TPAs help with the design and ongoing management of health plans.

What Is a Third-Party Administrator (TPA)?

Understanding TPA Services

A third-party administrator is an entity that delivers various administrative services on behalf of a health insurance plan. Third-party administrators are normally called TPAs but, sometimes, they are called “administrative services only” (or an ASO) entity and these ASOs may or may not have a more limited service set. TPAs are often used with self-insured health plans where the organization wants the savings associated with self-insuring but not all the operational work that goes with those savings.

TPAs help with the design, launch, and ongoing management of a health plan. TPA services are normally configured to the needs of the client. Examples of services that a third-party administrator could potentially provide are:

  • Health plan benefit design
    • Benefits tailored to needs of employees rather than using off-the-shelf benefit designs
    • Prescription drug formulary design
    • Benefit bundling (e.g. medical benefits with dental or disability benefits)
  • Healthcare provider access
    • Doctor & hospital network
    • Pharmacy network
  • Enrollment assistance
    • Plan eligibility verification for employees of association members
    • COBRA assistance for qualifying individuals who were terminated or had hours reduced
  • Customer service to plan participants
  • Consolidated billing across vendors for health plan services
  • Processing of medical claims
    • Claims processing according to applicable regulation
    • Identification of billing mistakes from healthcare providers
  • Stop loss coverage
    • Stop loss coverage for self-insured plans
    • Determination of the “attachment point” for stop loss coverage
  • Plan record keeping
  • Health plan compliance

Before entering into a contract with a TPA, your organization should:

  • Get a detailed description of all fees and charges associated with TPA services to be provided
  • Receive contact information for client references
  • Obtain a summary of TPA licensure status within the state or states of operation for the association health plan (the majority of states require special licensing for TPAs)

Alongside the above health plan operation functions, another value of a TPA is the ongoing monitoring of regulations, laws, and court decisions for the legally compliant management of a health plan.

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