Core: What Table-Stakes Level Funded Administration Includes and What It Costs

LFP-15.02

The tiered product architecture proposed in LFP-15.01 begins with Core: standard level funded administration executed at a high standard. Core is not the exciting tier. It is the essential one. Reputation is built here. Employers enter the ecosystem here. The claims data generated here feeds the analytics that make Plus and Black possible. A tiered model without an excellent core is a marketing exercise. A tiered model with an excellent core is a product strategy.

The Capability Stack

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Core includes everything a level funded employer needs and nothing they do not. The boundaries matter. Every additional capability beyond what Core offers should appear in Plus or Black, not added to Core at extra cost.

Claims adjudication sits at the foundation. Accurate, timely processing against plan design rules and network contracts represents the standard that every TPA must meet. The Self-Insurance Institute of America surveys its membership on processing turnaround and accuracy, and the industry benchmarks cluster around 95% to 98% first-pass accuracy and 10 to 15 calendar days from receipt to payment for clean claims. These numbers appear unremarkable until the employer encounters a TPA that cannot hit them. Claims processing failures compound: an incorrect denial produces a member complaint, a provider balance-bill dispute, a broker escalation, and an employer who questions the renewal. At Core, the TPA must process accurately and promptly because the downstream consequences of failure exceed the cost of the claims themselves.

Eligibility management includes enrollment, termination, COBRA notification and administration, dependent changes, mid-month effective dates, and the exception handling that small group plans produce constantly. An employer with twelve employees terminates two, hires one mid-cycle, and has an existing employee add a spouse after marriage. The eligibility system must handle each of these events, generate correct 834 transactions to the network and stop loss carrier, and update the member portal within the same cycle. At scale, eligibility is database management. At small group scale, eligibility is exception management, because every group produces unique situations and the TPA that cannot handle them creates confusion for members and frustration for brokers.

Stop loss coordination tracks claims against specific and aggregate attachment points, manages carrier submissions, and coordinates reimbursement. The TPA is the employer’s agent in stop loss recovery. When a high-cost claim breaches the specific attachment point, the TPA must submit timely and accurate documentation to the stop loss carrier and follow through until the reimbursement flows. At Core, this function operates as standard administration. The TPA handles the mechanics so the employer does not have to. The stop loss coordination capability at Core does not include the proactive case management, laser negotiation, or carrier relationship leverage that Plus and Black offer. It includes competent administration of the existing policy.

Compliance documentation covers plan documents, summary plan descriptions, summaries of benefits and coverage, PCORI filing, COBRA administration, Consolidated Appropriations Act price transparency requirements, and Mental Health Parity and Addiction Equity Act compliance documentation. Series 03 documented how many small group plans manage these obligations poorly, and Department of Labor audit findings show the failure modes. At Core, the TPA produces compliant documentation, updates it when regulations change, and provides the employer with the records they need if they encounter an audit. This is not legal advice. It is documentation support that reduces the employer’s compliance burden and exposure.

Employer reporting at Core includes monthly claims experience summaries, surplus and deficit position tracking, and utilization summaries by service category. The reporting is standard: PDF or dashboard, current-quarter data, retrospective analysis. The data shows what happened. It does not yet include the predictive analytics, cost driver identification, or real-time dashboards that Plus and Black offer. For the Core employer, retrospective reporting is sufficient. They are not actively managing claim costs at the program level. They want to know where they stand against the expected claims fund and whether the stop loss policy has been triggered.

Network access at Core comes through a leased network from a national carrier or regional aggregator. The Kaiser Family Foundation 2025 Employer Health Benefits Survey found that 67% of covered workers in self-funded plans access care through preferred provider networks, and the network remains the dominant cost control mechanism even when employers are not engaging additional cost management programs. Core offers standard provider directory access, standard repricing against the network contracts, and the geographic footprint that the leased network provides. What Core does not offer is the domestic facility steering, centers of excellence routing, or cross-border access that Plus and Black include. The network at Core is the network the employer gets.

Bundled ancillary options at Core include dental and vision available as bundled or carved-out arrangements. The employer chooses. The integration analysis from Series 11 suggests that bundling produces administrative simplicity but may sacrifice cost optimization compared to carved-out arrangements with independent dental and vision specialists. At Core, the TPA offers the choice and does not mandate bundling. The ancillary carriers are national options: Delta Dental, VSP, EyeMed, Principal, and comparable alternatives. The integration with the medical TPA administration is seamless, with consolidated billing and unified member communication.

The member portal at Core includes digital ID cards, provider directory access, claims history, deductible and out-of-pocket tracker, and basic benefit information. The portal meets the standard that members expect: they can find their card, look up a provider, see what they have spent against their deductible, and review claims status. What the portal does not yet include is the cost transparency, pharmacy price comparison, and navigation features that Plus and Black offer. The Core member portal is functional. It is not yet a cost management tool.

The broker dashboard at Core includes account overview, renewal timeline, basic claims summary, and contact management. Brokers can see their book, track renewals, and access high-level claims data. The dashboard is functional but not analytical. It does not include the cost driver analysis, population risk segmentation, or competitive intelligence that Plus and Black offer. For the broker managing Core accounts, the dashboard supports relationship management. It does not yet support consultative selling.

Administrative Cost Structure

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The administrative fee at Core reflects the cost of delivering the capability stack competently. The industry operates in a range. Jan-Felix Schneider’s 2025 analysis of health plan fees placed TPA administrative fees between $5 and $60 per employee per month, with variation driven by scope of service and group size. At the low end, TPAs charging below $20 PEPM are often cross-subsidizing through hidden revenue streams: claim savings fees, PBM overrides, or percentage-of-claims arrangements that the employer does not see. At the high end, TPAs charging $40 to $60 PEPM are either including cost management programs or serving complex populations with high administrative intensity.

Core’s PEPM must be competitive with the existing TPA market for standard level funded administration. The value proposition at Core is not differentiation through unique capability. Every competent TPA can process claims, manage eligibility, coordinate stop loss, and produce reports. The value proposition at Core is differentiation through execution quality: claims accuracy, reporting timeliness, compliance reliability, and member and broker service responsiveness.

The administrative cost structure at Core includes several categories. The administrative fee itself covers staff, systems, and overhead. Stop loss coordination cost covers the submission and recovery process. Compliance cost covers document production and regulatory updates. Technology cost covers the member portal, broker dashboard, and underlying infrastructure. Margin is the remainder.

The relative weight of these categories varies by group size. For smaller groups below twenty employees, administrative intensity per member is higher because the fixed costs of onboarding, compliance documentation, and reporting spread across fewer employees. For larger groups approaching fifty employees, the per-member administrative cost drops because the fixed costs spread further. This is why tiered pricing by group size is common in the TPA market. Core pricing reflects this reality: smaller groups pay more per employee because they cost more to administer.

Target Segment

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Core serves three overlapping employer segments.

Price-sensitive employers represent the first segment. The employer with ten to thirty employees wants level funded economics: transparency into claims, potential for surplus return, plan design flexibility beyond the constraints of fully insured small group products. They do not want active cost management programs. They want good administration at a competitive price. For this employer, Core delivers exactly what they need. Adding cost management programs they will not use increases the PEPM without producing value.

Lower-complexity groups represent the second segment. These are employers with healthy, younger workforces without significant chronic disease burden or high-cost claimant risk. The actuarial profile is favorable. The stop loss premium reflects the favorable risk. Claims experience tends to run under expected. For this employer, standard administration is sufficient because the population does not generate the cost management opportunities that justify Plus. They do not have the MSK exposure that requires virtual physical therapy. They do not have the maternity concentration that requires maternity management. They do not have the chronic disease prevalence that requires targeted coaching. Core serves them well because their needs are simple.

Employers entering self-funded for the first time represent the third segment. The employer moving from fully insured to level funded is making a significant shift in plan design and financial structure. They are learning how self-funded economics work. They are building confidence in the TPA relationship. Core is the entry point. The TPA demonstrates competence at Core before upgrading the employer to Plus. The employer who enters at Plus or Black without the foundation of confidence in basic administration may become overwhelmed. The employer who enters at Core, sees competent administration, and then encounters a cost driver becomes the natural upgrade candidate.

The Foundation Argument

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Core must be excellent because three strategic imperatives depend on it.

First, reputation is built at Core. A TPA known for processing claims accurately, reporting on time, and handling member inquiries well builds the trust that supports Plus and Black upsell. The broker who places a Core account and sees competent execution becomes the broker who refers a Plus account. The employer who experiences smooth administration becomes the employer who takes the call when the TPA proposes upgrading to cost management. A TPA that delivers mediocre Core administration never gets the opportunity to sell Plus and Black because the brokers stop placing accounts.

Second, employers enter through Core and upgrade. The employer who starts at Core, sees competent administration, and then encounters a cost driver becomes the natural upgrade candidate for Plus. The cost driver might be a pregnancy, a high-cost claimant, rising pharmacy costs, or MSK claims that spike after a workers’ compensation event resolves. The Core employer who trusts the TPA and understands their claims data is ready to discuss cost management. The Core employer who does not trust the TPA leaves at renewal rather than upgrades. The upgrade path depends on Core execution.

Third, claims data generated at Core feeds Plus and Black analytics. The predictive models in Black and the cost management routing in Plus require claims data from across the book. Core’s large enrollment base generates the data volume that makes Plus and Black intelligence possible. A TPA that serves only Plus and Black accounts has limited data for population-level analysis. A TPA that serves a large Core book with consistent claims data feeds analytics that identify cost drivers, predict high-cost claimants before they become catastrophic, and route members to the right programs at the right time. Core is the data engine for the enterprise.