Third-party administrators (TPAs) are intermediaries who either operate as a network or access networks to price claims on behalf of companies.
When working with patients in a Medical Office, there are many different types of Insurance options. Each type of insurance has it’s own set of advantages and disadvantages, and it is important to understand these so you can assist your patients when they are using their insurance.
Third-party Administrators function as a network to price claims and serve the provider, the patients, and the employer by keeping healthcare costs under control. TPAs often handle claims processing for employers who self-insure their employees rather than use a traditional group health plan.
Third-party Administrators can be viewed as outsourcing the administration of the claims processing, since they perform the task traditionally handled by the company providing the insurance or the company itself. Often, in the case of insurance claims, a TPA handles the claims processing for an employer that self-insures its employees.
Some labor unions who offer coverage for members use Third-party Administrators. The reality is that most small companies are not in the healthcare business. They offer coverage to their employees but want to control the cost.
By self-insuring it’s employees, the company actually pays the Healthcare providers from a company account. By doing this the small company is, in theory, able to save money.
Here’s how the cost savings is supposed to work: When a small company provides healthcare for its employees through a commercial carrier, the carrier prices the policy based on the health history and ages of the employees.
Typically, a small group health plan costs a company about $ 450 per month per employee. If an employer chooses to self insure and uses a TPA, the employer pays a fee to be part of the network but then pays only the cost of the individual claims.
Third-party Administrators negotiate prices through network pricing. The downside of this arrangement is that, in the event of a catastrophe that affects several employees, the company could be in a dire financial situation. The success of using a TPA depends on playing the odds that a large percentage of employees won’t have medical needs at the same time.
Most providers view TPAs as run-of-the-mill network contracts, which they essentially are, although some TPA networks are funded by all parties. The provider may be responsible for paying a fee on adjudicated