Purpose of a TPA

• A third-party administrator is typically hired by a company to administer its health insurance program. This includes collecting premium payments and issuing reimbursements. When an employer uses a third-party administrator, the TPA needs to provide a written notice to all covered individuals or employees. This notice needs to explain who the TPA is, his relationship to the employer or payor as well as the policyholder.
  
  

Collection of Funds

• A third-party administrator who collects funds must provide an explanation for why the collection is necessary. She must also list any item and amount separately from any premium that is collected. A third-party administrator may not make any additional charges for any service that has been paid for by a payor or employer.
  
  

Payor Responsibilities

• A payor is an employer or organization that hires a third-party administrator to administer its group health insurance plan. The payor as well as the insurer or the group health insurance plan is still responsible for determining applicable benefits and premium rates that are going to be charged for coverage. A payor who hires a third-party administrator is required to make sure his health insurance program is administered competently.
  
  

Master Service Agreements

• A master service agreement is an agreement in which an employer enters with an insurance carrier and a third-party administrator. This agreement details the payment of claims that are made for insurance coverage. An insurer and third-party administrator need to keep copies of all master service agreements that they have agreed to. The agreement needs to be made available to a state's department of insurance for inspection upon request.
  
  

Delivery of Materials

• A third-party administrator is required to send information, such as policy information, an explanation of benefits, booklets or termination notices, to covered individuals. Information that is sent will also include any COBRA continuation coverage options if necessary. This information needs to be sent to covered individuals within a specified amount of time after being notified by the payor or employer.