Appendix L



Third Party Administrative Services for Penn State’s Medical and Prescription Drug Plan



Penn State has developed a five (5) year strategic plan (2016-2020) that includes a thematic priority of enhancing health.  The University will invest in innovative, multi-pronged, institution-wide health initiatives that inspire faculty, staff, and students to focus proactively on their physical, mental and emotional wellness.  Penn State needs a service provider to advance its population health management goals in the most effective and efficient ways possible.

The current third party administration (TPA) contract for Penn State’s medical and prescription drug plan offered to eligible employees and dependents is ending December 31, 2017.  Currently, Highmark Blue Shield is the TPA and provides claims payment and adjudication services, contracts with the pharmacy benefits manager (Express Scripts), develops a network of out-patient, in-patient and professional services providers, negotiates provider reimbursement rates in order to optimize discounts, provides dedicated member services, provides care management services, creates and maintains online administrative tools and resources, etc.  Penn State pays a per member per month (PMPM) fee for these services—for 2017, approximately $28 PMPM, $13M annually.

The TPA contract with Highmark Blue Shield has been in force for ten years and Penn State is embarking on a rigorous Request for Proposal (RFP) process this fall.  It is anticipated that a TPA vendor(s) decision will be finalized before the end of the Spring 2017 semester, with implementation occurring between that point and the end of 2017.  The effective date of the new TPA contract(s) will be January 1, 2018.


In late September, the Office of Human Resources (through its procurement dept.), sent a Request for Information (RFI) to gather relevant information about a potential partner(s).  Four national TPAs were included in the RFI—Highmark Blue Shield, United Health Care, Aetna and Cigna.  The University is seeking an administrator(s) that will display an ability to align competitive pricing (including aggressive performance guarantees), minimal network disruption, reasonable access to appropriate sites of care, innovative and user friendly consumer tools, account management, and a heightened focus on overall customer service. The University is exploring the possibility of separately contracting for the management of its prescription drug program and health and care management programs (through Penn State Health Care Partners).

Penn State has partnered with Willis Towers Watson to assist with the selection of one or more health plan administrative partners.  The University may consider selecting more than one partner, if certain gaps are identified.  For example, a potential partner could be added during the formal RFP process, if it is determined that there would be significant disruption to accessing UPMC providers and facilities that cannot be effectively managed by one of the four national TPAs.

A Steering Committee has been created to oversee the RFP process, review and analyze RFI responses, determine RFP participants, provide input on the content of the RFP, review and analyze RFP responses, determine finalist presentations and provide a recommendation to administration for a TPA partner(s).  The Steering Committee includes representatives from the Health Care Advisory Committee, Senate Committee on Faculty Benefits, Joint Committee on Insurance and Benefits, University Staff Advisory Council, Human Resources, Finance, and Procurement.

Sample of Key Measures for TPA Partners

Quantitative Measures

  1. Medical Network Disruption
    1. Vendors will be evaluated based on in-network, out of network/participating, out of network/non-participating providers
  2. GeoAccess
    1. Vendors will be evaluated based on access standards for provider groups and accepting new patient status

Qualitative Measures

  1. Penn State expects the vendor(s) to be able to limit restrictions and be flexible in meeting the needs of the University. As such, Penn State is requiring a potential health care partner to be able to accommodate several new and emerging health care delivery models including, but not limited to, the list below.  These are not necessarily items that Penn State will be implementing on January 1, 2018, but are potential strategies to be implemented during the contract term.
    1. Reference based pricing
    2. Bundled pricing reimbursements
    3. Accountable Care Organizations
    4. Patient Centered Medical Homes
    5. Alternative/Narrow Networks and Steerage (e.g. Quest Diagnostics)
    6. Mental/Behavioral Health Services
    7. Pharmacy utilization management
    8. Competitive drug pricing programs
  2. Health and care management programs
    1. Performance guarantees
    2. Ability to collaborate with third party (e.g., Penn State Health Care Partners)
  3. Innovative strategies to leverage Penn State Health
    1. For example, the ability to create a custom network with appropriate steerage mechanisms that would be comprehensive of Penn State Health and its affiliates including the onsite employee health and wellness center?
  4. Retail pharmacy network and formularies
  5. Experience with large, higher education clients

Because of the participation on the Steering Committee of members of the Joint Committee on Insurance and Benefits and the Senate Committee on Faculty Benefits, the Faculty Senate will remain informed and have input on the determination of the TPA partner(s) for a contract term expected to be three to five years in length.


  • Susan Basso
  • Renee Borromeo, Chair
  • Victor Brunsden
  • Amy Dietz
  • Mark Horn
  • Peter Jurs
  • Cassandra Kitko
  • James Miles
  • Jamie Myers
  • Willie Ofosu
  • Erica Smithwick, Vice-Chair
  • Greg Stoner