Third-Party Administrator (TPA)
An organization that manages an employer’s self-funded health plan. Nearly 66% of US employers use self-funded health plans, the majority of which are managed by TPAs. TPAs are important for ensuring that self-funding is cost-effective for the employer and that the transition is smooth.
As an independent third-party, TPAs perform all administrative duties related to employee health benefits, such as plan design, claims processing, and government compliance. TPAs can be assigned as many or as few tasks as the client wishes, and each client-TPA relationship is uniquely customized. Employers pay TPAs on a fee-for-service basis– through a fixed price for services provided, a percentage of assets managed, or a combination of both.
A TPA’s duties are what the client wants them to be, but not all TPAs are created equal. Performance guidelines, which ensure that claims processing will be completed in a thorough and timely manner, are an important measure of a TPA’s quality.