What is a TPA?

It’s no secret that health plans are complicated. As an employer, nobody knows it better than you.


Luckily, that’s what a third party administrator (TPA) is for. With a TPA, you don’t have to worry about the trials and tribulations of health plan management — they already have it covered.


But what is a TPA, anyway? What do they do? And, most important, how do you find the right TPA for you and your members?


Let’s explore everything there is to know about third party administrators and how you stand to gain from a TPA like MagnaCare.


What is a health plan TPA?

According to the Health Care Administrators Association, a third party administrator is an entity that processes or adjudicates health claims on behalf of an employee benefit plan.


In other words, TPAs handle administrative services for certain employee benefits, focusing primarily on an organization’s health plan. They often provide additional assistance related to managing the employee benefit plan, such as collecting premiums, reviewing healthcare utilization and overseeing the entire claims process.


TPAs are most often contracted by businesses that self-fund their employee benefits. When an employer chooses a self-funded health plan, they’re essentially deciding to assume complete financial responsibility for the healthcare services their members receive.


So whenever an employee visits their provider, the policyholder — the employer — pays the cost of its own pocket.


Despite the financial risk, self-funding is widely popular. In fact, more businesses are self-funding their employee benefit plan today than 10 years ago. Nationwide, almost two-thirds of companies have a fully or partially self-funded plan.


This approach is notably different from the traditional model, which is to fully insure your health plan directly through an insurance company. With this option, the policyholder pays a monthly premium to the carrier regardless of whether members use their benefits.


Who do TPAs serve?

Self-insured businesses are also responsible for managing and processing their members’ claims. With multiple moving parts, the claims process can be exceptionally complicated. That’s why many organizations work with a third party administrator.


Aside from employers, TPAs also offer administrative services to:


  • Labor funds: Multiemployer benefit funds are also complex to manage. There are many rules and regulations pertaining to Taft-Hartley funds, which is why so many engage a TPA service to simplify compliance.
  • TPAs and carriers: A TPA may also provide access to an extensive healthcare network beyond what’s already available to an insurance carrier or even a fellow third party administrator.
  • Brokers: Likewise, health insurance brokers often work with TPAs to offer custom fit solutions to their customers. TPAs can tailor the healthcare plan to the customer’s needs, which allows them to create a better experience for their members.



How do health plan TPAs work?

What administrative services do TPAs actually offer? Here’s a non-exhaustive list of the most essential ways a TPA can ease the pain of benefits administration:


  • Health plan design and implementation: TPAs help self-funded employers create an original plan tailored to their organization’s needs, as well as those of their members, including managing enrollment and issuing member ID cards.
  • Claims administration: Claims processing, claims settlement, claims adjudication, cashless claims — the list goes on. There’s an overwhelming amount of work to be done when it comes to claims management alone, but that’s what TPAs do best.
  • Utilization management: TPAs ensure clients are getting the best value for the healthcare services their members receive so you and your members can put money back in your pockets.
  • Provider network management: With a TPA, you also gain access to a variety of networks. Better yet, your vendor can negotiate contracts with providers on your behalf.
  • Member engagement and customer service: TPAs help members understand their employee benefits through outreach, resources and dedicated customer support.
  • Compliance and reporting: TPAs ease the burden of recordkeeping and help employers ensure compliance with healthcare rules and regulations.


Best of all, some TPAs also offer retirement plan management, medical management and other ancillary services.


Why hire a TPA?

Whether you’re a small business or a large organization, hiring a TPA has its advantages. Not only can a TPA help you navigate your health plan, but it also has numerous benefits for employers and members alike.


As the policyholder, here’s how you stand to gain:


  • Cost savings: Healthcare expenses have steadily increased over the past few decades — which, for self-insured businesses, is a major problem. Fortunately, a quality TPA can work with you to better manage costs and keep expenses to a minimum. By optimizing healthcare utilization, they can ensure your members only use services that are appropriate. TPAs can even reprice bills on your behalf.
  • Customization: Because they’re not bound by a single carrier, TPAs allow you to design the ideal health plan for your company’s needs.
  • Administrative support: Perhaps best of all, TPAs take the weight of managing the benefit plan off your shoulders. As experts in administrative services, you can rest assured your processes are well taken care of while you focus on core business initiatives.
  • Compliance: When you’re managing the claims process on your own, it’s easy to fall out of compliance. TPA services ensure you always are aligned with industry regulations.
  • Data analysis: The best TPAs make it easy for you to leverage health plan analytics and make informed decisions about how to best manage your employee benefits.


What’s most important is that your members benefit, too. Let’s take a look:


  • Faster claims processing: Employees want reimbursements as soon as possible. TPAs automate these processes, which allows you to rapidly settle claims and ensure members are reimbursed in a timely manner.
  • Greater access: Many TPAs help you administer complex health plans that not only give members access to a network of high-quality providers, but also wellness programs such as health coaching or disease management.
  • Cost transparency: Members want to understand their healthcare coverage. Unfortunately, transparency isn’t easy to obtain. TPAs clear the air and give members a peek under the hood, allowing them to grasp exactly how services are priced and why.
  • Care coordination: The unfortunate truth is that people don’t always receive the care they deserve. The good news? TPAs are experts in coordinating care and ensuring members are given the most appropriate care at the right time and price.


How to find the right TPA for your needs

No two third party administrators are exactly the same. You want what’s best for you and your members, which is why you should think long and hard about who you’re working with.


Self-funded employers should keep three factors in mind when choosing a TPA:


  1. Flexibility: The right TPA should allow you to customize your health plan according to your needs.
  2. Nationwide coverage: It’s important for members to have access to coverage wherever they’re located. The best TPAs allow you to extend your coverage using a nationwide network of providers.
  3. Technology: From self-service member portals to employer administrative dashboards, look for a TPA with the technologies you need to simplify health plan management.


Fortunately, you don’t have to search high and low for the right partner. MagnaCare is a leading third party administrator with 30+ years of experience delivering a modernized, high-quality healthcare experience. Whether it’s our Create® Technology platform or our flexible network of nationwide providers, we offer everything you require to take your health plan to the next level.


Ready to learn more? Check out our TPA services today.

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