What Is a Third Party Administrator (TPA) in Health Insurance?
Third party administrators, or TPAs, help insurance companies with claims, billing and other tasks.
TPAs are most common with plans that companies offer employees, called group health insurance. Health insurance companies use third party administrators to save time, keep costs down, negotiate health care costs and free up time for other tasks.
TPAs and health insurance
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What is a TPA in health insurance?
A TPA, or third party administrator, is a company that helps health insurance companies with various tasks.
TPAs can help health insurance companies with things like:
- Administrative tasks: This can include creating reports and filing paperwork, making sure health insurance companies are aware of changing regulations and processing applications for new customers.
- Billing: A health insurance company might use a TPA to create and send monthly bills. When you pay, the TPA might also process the payment.
- Claims processing: This includes reviewing the bills and notes from medical offices, checking your plan's coverage and paying the right amount.
- Customer service: TPAs sometimes handle customer service. So when you call your health insurance company, you might actually be talking to a third party administrator.
TPAs usually help employers with the group health insurance plans they offer their employees. It's estimated that about 60% of health insurance plans use a TPA to some degree.
A TPA is separate from your insurance company, although some health insurance companies have their own in-house TPAs.
Examples of TPAs in health insurance
There are two types of third party administrators: captive and independent.
Captive TPAs are owned by an insurance company and only work with that company. For example, UnitedHealthcare owns a TPA that only works with UnitedHealthcare companies.
Independent TPAs aren't a part of health insurance companies and can work with any company that hires them. Broadspire, for example, is a TPA that can work with any insurance company that asks for help.
Why do companies hire third party administrators?
TPAs help health insurance companies save time and money.
If a health insurance company had to handle all of its billing, claims and reporting itself, it would have to hire a lot more employees. It would also have to train those employees in different specialties and possibly pay for specialized equipment or software. A TPA helps by taking on the time consuming tasks so health insurance companies can focus on their plans.
Do I need to know if my health insurance uses a TPA?
You don't need to know about your health insurance company's TPA most of the time.
Your health insurance company should always give you contact info if you have a question or need help. If that info is for a TPA, they'll be able to help you just like your company would.
Knowing if your company uses one could help clarify things for you if you see that company's name on your paperwork. But it won't really change how you interact with your health insurance. When you need help, you'll call the number that your health insurance company gave you. If it's for a TPA, that's who you'll talk to.
Frequently asked questions
What does TPA stand for?
TPA stands for "third party administrator." A TPA is a company that helps health insurance companies with daily tasks, like billing, claims processing and customer service.
What is a TPA in insurance?
A TPA helps health insurance companies by doing some of the administrative work for them. This can include customer service, billing, handling claims, negotiating medical bills and processing applications.
Why do insurance companies use TPAs?
Health insurance companies use TPAs to save time and money. Having a TPA do time-consuming tasks like billing and claims processing lets health insurance companies hire fewer employees and focus on other things, like strategy and staying current with legal changes.
Sources
Info about third party administrators is from Broadspire, Crawford, Healthcare.gov, the Society of Professional Benefit Administrators (SPBA) and UMR.
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