Are You Paying in the Dark?
Background:
Cost transparency in health care has been a hot topic for years, but the attention has focused largely on hospital, practitioner and pharmacy costs. The expenses associated with the third-party administrators (“TPAs”) and vendors that administer employer-sponsored health plans have received far less scrutiny.
A new study published in Health Affairs Scholar looked at TPA related expenditures within self-insured plans and confirmed that fee obscurity limits plan sponsor’s ability to make informed decisions about their vendor suite. The research finds that most decision makers fixate on the base administrative fee within the Administrative Services Agreement (“ASA Fee”) as the main comparison across vendors, which creates the incentive for vendors to keep that fee low, while finding other ways to make a profit. And with employer sponsored healthcare affecting 165 million people and family premiums reaching $27,000 per year, the difference between what sponsors think they are paying versus their actual expense can be material. [1]
The goal is not to cut costs for their own sake, or to keep legitimate service providers from earning appropriate compensation. It is to improve fee transparency and vendor accountability so that sponsors can confirm they are receiving the services they agreed to buy, at the price they agreed to pay.
The Data is in the Details:
The administrative fee works as an anchor, but the additional fees add up quickly. Several of them are not presented as fees at all. They are embedded in what appears as claim cost, and routine monthly reporting rarely walks through the arithmetic.
Additional Potential Fees:
- Shared savings fees, especially on out-of-network claims. The administrator or its repricing vendor keeps a percentage of the difference between billed charge and allowed amount, sometimes up to half. One legal expert’s illustration: a $100,000 claim negotiated to $1,500, then billed to the plan at $31,500, with $30,000 of that a fee appearing as claim cost.
- Retained in-network discounts. The same percentage logic applied to in-network negotiations.
- Overpayment recovery fees. A percentage of recovered overpayments, including, according to interviewees, errors the administrator’s own processing enabled.
- Network access fees. An independent TPA described a carrier taking 3% to 5% of the paid amount on a rented network.
- Intercompany charges. Where a TPA owns repricers, point solutions, or a PBM, fees move between affiliated entities in ways employers cannot track.
- Add-on fees. Reporting, navigation, fraud-waste-and-abuse programs, No Surprises Act dispute resolution, and charges to obtain or audit your own claims data. One interviewee described contract terms that named the auditor the employer had to use and capped the review at 20 claims per month.
- Cross-plan offsetting. Recouping an alleged overpayment under one plan by reducing payments owed under a different plan, across distinct lines of business. Interviewees described the reduction falling on self-insured plans while the recovery accrues to the administrator’s fully insured book.
The study confines itself to TPAs, but in our experience the same dynamic runs across the vendor suite. Brokers and advisors frequently collect commissions and incentive compensation in addition to their stated fees, and that compensation is often obscured or only partially reported.
The solution:
- Legislation
The Consolidated Appropriations Act, 2026 extends ERISA’s service-provider compensation disclosure requirements to TPAs and PBMs beginning in 2028. The Department of Labor has separately proposed a rule strengthening employer audit rights over PBM fees, including limits on restricting information sharing and on which entities may perform the audit. Whether TPAs are fiduciaries when they control how plan assets are spent also remains unsettled federally, though California and Indiana have legislated it within their reach.
Unfortunately, how much these regulations will impact the situation remains to be seen.
Additionally, consolidation has left many employers with only one or two viable TPAs in their market, which weakens the leverage that disclosure is meant to create. That makes disciplined management of the vendors you already have more important, not less.
- Proactive Vendor Management
This is your plan’s data, and the gag clause prohibition in the Consolidated Appropriations Act, 2021 was written to secure access to it. Pressing for detailed, itemized fee disclosure need not damage the relationship. A vendor that can document the value behind its fees has little to lose by showing the detail.
How Optimatum Can Help
In practice, getting the data takes specific knowledge and persistence. We understand what data is needed to make informed decisions, and how to obtain it. Working directly with your vendors, we reach the right people, name the specific reports, and hold vendors to delivering them. From there, we help your team analyze the results and build mutual understanding with the vendor. In an RFP, we compare the full spectrum of fees across all bidders, so that your decision rests on total cost rather than the administrative rate alone.
Source:
Buttorff C, Rasmussen PW, Bhandarkar M, Shiferaw M, Duffy EL. “Paying in the dark: third-party administrator fees and the limits of employer cost control in self-insured health plans.” Health Affairs Scholar. 2026;4(8). https://doi.org/10.1093/haschl/qxag177
[1] https://www.kff.org/health-costs/health-policy-101-employer-sponsored-health-insurance/