More than half of the U.S. workers use Third Party Administrators (TPAs) for their non-federal health & pension employee benefits plans.   Approximately 90% of employers outsource their health and insurance to a third party; 30% are totally using TPAs, and 60% are partially using TPAs.    Now, TPAs do not make medical decision.  It’s similar to the way that Medicare officials refuse to pay a bill for a service that is not a covered benefit.  They are upholding the allowable services as set by Congress.  They simply interpret the contractual plan language.  TPAs keep personal relationships with every participant that calls for services.  They are more tuned into Government Regulations and New Laws due to their involvement in the industry.

The growth of the TPA business involves some degree of self-funding (self-insurance).  The funding stability comes from stop-loss insurance.  Many insurance companies are even offering self-funding insurance because of its popularity.

Another popular asset of TPAs is the flexibility and personalized service.  A TPA administered plan is custom-designed to the needs and specific workforce of a plan sponsor, and with self-funding, a particular group can get the cost-efficiency to custom-design the benefit package for their needs.  With the aim for highly attentive service, TPAs are able to process and finalize claims in a shorter period of time.  Questions are handled more promptly and plans can be adapted as the client’s needs and wants for the plan change.  Insurance companies normally make one decision for all policy holders, but TPAs work with each plan to see how changes can best be implemented for each plan and/or individual worker.  Also, since TPAs work more closely with the employer, compliance tends to be more uniform and thorough.  With insurance companies, they handle only the compliance items that relate to their services; which means that there is risk that something might fall through the cracks.  This could result in some serious legal consequences.  There is also the added advantage of TPAs with regard to efficiency and cost-containment.  Due to the fact that they work closely on a personal and jurisdictional services, TPAs can more efficiently spot abuses and/or errors; like a particular doctor who diagnoses everyone  with a particular ailment, no matter what the original illness.

With the increasing moves towards Value Driven Transparency, TPAs are the perfect solution for cost management, and low overhead.