Appendix M



Embedded Recommendations for Third Party Administrator (TPA) Choice for Penn State Medical and Prescription Drug Coverage


Implementation: Upon Approval by the President

Introduction and Rationale:

As the University moves forward in its engagement with prospective third party administrators (TPAs) for the administration of its medical and prescription drug benefit plans, it is important that innovative contractual agreements and creative opportunities be explored to ensure the best possible and most efficient outcomes for Penn State, its employees and their dependents.   As reported in the Faculty Benefits Committee’s informational report of December 6, 2016 titled, “Third Party Administrative Services for Penn State’s Medical and Prescription Drug Plan,” a steering committee has been created to review and make recommendations regarding new contractual agreements for TPAs to be effective January 1, 2018. This committee is comprised of faculty and administrative personnel, representing 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. The steering committee is working with Willis Towers Watson to obtain information from and evaluate the merits of prospective TPAs.

As the request for proposal (RFP) process moves forward, it is important that the steering committee remain informed and mindful of both qualitative and quantitative measures in choosing one or more new TPAs. Health care costs continue to rise and it is essential that Penn State chooses to work with a TPA that is willing to consider all options in order to contain costs, while at the same time, maintaining and improving quality care for employees and families across the Commonwealth.

Even though it may not be possible to engage in any or all of the innovative strategies described below by the implementation of the new contract date of January 1, 2018, Penn State should seek to partner with a TPA that is willing to consider these strategies to improve the patient experience while at the same time eliminating unnecessary spending that could drive up the cost of health care. Some strategies that might be considered include:

  1. Explore the creation of High Performing Networks and Steerage: this involves negotiating with specific groups of health care providers who are proven to deliver high quality services at a lower cost (e.g., Quest Diagnostics, Penn State Health, Mt. Nittany Health).
  2. Create custom networks with appropriate steerage mechanisms that would encourage Penn State employees to utilize “Centers of Excellence” for specific services; e.g., hip replacement surgeries performed at designated provider sites that would cost the employee and employer less than those performed at other sites.
  3. Pursue TPAs who are forming accountable care organizations: these are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their patients, and are incentivized to eliminate duplication of services and medical errors.
  4. Partner with TPAs who contract with providers who operate patient centered medical homes: treatment and care are coordinated through one physician (often primary care physician) to create efficiency and delivery of services and improve communication with the patient.
  5. Create bundled care models: a specific payment for a diagnosis or condition, rather than for each piece of the care (i.e., single payment for management of a total hip replacement instead of paying a separate price for diagnostic procedures, surgical interventions, and physical therapy).
  6. Develop referenced based pricing models: setting a maximally allowed amount to be paid for a specific intervention.
  7. Seek health care management programs that would allow Penn State University the flexibility to collaborate directly with third parties, such as Penn State Health Care Partners.
  8. Obtain performance guarantees that hold the TPA accountable to meet predetermined levels of performance in the administration and handling of claims, provider networks, prescription drug rebates, member services, etc.


The University Faculty Senate Committee on Faculty Benefits is seeking endorsement from the full senate on the following recommendations regarding the work of the steering committee and the senior administration that are ultimately responsible for the final decision.

The steering committee and senior administration should:

  1. Consider new and innovative opportunities for the pricing and delivery of health care, including but not limited to, those described above.
  2. Insist upon a TPA that is able to provide quality health care coverage to all Penn State employees across the Commonwealth, with broad, in-network access to physicians and facilities.
  3. Remain committed to the guiding principles outlined in the Principles for the Design of Penn State Health Care Plans Advisory and Consultative report that was endorsed by the Senate and accepted by the President in spring of 2016.
  4. Seek contractual agreements with TPAs to specify terms of commitment of no longer than 5 years in order to retain flexibility in administrative options in the context of a rapidly changing healthcare environment.


  • 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