Many employers team up with third-party administrators (TPAs) to help them navigate the maze of health benefits and streamline their self-funded health plans. TPAs play a crucial role in processing claims, managing provider networks, and ensuring regulatory compliance. But there’s a growing concern that often goes unnoticed until it’s too late: fees for processing routine out-of-network claims.
While this practice may appear to be just a standard part of doing business, it raises serious questions about transparency, fairness, and—most importantly—alignment with your best interests as a self-funded employer.
Out-of-network (OON) claims occur when a patient receives care from a provider not included in the plan’s preferred network. This can happen for a variety of reasons—emergency situations, limited provider access in rural areas, or patient preference.
In these cases, many TPAs and carriers apply an additional administrative charge known as a percentage-of-savings fee. These fees typically range from 20% to 30% of the “savings”, which is the difference between the provider’s original bill and the amount your plan actually pays.
At first glance, this might seem like your TPA is rewarded for negotiating lower payments. But here’s the issue: the billed amount is arbitrary and often inflated far beyond what any payer would realistically reimburse. Providers can bill $75,000 for a procedure that they routinely accept $10,000 for. This means the “savings” are manufactured, not negotiated.
So, when a TPA takes 25%-30% of that inflated “savings,” they’re not driving real value—they’re profiting from an artificial markup. This issue becomes even more costly with recurring treatments at OON facilities, such as dialysis, where percentage-based fees build up over time.
This model seems like a smart way to pay for OON claims processing. But in reality, it works against your goals, creating hidden costs and misaligned incentives that hurt both you and your employees.
Here’s how:
Percentage-of-savings fees may appear performance-based, but they actually create a perverse incentive. TPAs profit more when the billed amount is higher, even if that amount is inflated and disconnected from market reality. The TPA isn’t negotiating better outcomes; it’s simply taking a cut of an artificial “savings” margin. That means higher provider charges can translate into higher TPA revenue—at your expense.
These fees are often buried in administrative contracts or hidden within complex claims data. Most employers only discover them after doing a deep audit of their plan costs. This lack of visibility makes it difficult to understand the true value (or cost) of the TPA’s services.
Self-funded employers invest heavily in cost containment tools like reference-based pricing, direct contracting, and care navigation. But OON processing fees directly work against those efforts by adding avoidable expenses to the very claims those strategies are designed to control.
Oftentimes, out-of-network care is not a choice. Emergencies, limited access to specialists, or rural care gaps can all force members outside the network. While the No Surprises Act offers some protection and cost predictability for emergency-related OON claims, TPAs that use uncapped fees shift even more of the cost burden onto employers—and eventually their employees.
There are actions that you can take if your TPA partner is charging a percentage-of-savings fee during OON claims processing:
Out-of-network claim processing fees are more than just a line item—they’re a reflection of a system that can be misaligned with the needs of employers and employees. True alignment means transparent pricing, shared goals, and a mutual commitment to reducing costs and improving care.
As healthcare costs continue to rise, self-funded employers need a plan supervisor who acts as a trusted partner, not a profit center.
That’s why Healthgram offers:
At Healthgram, we’re always on your side.
To learn more, contact us today.
