What is the definition of Third-Party Administrator?

A Third-Party Administrator is an independent entity that processes claims or performs related tasks for an insurance company or employer. This is mainly for tasks involving employee benefit plans.

The insurance company or any self-insured company that has an employee benefits package can outsource some services such as the management of membership and claims processing, perform utilization review, establish medical provider networks. TPAs also help in processing flexible spending accounts and retirement plans.

Third-party administrators do not assume any risk - the insurance company or self-insured employer does.

For some, outsourcing to a TPA makes sense, as employee benefits can be very technical and difficult to administer. A TPA already has the expertise and the experience, so it may be more cost-effective to hire a TPA.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage