When searching for insurance services, you will likely come across the term TPA, which stands for Third Party Administration. If you are wondering what a TPA is and how it can benefit you, this piece will come in handy.
What is a Third Party Administrator?
It is an organization or an individual that performs administrative services under contract for a separate entity. These may include billing, managing employee benefits, identification card production, and processing insurance claims, among other daily operational services.
What is a Third Party Administrator in Health Insurance?
It is an organization or individual contracted to handle health insurance claims for a separate entity. Many health insurance companies outsource their claims processing and employee benefits plan management to third-party administrators.
TPA firms do not take any risks with health plan claims or provide insurance coverage. Instead, they operate under a surety bond such that they only help insurance companies manage their administrative tasks and fulfill their mandate to customers.
TPA Services
A Third Party Administrator’s services can help effectively handle administration functions for either a health insurance company or a self-funded plan. Such services include:
- Enrolling new members
- Reporting and keeping records of financial statements
- Reimbursements
- Claims adjudication and auditing
- Billing
- Managing documentation of stop-loss insurance claims
- Customer service
- Member education
- Accounting services
- Producing identification cards
- Utilization reviews
- Building relationships with clients
Services offered by TPAs differ from one another. They differ based on an organization’s needs and emerging market trends.
Benefits of Hiring a Third Party Administrator
More and more insurance companies and organizations with self-funded health plans continue to seek the services of Third Party Administrators for benefits such as:
1. Expertise
TPAs are knowledgeable and experienced in carrying out various administrative tasks. They are also well-versed in the regulatory requirements involved.
2. Saves Money
Effective management can help save time and increase client cash flow and savings. It translates to not only savings but also more profits.
3. Reduced Pressure
TPAs can help lessen the burden on the human resource and customer care departments.
4. Information and Insight
TPAs provide in-depth information and insights into costs, history, current market trends, and more. With such information, insurance companies and organizations running a self-funded health plan can make better-informed decisions and adjustments.
How Much Does a Third Party Administrator Cost?
The charges will depend on the services provided and the magnitude of the work assigned. TPAs may price each administrative task individually or as a package deal.
Thus, it is difficult to determine how much a TPA will charge. Typically, the monthly charge per employee ranges from 12 Euros to 60 Euros.
TPA’s are more likely to charge small to medium businesses less than large businesses.
Third Party Administrator(TPA)Registration
Based on the TPA act you must be a registered company whose sole purpose is to administer claims. You should also have a TPA license from the State Department of Financial Services.
Alternatively, you should be an insurance carrier licensed to write worker’s compensation policies. You must also be licensed to do business in your geographical area.
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