What is a TPA in health insurance?

Updated October 21, 2026

A third party administrator (TPA) in health insurance is a company hired to run the day-to-day administration of a health plan that an employer, union fund or other group pays for itself. It processes and pays claims, keeps eligibility records, issues ID cards and answers member questions. Unlike an insurance carrier, a TPA does not bear the financial risk of paying claims. The plan does.

This guide is about health plans. The term TPA is also used for firms that administer retirement plans and workers’ compensation claims, and the NAIC’s newer TPA guideline offers a version that covers workers’ compensation. Those are separate lines of business with their own rules.

What does a TPA do?

A TPA handles the administrative work of a self-funded health plan under a written contract, while the plan sponsor keeps control of what the plan covers. The NAIC’s model TPA law requires a written agreement between the TPA and the payor, and it leaves the payor responsible for the benefits, the claims payment procedures and securing any stop-loss insurance.

Public employers that hire TPAs list the services they expect in their requests for proposals, which makes those documents a useful plain-language checklist.

• Claims adjudication and payment. The TPA checks each claim against the plan’s terms and pays it from plan funds. Federal regulators describe TPAs processing and paying health claims for self-insured plans. Under the NAIC model, money a TPA holds to pay claims is held in a fiduciary capacity, in a fiduciary account at a federally insured bank.
• Eligibility and enrollment. The TPA processes plan enrollment and maintains membership files. One county expected its TPA to receive eligibility data in a standard 834 file and keep it current.
• ID cards. The same county’s scope included printing and mailing plastic ID cards and offering electronic cards that meet legal content requirements.
• Member and provider service. The TPA answers member calls; one county required toll-free member and claim service lines for questions about network providers, enrollment and plan design. On the provider side, they accept claims from and pay providers directly and send explanations of benefits.
• Access to provider networks. TPAs create provider networks and negotiate payment rates, and employers hire them in part for access to the TPA’s network rates. Some networks are rented from another company, which is why one county asked bidders whether any part of the network is leased. You can find TPAs that list network access in the directory.
• Stop-loss coordination. The TPA feeds the stop-loss carrier the data it needs, such as regular claim and enrollment data transfers and statements showing claims that exceed the stop-loss limit. See TPAs that coordinate stop-loss.
• Reporting. Expect utilization reports, savings analyses and claims lag studies, plus the data an employer needs for its ACA Forms 1094 and 1095.
• Plan documents and compliance. TPAs can prepare the summary plan description and the Summary of Benefits and Coverage. They can also file the federal gag clause attestation for a self-funded plan, but if the TPA fails to file, the plan is the one in violation.

TPAs also typically oversee utilization management and prior authorization, and some coordinate pharmacy benefits through a pharmacy benefit manager.

Who uses a TPA?

TPAs serve self-funded plans, where the group pays claims from its own funds instead of buying insurance. In 2025, 67% of covered workers were in self-funded plans: 80% at firms with 200 or more workers and 27% at firms with 10 to 199. KFF notes these sponsors typically contract with a TPA or an insurer for administration.

• Self-funded employers. Smaller employers often use level-funded plans, where 37% of covered workers at firms with 10 to 199 workers are enrolled and the employer pays a set monthly amount to an insurer or TPA. Browse TPAs for self-funded employers or TPAs for level-funded plans.
• Union (Taft-Hartley) funds. A multiemployer plan is run by a board of trustees with equal union and employer representation, and the board hires a TPA for work such as processing reports of covered work hours and employer contributions. See TPAs for Taft-Hartley plans.
• MEWAs and associations. In rules on multiple employer welfare arrangements, the Department of Labor noted that TPAs perform critical services for the plan community, including helping MEWAs understand their duty to pay claims. See TPAs for MEWAs and associations.
• Public entities. Counties and school systems self-fund and hire TPAs through public bids, like the requests cited above. ERISA does not cover public sector or church plans. See TPAs for public sector plans.
• Church plans. The NAIC model has TPAs that administer self-insured church or governmental plans post a surety bond of the greater of $100,000 or 10% of that self-funded coverage. See TPAs for church plans.
• Health share ministries. In its 2024 report, Colorado’s insurance regulator found that 11 sharing arrangements paid third parties $13,506,917 to operate, manage or administer their programs, and some referred to their third-party administrators. See TPAs for health share ministries.

How is a TPA different from an insurance carrier?

The difference is who carries the risk. In a fully insured plan, the employer pays a fixed premium and the insurer bears the risk of paying claims. In a self-funded plan, the employer pays claims and bears that risk, though it can buy stop-loss insurance to limit it.

At firms with 200 or more workers, 75% of covered workers in self-funded plans are in plans with stop-loss coverage.

Carriers can also act as TPAs. Federal guidance refers to an issuer acting as a TPA for a self-funded plan, under what is known as an administrative services only (ASO) contract. The guide to TPA vs ASO compares the two.

Is a TPA a fiduciary under ERISA?

Generally not, as long as it only performs ministerial tasks within rules others have set. The Department of Labor says a TPA that performs solely ministerial tasks is not a fiduciary, but that may change if it exercises discretion in deciding a participant’s eligibility for benefits.

DOL’s interpretive bulletin lists tasks such as applying eligibility rules, processing claims and preparing required government reports as ministerial when done within a framework of policies set by others. Under ERISA’s definition, a person becomes a fiduciary to the extent it exercises discretionary authority over plan management or administration, or any control over plan assets. Fiduciary status is based on the functions performed, not the job title.

Contracts matter here. One county’s request for proposals asked the TPA to accept limited fiduciary responsibility for interpreting the plan and deciding claim appeals. Either way, hiring a service provider is itself a fiduciary function, and the employer must monitor the TPA it picks. Confirm how your own contract allocates fiduciary duties with your benefits counsel.

How do states license or register TPAs?

States regulate TPAs through their insurance departments, by license, registration or both, and the NAIC publishes model language for those laws. The NAIC first adopted its TPA model law in 1977, amended it in 2001, and revised it as Guideline 1090 in 2011.

• Who counts as a TPA. The guideline covers anyone who underwrites, collects premiums or charges, or adjusts or settles claims for state residents in connection with life, annuity, health or stop-loss coverage.
• Where to be licensed. Under the 2001 model, a TPA must obtain a license in each state where it operates, with its home state as the main regulator. The model exempts licensed insurers acting as TPAs, apart from some workers’ compensation rules.
• Self-funded plan administrators. Someone who administers only self-funded plans, other than governmental or church plans, registers with the commissioner annually under the model.

State rules vary. Connecticut says TPAs must either be licensed or registered, renewing every September 30. Vermont requires licensed TPAs to file an annual report by July 1, and Arkansas requires annual registration with its insurance department.

How are TPAs paid?

A TPA primarily charges a per-employee-per-month fee for administration. Other charges can include shared-savings fees, which can run as high as 50% of the difference between a provider’s billed charge and the amount paid, and fees for recovering overpayments.

The Department of Labor tells plan sponsors to ask which services a quoted fee covers and whether the provider receives third-party compensation such as commissions or revenue sharing. The guide to what a TPA costs covers fee structures in detail.

How do you find a TPA?

Start with TPAs that serve your type of plan and operate in your state. The full directory of TPAs can be filtered by plan type and service, and the list of TPAs by state shows who operates where.

DOL’s checklist for hiring a service provider is a good process to follow. It says to get information from more than one provider, compare them on the same information, and confirm required licenses are current. For the questions to ask, see how to choose a TPA.