Third-party administrators (TPAs) provide claims administrative services to businesses. Many serve mid-sized or large companies that have opted to self-insure a portion of their liability, commercial property, or workers compensation risks. They may also administer claims on behalf of businesses that have self-funded their health, dental or other benefit plans. TPAs range in size from very small to very large companies. The 10 largest TPAs are listed in the table below.
10 Largest Third-Party Administrators
The revenues cited in the following list are derived from data published by Business Insurance, an insurance news and information publication. The TPAs are ranked in descending order according to gross revenue (in U.S. dollars) generated in 2017.
|Largest Third-Party Administrators|
|1||Sedgwick Claims Mgt.||Memphis, TN||Multiline||1.8 BN|
|2||Crawford & Co./ Broadspire||Atlanta, GA||Multiline||1.1 BN|
|3||UMR Inc.||Wausau, W||Employee Benefits only||830 MM|
|4||York Risk Services||IParsippany, NJ||Multiline||780 MM|
|5||Gallagher Bassett Services||Rolling Meadows, IL||Multiline||776 MM|
|6||CorVel Corp.||Irvine, CA||Multiline||519 MM|
|7||Meritain Health||Buffalo, NY||Employee Benefits only||452.8 MM|
|8||ESIS Inc.||Philadelphia, PA||Multiline||395.2 MM|
|9||Helmsman Mgt. Services||Boston, MA||Multiline||294.7 MM|
|10||CoreSource Inc.||Chicago, IL||Employee Benefits only||195.4 MM|
Services Provided by TPAs
The services provided by a TPA depend on the company's size and complexity. A small TPA may provide only claims processing services for one line of business, such as workers compensation.
Many large TPAs offer administrative services for several types of claims. For instance, Gallagher Bassett can administer six types of claims (according to the company's website) including auto liability, professional liability, and medical malpractice. Gallagher Bassett is a subsidiary of Arthur J. Gallagher, a large insurance broker. Three TPAs on the top ten list provide administrative services for employee benefit claims only. They are UMR, Mertain Health, and CoreSource.
Many TPAs provide a variety of services besides claims administration. Here are some areas in which a TPA might provide assistance:
- Loss control programs
- Emergency response plans
- Industrial hygiene inspections
- Loss adjusting
- Return to work programs
- Absence program management (long and short-term disability, jury duty, and other types of leave)
- Workers compensation audits
- Forensic accounting
Many TPAs provide a variety of services besides claims administration.
The following example demonstrates how a company might use the services of a TPA. ABC Inc. is a large food products manufacturer that has an effective loss control program and a good loss history. ABC thinks it can lower its cost of insurance by self-insuring some of its liability risk. To that end, ABC buys a general liability policy that includes a $250,000 self-insured retention. The policy states that ABC will handle claims that fall below the SIR while the insurer will handle claims that meet or exceed that amount.
ABC wants to avoid the expense of creating and maintaining an in-house claims department. It hires a TPA called Ace Administration to administer its liability claims. If ABC receives a claim for less than $250,000, it forwards that claim to Ace. The TPA investigates the claim, verifies coverage, sets a reserve, establishes liability, and negotiates a settlement with the claimant.
The manufacturer also hires Ace Administration to administer ABC's worker's compensation claims. ABC has purchased a workers compensation policy that includes a $250,000 self-insured retention. The retention applies to losses only, not loss adjustment expenses. The insurer pays all claims and ABC reimburses the insurer for any that falls below the retention. If an employee files a claim that falls below the retention, ABC forwards it to Ace. The TPA conducts a investigation and ensures that the injured worker obtains the benefits he or she is entitled to under the law.
What to Look for When Hiring a TPA
If you are considering hiring a TPA for your business, here are some things to look for.
- Experience–Make sure the TPA has substantial experience performing the services you need. For instance, if you are looking for a TPA to administer workers compensation claims, you need a company that has a solid track record in that area.
- Assigned Team–Ask whether the employees assigned to your business have experience handling the type of claims they will be administering.
- Work Load–Find out how many claims each adjuster is expected to handle. An overloaded adjuster will have difficulty handling your claims effectively.
- References–Ask the TPA for references. Contact the companies on the list to see whether they are satisfied with the services they have received.
- Quality Control–What types of quality checks does the TPA conduct to ensure claims are handled properly? What measures does it take to secure data? Does the TPA conduct self-audits?
- Cost Control–What steps will the TPA take to control costs? For instance, a TPA that administers workers compensation claims might control costs via utilization review, medical bill reviews, and the use of nurse case managers.
- Data Reporting–Ask the TPA what types of documents it will produce to report data. Ask to see samples of these documents.
- Compliance–Ask how the TPA stays abreast of state and federal laws. Also, how will it help your company fulfill its legal requirements?