What's a TPA & Why Does It Matter for Your Health Insurance

June 20, 2024

A third-party administrator (TPA) in the insurance industry refers to a company that mediates between policyholders and insurance companies. The health insurance industry also refers to them as third-party claims administrators. However, these companies may do far more than administer the claims process.

What is a TPA?

In addition to their role in managing insurance claims and administering various aspects of insurance plans, TPAs have expanded their services to encompass a wider range of operational functions. This includes customer enrollment, accounting, and billing. Moreover, TPAs may also assume responsibility for other critical tasks within the insurance ecosystem. For instance, they integrate with the provider network and take charge of case management and prior authorization processes. Through these additional responsibilities, TPAs contribute significantly to the efficient functioning of insurance programs and ensure coordination between policyholders, providers, and insurance carriers.

Role of a TPA in Handling Your Insurance Policy

The role of the TPA your health insurance provider uses may differ from that of an insurance company. Your health insurer may use a TPA only for claims management or for all of its financial administrative needs. According to Indeed, some TPA companies have moved beyond claims management and administrative tasks into financial accounting and underwriting fields. A full-service TPA could free an insurance company from many of its administrative requirements.

Customer Service

TPAs can also serve as a point of contact for a company's customers, especially regarding questions about their insurance plans. They offer personalized guidance to customers to access administrative information and complete other basic tasks. Companies can route customer service to a TPA, utilizing streamlined troubleshooting processes to answer questions without overwhelming the main company's resources.

Claims Management

TPAs play a pivotal role in adjudicating claims, ensuring they comply with contractual agreements within the PPO network. This involves meticulously assessing the allowed amounts stipulated in the network's contract and applying them to the billed charges. Subsequently, they factor in the member's deductible and coinsurance responsibilities, determining the final amount owed by the member. Claims adjudication encompasses a comprehensive process that considers network contracts and individual plan details, ultimately facilitating fair and accurate claims processing for all parties involved.

Policy Account Management

TPAs typically oversee the distribution of claim funds as part of managing the claims filing and decision-making process. They are also responsible for updating the policyholder's account. The TPA manages all aspects associated with a claim, ensuring efficiency and accuracy throughout the process.

General Administrative Tasks

Full-service TPAs offer a spectrum of administrative services, although the specific offerings may vary among companies.

Case Management

Case Management involves closely monitoring members diagnosed with conditions that pose potential for high claims or require specific treatments such as surgery or physical therapy. In this process, individuals are assigned a dedicated case manager who oversees their care journey, ensuring they receive appropriate and timely interventions. These case managers serve as vital contact points, liaising between members, healthcare providers, and insurance companies to optimize care outcomes while managing costs effectively.

Case Manager

Case managers are pivotal in advising members and ensuring compliance with their healthcare regimen. They actively monitor members' progress and guide follow-up appointments, medication adherence, and the exclusive utilization of PPO-contracted providers. By overseeing these aspects, case managers ensure members adhere to their prescribed treatment plans and uphold necessary protocols, ultimately contributing to improved health outcomes and efficient cost management.

Prior Authorization

Prior authorization is critical in healthcare management, particularly for advanced procedures such as MRIs, CAT scans & surgeries. Prior authorization is required before these procedures can be performed and covered by the insurance plan. This process ensures that the treatment is medically necessary and meets the plan's guidelines. Often, the TPA is responsible for facilitating prior authorization requests, ensuring that members receive the required approvals before undergoing costly medical procedures. However, TPAs may only sometimes perform this role and may involve additional service fees.

Network Affiliation

It is crucial to consider when selecting a TPA for your self-funded health plan. TPAs partner with specific provider networks, influencing the accessibility of healthcare services and the extent of cost savings. Evaluating TPAs based on network affiliations ensures alignment with preferred providers, maximizing network discounts and optimizing healthcare benefits for plan members.

Third-party Programs

Third-party Programs offered by TPAs can significantly enhance the value of your health plan. These programs may include disease management initiatives, wellness programs, nurse hotlines, and specialized support services. By leveraging third-party programs, TPAs can provide comprehensive support to plan members, promoting better health outcomes and reducing healthcare costs over time.

TPA vs ASO: What's the Difference?

The distinction between a TPA and an ASO is fundamental in self-funded health plans. An ASO, or Administrative Services Only, involves a comprehensive package provided by a single entity, such as an insurance carrier, offering access to a network, case management, and pharmacy benefit management services. However, the risk lies with the employer, who assumes responsibility for the self-funded plan. On the other hand, the unbundled approach, represented by a TPA, allows for the selection of individual services from different providers. This method entails choosing the best-suited network and TPA separately based on service breadth and pricing. Comparing TPA versus ASO thus underscores the contrast between a specialized approach and an all-in-one solution from a single vendor.

What Is the Difference Between a TPA and an Insurance Company?

The insurance company assumes the financial risk of providing individuals with health coverage. Conversely, TPAs handle administrative tasks similar to insurance companies but do not undertake any financial risk. This includes claims adjudication and facilitating communication between the insurance carrier and the insured.

What Services Do TPAs Provide?

TPAs offer a range of essential services, including managing eligibility, interacting with the carrier, and adjudicating claims. They facilitate claims payment to healthcare providers and communicate with members regarding their out-of-pocket obligations through explanations of benefits. Additionally, TPAs may handle prior authorization, case management, and disease management and provide crucial reporting functions.

TPAs Provide a Valuable Service

At The CBC Health Insurance Marketplace for Costco Members, we recognize the importance of these services in optimizing self-funded plans. Through our marketplace, we have established relationships with TPAs to curate options that reduce overall expenses and ensure efficient plan management. By leveraging these partnerships, we aim to provide comprehensive solutions customized to the unique needs of our members.

Maximize your benefits while minimizing costs through The CBC Health Insurance Marketplace for Costco Members. Whether you are exploring self-funded options for the first time or seeking to enhance your existing plan, our team is here to assist you. Contact us today for a comprehensive analysis of your self-funded plan needs and discover how we can help you achieve your goals.

Brought to you by the insurance professionals at Custom Benefit Consultants, Inc.

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