Healthcare benefits are an integral part of our job. Many people forego well-paying jobs if the health benefits are lacking. This is very true for Malaysians even though Malaysia has a universal healthcare system (albeit specialist services requires you to queue up despite being free).

Thus, private healthcare plays a pivotal role when it comes to recruitment as most, if not all, Malaysians except some form of healthcare to be provided to them. Currently, companies in Malaysia use a few different methods to provide healthcare to their employees:

  1. Insurance
  2. Self-Managed
  3. Third-Party Administrators (aka. TPAs)
  4. Employee Healthcare Management Platforms

However, today, we'll be focusing on Third-Party Administrators (henceforth referred to as TPAs).

What are TPAs?

Imagine this; you are a large company. For this example, we'll use Starbucks.

Starbucks has many employees worldwide. Now imagine you are an HR in the company and one of your daily tasks is to manage your colleague's health claims. Can you imagine how daunting it would be for ONE HR ALONE to maintain the health claims for 500+ people?

So what does Starbucks do instead? Simple, they outsource all of the administrative and manual work. To put it in simple terms, TPAs are outsourced agents that help companies manage their medical claims. Moreover, Starbucks is not the only company to do this; many large companies follow this method.

How TPAs work

Now that you understand what a TPA is, you must be wondering how TPA's work? Let's break it down with a numbered list to keep it short and give you a good understanding:

  1. Employees can seek cashless treatment at panel clinics using the medical cards which are provided by the TPA
  2. Panel clinics then submit the charges to the TPA, and the TPA offers a consolidated bill to the company
  3. The company then makes the payment to the TPA who in turn forwards it to the respective clinics

Why do companies use TPAs

By using TPAs, huge companies don't have to do all the manual administrative work that comes with providing your employees with healthcare benefits.

Outsourcing all the overwhelming and time-consuming administrative tasks, allows HRs to better utilize their time in doing other jobs (i.e. recruitment, employee appraisals and so forth)

Why You Should NOT Be Using TPAs

From the information above, you might be screaming "Praise the Lord!" in your head but trust me; it's not as perfect as it looks.

TPAs come with certain downsides which might even be deal-breakers for you:

  1. TPAs typically do not keep track of employees' benefit entitlement & balances. If an employee has overused their entitlement, HRs will need to keep track manually and minus it off from within the payroll which may cause confusion and disputes
  2. Want analytics? Too bad, you are going to have to pay extra. TPA's do create reports on the behest of the company, but they also charge extra for it. Some TPAs may even charge based on each report/page. Furthermore, the information is not real-time and TPAs will generally take a few days to deliver the report
  3. When a company signs up with a TPA, there is a downtime period where they have to wait for the medical cards to arrive. Medical cards typically take about 1-2 months to come (so within that period employees cannot seek cashless treatment)
  4. If an employee loses a medical card, it takes another 1-2 months to get a replacement, and a penalty fee is charged. Each medical card typically costs between RM5 - RM20
  5. There is no real-time verification of employees at a panel clinic. Employees that are no longer a part of the company might abuse this as clinics won't be aware

Reading the points above, you are given a clearer picture of what can go wrong if you do decide to use a TPA.

Conclusion

TPAs seem like an excellent immediate option when you are a huge company and want to manage your employee health benefits more effectively. However, in the long run, it can be more detrimental than beneficial to your company.

Manual work at the end of the day is well, manual work. It's counter-productive to hire more hands to keep doing the same task over and over again instead of finding a way to automate it through a more sophisticated platform.