Employers find success in healthcare savings through TPA shift and payment integrity

An alliance of large employers has identified three approaches that have provided its member companies with the largest healthcare savings.

The Health Transformation Alliance (HTA), a cooperative owned by about 80 U.S. companies, including JP Morgan Chase, Intel, Comcast, Boeing and Marriott, found the initiatives that have saved employers the most in healthcare expenditures include:

• Switching from fully insured to use of third-party administrators (TPAs)
• Shifting to a full pass-through pharmacy benefit manager
• Pushing payment integrity

The TPA shift drives the biggest savings because it provides more transparency on prices and quality, said Rob Andrews, JD, CEO of HTA.

His organization is pushing legal prohibitions on contractual gag clauses between providers and payers. Every company in HTA has been blocked by such clauses when trying to steer enrollees to higher-quality and lower-cost providers, Andrews said.

“Very often carriers and or provider systems sign contracts that do not permit them to disclose financial facts like pricing or other things,” Andrews said. “And we think that those to some extent should be known in the public domain.”

The contractual language prevents employers from creating provider tiers and steering enrollees, he said.

When those companies have been able to implement tiering and steering designs in their employee health plans, those have driven 11% to 12% reductions in healthcare costs, he said.

“We think that tiering and steering should be absolutely permitted, and we don’t think that hospitals and insurance companies should be able to contract their way out of that opportunity for employers,” Andrews said.

Cost trend

The HTA’s findings on successful cost-control tactics come as employers are facing a potentially historic cost surge for their health plans in 2026 and looking for ways to mitigate it.

For example, large employers expect a median 9% increase in healthcare expenses next year, according to recent survey by the Business Group on Health (BGH). They plan to reduce that to a 7.6% increase through various initiatives, which include moving toward alternative health plans.

Employers and payer advisers are partially blaming the cost surge on changes hospitals have undertaken.

For instance, Aon’s recent survey projected a 9.5% increase in employer healthcare costs in 2026. Among other factors, it said “hospital workforce expansion is enabling greater patient throughput, further contributing to higher levels of health care utilization.”

“Hospital costs have always been a perennial concern, but what we’re seeing now is an intensification of that pressure,” said Derek Skoog, FSA, MAAA, health actuarial and economics practice leader for PwC.

The share of large employers (more than 50,000 employees) undertaking initiatives on hospital costs, according to a recent National Alliance of Healthcare Purchaser Coalitions survey (free login required), include

• 65% use centers of excellence (COEs)
• 48% use site of care redirection
• 44% use direct contracting with high-value hospitals

Payment integrity push

The lower profile push on payment integrity by employers in HTA also goes beyond standard fraud fighting, Andrews said.

“Some of the payment integrity firms in which we work look not only at the obvious error or fraud but [also] look into the arms race of up coding and challenge it,” he said.

Concerns over provider upcoding is also leading more of the companies in HTA to push capitated rates on providers.

“We strongly believe in what’s called capitated rates, where if a healthcare provider gets x dollars a year to take care of a person, and they make a margin if the cost of taking care of him is less than x,” Andrews said. “And they lose money if it’s more than X. We like that because we think what that does is align the interest of the care provider with the patient, with the payer, who in this case is the employer.”

Switching from fee-for-service payment to capitated rates would eliminate unnecessary treatments, he said. “We do think that’s a payment integrity issue,” Andrews said. “The way we’ve been able to save for our members has really more gone to the more obvious mistake and fraud, error and fraud, but certainly clinical appropriateness is another area that we are looking