Third Party Administrator: What is a TPA in health insurance?

What is a TPA Insurance


When it comes to the health insurance industry, a third-party administrator (TPA) is an administrative services provider that delivers support for self-insured health plans.

Outsourcing to a TPA like Collective Health can be an attractive option for organizations looking to take advantage of the significant cost benefits associated with self-insuring their healthcare plans without expending the operational resources required when you don’t use a traditional insurance company. TPAs supporting companies that decide to self-fund insurance policies can help design employee benefit plans and provide ongoing management of the employee health plans.

What does TPA stand for?

TPA stands for “third-party administrator”. In the health insurance industry, a third-party administrator (TPA) provides administrative services for self-funded health plans, sometimes referred to as self-insured health plans. A TPA can also provide access to healthcare networks and may be able to source additional vendors, such as stop-loss insurers.

The difference between an insurance company and a third-party administrator

Most people are familiar with how a health insurance company works: The insurance provider sells coverage to protect individuals against damage to their physical person and incurring medical expenses. In essence, a health insurance provider is exchanging the risk of that damage for a monetary fee and can cover part of or all of that risk for an individual. This is possible for insurance companies because they are sharing risk among a large group of policyholders.

A third-party administrator doesn’t take on any risk and doesn’t provide insurance or health benefits. Instead, a TPA exchanges the administrative services required to manage a self-funded health plan for a monetary fee.

How does a third-party administrator support your health plan?

TPAs supporting self-insured healthcare plans take on the administrative burden that typically rests on the human resources (HR) and finance teams within an organization, including enrollment, insurance claims processing, reimbursement, reporting and record-keeping, and eligibility profiles.

And unlike an “administrative services only” or ASO provider, TPAs can also provide support coordinating services from additional vendors such as actuaries, adjusters, claims analysis firms, or legal counsel when necessary. Additionally, TPAs can negotiate stop-loss insurance, review your claims data for abuse, fraud, and waste, and optimize accordingly and provide greater customization in benefit designs.

Learn more about the benefits of utilizing a third-party administrator today

TPAs offer a wide variety of benefits for provider organizations, brokers, and consultants. If you are interested in finding out more about Collective Health’s TPA services for your business or your clients, please contact us for a demo today. Want to know more about Collective Health? Read about us here.

Deliver a better healthcare experience for your people and your team.

Take a self-guided tour