Third Party Administrators, or TPAs, are at the center of self-insured health insurance plans. TPAs enable companies to sponsor self-insured group health plans instead of turning to an insurance company to provide health insurance.
TPAs and Self-Insured Plans
With a self-insured plan, the company replaces the insurance company, establishes rates, collects premiums and pays the employees' medical bills. Employer and employee premiums are paid into a company-owned pool to pay for medical services. TPAs are responsible for payment of claims from this pool consistent with the company's health plan.
TPAs Customize Health Plans
TPAs allow employers to have customized health plans. Instead of a predetermined plan from an insurance company, the employer and TPA tailors a health plan for the needs of their group as to:
• copays for office visits, prescriptions, inpatient, outpatient and ER services
• the type of deductible (annual or general plan)
• use of a bi-level or multi-level rate plan
• the annual out-of-pocket maximum
TPAs in America
Sixty percent of nonfederal workers are in health plans that use a TPA. An estimated 4,000 TPAs exist in America. The national association is the Society of Professional Benefit Administrators.
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