Managing a health plan transition
By Adam Miller
When health and welfare plan trustees decide to change health plans (e.g., switching carriers, TPAs, or plan designs), there are significant legal, operational, financial, and participant-impact implications to consider. To help ensure the transition goes smoothly, meet fiduciary obligations, and reduce adverse impacts, best practices suggest that trustees follow a structured decision process that includes:
- RFP for carriers/TPAs (documented evaluation of alternatives)
- Financial and actuarial analysis
- Legal review
- Participant disruption analysis
Plan changes like these can easily take 6 to 12 months, so careful planning is important. The sections below explore key issues and considerations in more detail.
Participant coverage and access to care
Switching plans often changes provider networks, covered services, and cost sharing. Trustees can better understand these member-facing risks by examining:
- Network disruption (participants losing doctors or hospitals)
- Prescription formulary differences
- Prior authorization requirements
- Continuity of care for ongoing treatment
- Geographic coverage for members working in multiple states
Financial impact
The financial impact of changing health plans and/or benefits will directly affect plan costs and long-term solvency. Changes may lead to short-term cost savings or increases, volatility if moving between fully insured and self-funded models and impacts on employer contribution rates and fund reserves. A financial and actuarial analysis can include:
- Premium vs. self-funded cost projections
- Administrative fees and stop-loss coverage
- Claims experience and risk pooling
- Reserves and funding policy
- Cost-sharing changes (deductibles, copays, coinsurance)
Operational and administrative risks
Administrative impacts and operational capabilities must be considered to avoid member confusion, claims processing delays, and unplanned administrative burdens. Key administrative items to evaluate include:
- Data migration (eligibility, claims history)
- Enrollment and ID card issuance
- COBRA administration
- Claims run-out period with the prior carrier
- Coordination with vendors (PBM, wellness, dental/vision)
- Call center staffing
Compliance and regulatory requirements
Plan changes such as switching carriers, TPAs, and/or plan designs almost always trigger regulatory obligations. These requirements carry the risk of penalties if disclosure rules are missed and can include:
- Updated Summary Plan Description (SPD)
- Summary of Material Modifications (SMM)
- Compliance with Affordable Care Act requirements
- HIPAA privacy and data transfer protections
- Form 5500 reporting updates
Vendor performance and contract terms
To achieve administrative efficiency and maintain the ability to control future cost trends, trustees should carefully evaluate new service providers (such as carriers or TPAs) from both a performance and contract perspective. Key considerations include claims processing accuracy, customer service metrics, network adequacy, transparency of pricing and rebates (especially for pharmacy benefits), termination clauses, and performance guarantees.
Communication and change management
One of the most overlooked risks is poor participant communication. To avoid confusion and help members successfully transition to the new plan, trustees should ensure that information is accurate and timely, including:
- Early notification to members and employers
- Comparison guides explaining changes
- Leadership briefings
- Member education meetings
When trustees are considering a change to their health plan, a structured and well-documented process can help minimize disruption while meeting fiduciary obligations. Rael & Letson can assist with RFP development, financial and actuarial analysis, vendor evaluation, and participant communication planning to support a smooth transition. Contact us to learn more.