TPA (Third-Party Administrator)

A TPA is a company that administers a self-funded health plan on behalf of the employer. The employer is the plan sponsor and pays the claims out of its own money; the TPA handles the operational machinery — processing claims, issuing ID cards, running eligibility, coordinating with the network, generating EOBs, managing appeals, and preparing reports. Think of the TPA as the plan's claims department, outsourced.

TPAs come in several flavors. Some are independent — Meritain, HealthSCOPE, Trustmark, Nova, Health Plans Inc. — and can plug into any rented network. Others are TPA arms of the big carriers (Aetna Signature Administrators, BCBS ASO products, Cigna ASO). Independent TPAs usually offer more flexibility in plan design, better data access for the employer, and easier integration with point-solution vendors. Carrier TPAs are simpler to set up and often bundle the network at a lower rented rate. The TPA doesn't take insurance risk — that stays with the employer, backed by stop-loss coverage.

The takeaway: if you're evaluating a self-funded arrangement, the TPA choice matters more than most employers realize. Data transparency, plan-design flexibility, and vendor integration should drive the selection, not just the per-employee admin fee.