funded program.

For these reasons, MEBS has developed a minimum risk approach to self-funding by using the high deductible Comprehensive Major Medical (CMM) contracts with BCBSM.

By using these high-deductible plans, the employer significantly reduces his premium costs while providing catastrophic coverage for his employees. With the premium savings, he can self-fund the benefit levels to those of his current plan.

The arrangement MEBS has with BCBSM allows BCBSM to process all claims to the BCBSM provider contract levels. The Explanation of Benefits forms are then sent to MEBS, where the claims are readjusted to the levels selected by the employer. This dual processing is not apparent to the employee.

It should be noted that MEBS is only one of many TPAs in the state that could perform similar services. MEBS, however, has more experience with this particular approach in the education industry. Additionally, MEBS has provided a number of school districts with the ability to create their own health care plan, which in turn has produced savings for those districts.

PET also had specific benefit plans designed for AFL-CIO members that mirrored the MESSA plans as closely as they could using BCBSM as the underwriter. These plans continue to serve their bargaining units well.

Although both union-sponsored TPAs (MESSA and PET) are 501(c)(9) trusts and are both monitored by the Internal Revenue Service, the significant difference is in the management approach used by the trustees of the funds. PET has trustees that also operate Taft Hartley Trust Funds which are monitored by the Department of Labor (DOL).

The strong influence of the DOL, its policies and procedures, and the desire of the trustees to use money paid into the funds to serve the needs of their members creates an attitude which is carried over to the management of PET.

In the Taft Hartley Trust environment the use of any money coming into the Trust is earmarked solely for the purpose of benefits for members covered by the Trust. The DOL strictly enforces this policy.