What are Third Party Administrators?

What are Third Party Administrators?

What are Third Party Administrators?

by Matt Tarpey


Consumers typically only ever see a small portion of the overall economy. A great deal of the exchanges of products and services aren’t between businesses and consumers, but rather between two businesses. Many companies contract with another business - or third-party - to help handle specific tasks or processes, allowing them to focus more of their time and resources on core competencies.

While much of this business-to-business economy is made up of simple transactions, some services offered are much more involved, particularly in heavily regulated industries like insurance and healthcare. In many states, tasks like insurance claims processing must be handled by a Third-Party Administrator (TPA), like Exela Enterprise Solutions, Inc. But what exactly is a TPA?

Administrative functions are some of the most commonly outsourced, and the entities doing the work are referred to as “third-party administrators.” In the case of health insurance providers, everything from premium billing and customer enrollment to benefits management may be handled this way. However, claims administration makes up the majority of health insurance work handled by TPAs.

Thanks to the complex and often shifting regulatory landscape insurance companies have to deal with, the claims processing methods insurance companies typically use can be costly and labor-intensive. In many cases, existing workflows need a complete technology-driven overhaul. TPAs are able to provide the support and specific expertise needed to keep the claims management process running smoothly. 

Organizations that set up their own health plans, rather than purchase one through an insurance company, also often outsource certain administrative responsibilities to TPAs. These companies likely have even less direct experience with the health insurance industry, and may work closely with a TPA to set up and manage the program. 

As with any large-scale service provider, a quality TPA may be looked at almost as a natural extension of the in-house claims department.

Why partner with a TPA?

Partnering with an experienced TPA is an excellent option for self-insured companies or health insurance providers that need to scale up their claims administration capabilities, want to avoid the overhead costs of developing in-house solutions, and want to ensure accuracy and efficiency. In many states, third-parties must be legally licensed to handle certain types of administrative work for other companies, a process which helps ensure quality service and security of your business’s assets and property.

Cost Savings

The most direct benefit and biggest reason health insurance companies seek out the services of TPAs is to save money. A good TPA partnership provides increased cash flow, reduced overhead, and more strategic allocation of resources, leading to greater overall efficiency. TPAs can also bring unique tools and processes to the table which prevent “certain-to-be-denied” claims from getting into the system, speeding up turnaround times and eliminating the need for time consuming and costly back-and-forths with providers.

Information and Insights

There are very few industries - if any - that are more tightly regulated than healthcare. That means transparency and clear audit trails to ensure everything is operating properly. Great TPAs not only help health insurance companies maintain compliance, they also provide actionable insights into relative costs, claims history, and useful metrics that can help improve productivity and return on investment. This kind of information enables better strategic decision making and ongoing improvements. 

Experience and Expertise

Becoming a licensed TPA has different requirements from state to state, but a central concern regardless of location is capability. That’s why health insurance companies across the country turn to TPAs to take advantage of their extensive experience and specific knowledge when it comes to regulations, account management, and claims adjudication. With these aspects of the business securely in the hands of an expert TPA, the healthcare company’s employees have more time to focus on their core competencies - such as providing exceptional service. 

As a licensed TPA offering a comprehensive claims processing platform developed based on decades of direct experience and designed to streamline processes and identify opportunities for greater efficiency, Exela can deliver greater efficiency, reduce pended claims by 30%, and help generate 24% fewer clinical edit exceptions. 

TPA licensing cements Exela’s position as a leading insurance industry partner, providing services across the value chain, including benefits administration, claims administration, billing services, accounting support, and reconciliation, through our PCH Global technology framework. Find out more about how PCH can simplify your firm’s critical processes.