A Third-Party Administrator, commonly abbreviated as TPA, is an organization that processes insurance claims or certain aspects of employee benefit plans for a separate entity. This is a service that can be utilized by a health insurance company, a self-insured employer plan, or various types of employee benefit plans. A TPA does not bear any insurance risk themselves but instead acts as an intermediary that handles the administration of the policies, including claims processing, premium collection, and other administrative functions for the entity they are serving. TPAs are specialized agencies that are distinct from the actual insurers or the employers who typically hire them, providing expertise and efficiency in the administration of claims and benefits. They are particularly beneficial to employers who fund their own insurance plans, as they allow for the outsourcing of complex administrative tasks without the need to develop in-house expertise.
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