TPA stands for Third Party Administrator, which is an organization or individual that handles the claims, processing, and reporting components of a self-funded health benefits plan. TPAs are professional, state-licensed organizations offering comprehensive services and are considered experts in saving money for employers and in directing the customization of coverage. They work on behalf of employers with the broad variety of outside vendors involved in the health care provider industry. TPAs may be independently owned and operated, owned by an insurance company, multi-employer group, or even by hospitals.

In the health insurance industry, a TPA provides administrative services for self-funded health plans, sometimes referred to as self-insured health plans. TPAs may also help coordinate reporting from outside vendors and provide access to healthcare networks. Unlike an insurer, a TPA does not take on the financial risk for a company’s health benefits claims. Instead of providing insurance, a TPA provides administrative services for claims to support a self-funded health plan. TPAs may also help coordinate reporting from outside vendors.

TPAs are often a critical component of self-funded insurance group health plans. These plans give companies the ability to better customize health insurance coverage for their employees, while also receiving some financial benefits. As these companies are typically not in the business of insurance, they contract TPAs to help manage and administer the plan for their employees.

In summary, a TPA in insurance is a third-party administrator that provides administrative services for self-funded health plans, sometimes referred to as self-insured health plans, in the health insurance industry. They help ensure policies are followed and provide access to healthcare networks.