If you’re a business owner or HR professional researching group health insurance and employee benefits, you’ve probably come across the term Third Party Administrator, or TPA. But what does it mean?

Here’s a simple breakdown to help you understand TPAs and how they fit into your employee benefits strategy.

What Is a Third Party Administrator (TPA)?

A Third Party Administrator is an outside company hired to manage specific aspects of an employer’s health insurance or employee benefits program. They’re not the insurance company—they’re the ones handling the details.

Think of a TPA as your benefits manager behind the scenes.

What Does a TPA Do?

TPAs help businesses by managing:

  • Claims processing – Reviewing and paying employee health insurance claims

  • Enrollment – Helping employees sign up for benefits during open enrollment

  • Compliance support – Ensuring the business follows federal and state laws like ERISA and COBRA

  • Customer service – Answering employee questions about their benefits

  • Reporting – Providing data and insights on benefits usage and costs

  • Billing & reconciliation – Handling premium payments and correcting discrepancies

Third Party Administrator Employee Group Benefits

Why Do Employers Use a TPA?

Here are a few big reasons:

  • Cost savings – TPAs often charge lower fees than big insurance companies

  • Customization – Employers can tailor their self-funded health plans to meet specific needs

  • Expertise – TPAs stay up to date on complex benefit regulations so you don’t have to

  • Efficiency – They streamline benefits administration, reducing HR workload

TPA vs. Insurance Carrier: What’s the Difference?

TPA Insurance Carrier
Manages your benefits plan Provides the actual insurance coverage
Processes claims, compliance, and admin tasks Pays for medical services under the plan
Works with employers to build custom plans Offers pre-designed plans
Hired separately Usually included in fully insured plans

Who Should Consider Using a TPA?

  • Small and mid-size businesses that want more control over their employee benefits

  • Companies with self-funded health insurance plans

  • Organizations looking to lower costs without sacrificing quality of coverage