What a TPA costs: fees and how they are quoted

Updated October 21, 2026

A TPA’s base administration fee is usually quoted per employee per month (PEPM) and covers claims processing and core plan administration. It is rarely the whole cost. Network access, cost containment fees charged as a percentage of savings, pharmacy arrangements, COBRA, account administration, implementation and run-out are often priced separately, and stop-loss coverage is a separate insurance premium.

What does a TPA’s base administration fee cover?

The base fee pays for the TPA’s core work: processing and paying claims, member service, eligibility, ID cards and standard reporting. What else it includes varies, so the Department of Labor suggests asking which services an estimate covers and which it does not. Some providers bundle many services into one fee and others charge for each one, so compare the total cost for the same set of services.

In interviews published in Health Affairs Scholar in 2026, researchers found that the administrative fee works as an anchor that makes other fees less noticeable. One TPA participant said the focus on it creates “this incentive to create a really low admin fee and find other ways to get money.”

A fee quoted per member per month counts dependents, so it is not directly comparable to a PEPM fee. If you are also weighing a carrier’s ASO product, TPA vs ASO explains how the two are structured.

Which TPA fees are priced separately?

Charges outside the base fee can appear as separate lines on the quote or arrive later as a share of claims or savings. The same study catalogs the main types.

Network access

A rented PPO network has a cost. One independent TPA in the study described a carrier whose network it rented taking 3% to 5% of the paid amount as a network access fee. Ask whether the network charge is passed through at cost or marked up. TPAs that list network access can explain their arrangements.

Cost containment

Out-of-network bill negotiation, repricing and payment integrity reviews are often charged as a percentage of the savings or recoveries. Interviewees also described fees on recovered overpayments, including reports that some TPAs collect fees on their own errors. See the next section and the cost containment filter.

Pharmacy benefits

A pharmacy benefit manager (PBM) can earn money in ways that never appear on a TPA invoice. The DOL’s January 2026 proposed PBM fee disclosure rule lists manufacturer payments, spread compensation, pharmacy claw-backs and price protection arrangements among the indirect compensation it would require PBMs to disclose to self-insured plans. Ask TPAs offering pharmacy benefits how each is handled.

Stop-loss premium

Stop-loss is insurance, bought from a carrier, that limits the amount a plan sponsor pays in claims. At firms with 200 or more workers, KFF found that 75% of covered workers in self-funded plans are in plans with stop-loss. The premium is separate from the TPA’s fee even when the TPA quotes both. In a level-funded plan, one monthly payment funds a claims reserve, administrative costs and stop-loss premiums, so ask for each part separately. See level-funded health plans and TPAs that offer stop-loss coordination.

COBRA and account administration

COBRA generally applies to private employers with at least 20 employees, and the plan may charge qualified beneficiaries up to 102% of the cost of coverage. The DOL notes that COBRA compliance remains the employer’s responsibility even when a third party administers it. HRA, FSA and HSA administration may be quoted as a separate per-participant fee. See TPAs offering COBRA and account-based plans.

Implementation, run-out and add-ons

Implementation fees cover setup. Run-out administration covers claims for care received before the contract ends but paid after it, which matters when you switch TPAs. Ask whether each is included, how long run-out lasts and what it costs.

The study also describes add-on fees for claims data access and audits, reporting, fraud and abuse programs, and No Surprises Act dispute resolution. Under the Consolidated Appropriations Act, 2021, a plan’s agreement with a TPA may not restrict the plan’s electronic access to de-identified claims data, including allowed amounts. Ask what that access costs before you sign.

How do percentage-of-savings fees work?

The vendor keeps a share of the difference between the provider’s billed charge and the amount the plan allows. Health Affairs Scholar describes the out-of-network version as a percentage of the difference between the charge and the allowed amount, and reports it was the most pervasive fee interviewees mentioned besides the administrative fee.

A legal expert in the study said some TPAs and repricers “will collect up to 50% of the difference between the billed rate and the paid rate.” In that expert’s example, a $100,000 bill is negotiated down to $1,500 and the plan is billed $31,500, of which $30,000 is the fee.

The problem is the baseline. The provider sets the billed charge, so a high charge produces a large “saving” and a large fee even when the final price is ordinary. A Catalyst for Payment Reform report on reference-based pricing warns that savings of 70% to 90% are likely measured against billed charges rather than the plan’s real baseline. The reference-based pricing guide covers that model.

How to evaluate a percentage-of-savings arrangement

• Baseline: is savings measured from billed charges, a network rate or a Medicare multiple?
• Caps: is there a per-claim cap, or a cap tied to the amount paid? One independent TPA in the study said it typically caps its fee at $25,000 and cannot make more than the provider was paid.
• Scope: does the fee apply only to out-of-network claims, or also to in-network discounts and overpayment recoveries?
• Reporting: will you get claim-level reports showing billed, allowed and paid amounts and the fee on each claim?
• Total cost: estimate the annual fee from last year’s claims and add it to the base fee before comparing quotes.

What fee disclosures does federal law require?

ERISA requires that fees charged to a plan be reasonable, and section 408(b)(2) requires certain service providers to disclose their compensation in writing before you sign. The DOL also suggests asking prospective providers whether they receive compensation from third parties, and documenting how you selected and monitor them.

408(b)(2) disclosures under the CAA 2021

The Consolidated Appropriations Act, 2021 (CAA) amended ERISA section 408(b)(2) to add disclosure rules for service providers to group health plans. As described in DOL Field Assistance Bulletin 2021-03, it requires brokers and consultants who reasonably expect $1,000 or more in direct or indirect compensation to disclose that compensation to the responsible plan fiduciary. The rule applies to insured and self-insured plans of any size, for contracts entered into, extended or renewed on or after December 27, 2021. The DOL says a provider’s title is not what decides whether it is covered.

Under the statute, the written disclosure must describe the services, state whether any are provided as a fiduciary, and describe direct compensation, indirect compensation and who pays it, transaction-based pay among related parties, and compensation expected on termination. It is due reasonably in advance of the contract, and changes must be disclosed within 60 days of the provider learning of them.

The 2026 expansion

The Consolidated Appropriations Act, 2026, enacted February 3, 2026, rewrote the covered services. “Brokerage services” became “Services (including brokerage services),” and “Consulting” became “Other services,” with a list that includes third-party administration, stop-loss and PBM services. Published analyses read this as reaching TPAs directly but differ on timing: the Health Affairs Scholar study says beginning in 2028, while a law firm analysis says it appears effective on enactment with no grace period. None of the DOL’s 2026 field assistance bulletins addresses it. Ask your benefits counsel how it applies to your next renewal.

Form 5500 Schedule C

Schedule C reports service provider pay on a large plan’s Form 5500. Under the 2025 instructions:

• It applies to large plans, generally those with 100 or more participants at the start of the plan year.
• It lists each provider that received $5,000 or more in direct or indirect compensation from the plan.
• Payments made directly by the plan sponsor and not reimbursed by the plan are excluded.
• Health and welfare plans that meet the limited exemption at 29 CFR 2520.104-44 or Technical Release 92-01 are not required to file it.
• Unfunded or insured welfare plans with fewer than 100 participants do not file a Form 5500 at all, unless they must file a Form M-1 as a MEWA.

If your plan pays fees from the employer’s general assets and meets that exemption, there may be no Schedule C. The written disclosures and the contract are then your main record.

How should you line up TPA quotes side by side?

Put every quote on the same census and the same plan design, then convert each line to an annual cost per employee. The table adds a pricing layer to the questions in how to choose a TPA.