What is a third-party administrator?

A third-party administrator is an organization that conducts the administrative and operational work for an insurance plan. The administrative work often includes processing claims, enrolling customers, collecting premiums, and complying with federal regulations. Third-party administrators, also called TPAs, do not set the policies of health insurance plans but they help ensure policies are followed. TPAs may work with more than one insurer.

While TPAs are commonly associated with health insurance, they are used in a variety of insurance fields. Commercial liability insurers and retirement plan administrators often contract TPAs to operate as claims adjusters or customer support staff. TPA companies can be large, multi-national corporations. There are also individuals with TPA certification that act as independent contractors.

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When do I need to be aware of a third-party administrator?

TPAs are often a critical component of self-funded insurance group health plans. These plans give companies the ability to better customize health insurance coverage for their employees, while also receiving some financial benefits. As these companies are typically not in the business of insurance, they contract TPAs to help manage and administer the plan for their employees.

What is important to know about a third-party administrator?

The role of a third-party administrator will vary depending on the specific plan they administer. However, there are some common services that many, if not most, TPAs offer:

TPAs may design a benefit plan that's tailored to the specific health needs of a company's employees.
They may assist with insurance enrollment by verifying an individual's eligibility or offering COBRA to individuals who have left the company.
TPAs often process medical claims by ensuring they stem from eligible medical services and follow applicable state and federal regulations.
Many TPAs provide customer support to employees covered by the group health plan.