A third-party administrator (TPA) for health plans manages administration on behalf of an employer, including claims processing, eligibility and enrollment, member support, and reporting.
A TPA manages the day-to-day administration of a health plan. Common services include:
Both TPAs and insurance carriers can perform many of the same administrative functions, including claims processing, member support, and enrollment administration. Which one an employer uses depends on their type of health plan.
|
Role
|
Third-Party Administrator (TPA)
|
Insurance Carrier
|
|---|---|---|
|
Plan type |
Self-funded or level-funded |
Fully insured
|
|
Who funds healthcare claims |
Employer |
Carrier
|
|
Who assumes financial risk |
Employer
|
Carrier
|
|
Processes claims |
Yes
|
Yes
|
|
Administers plan services |
Yes
|
Yes
|
|
Access to claims data |
Typically greater transparency
|
Often more limited
|
|
Plan flexibility |
Typically higher
|
Typically lower
|
TPAs help employers streamline health plan administration, gain greater visibility into healthcare spending, and improve the benefits experience for employees. In addition to managing day-to-day administrative functions, TPAs can support a more effective and informed benefits strategy. Key benefits include:
Employers typically evaluate TPAs when offering a self-funded or level-funded health plan, or when seeking greater support with benefits administration, claims management, and member services. When comparing options, employers should consider:
The right TPA should not only administer the health plan efficiently but also support the organization’s long-term benefits strategy.
Because TPAs are commonly used with self-funded and level-funded health plans, understanding these funding arrangements can help employers better evaluate whether a TPA is needed and how it supports plan administration.
Still have questions? Here are answers to some of the most common questions employers ask about third-party administration.
No. A TPA administers the health plan but does not provide insurance coverage or assume financial responsibility for healthcare claims.
Both TPAs and insurance carriers can perform administrative functions, but they play different roles. A TPA administers the health plan on behalf of an employer, while an insurance carrier typically provides and funds fully insured coverage.
While a TPA is not typically required, most employers with self-funded or level-funded health plans rely on one to manage claims administration, member support, reporting, and other operational functions.
In most self-funded and level-funded health plans, the employer selects the TPA and other administrative partners. In a fully insured arrangement, administrative services are typically provided by the insurance carrier.
