Becoming An Insurance Tpa: A Comprehensive Guide

Third-party administrators (TPAs) are intermediaries between insurance companies and policyholders. They are licensed entities that serve as a conduit between both parties, performing operational services that help insurance companies deliver various services or benefits to their policyholders. TPAs are used across the world and are typically contracted by insurers to provide services such as claims management, policy management, hospitalization support, underwriting support, and customer service. In the context of self-funded health insurance plans, TPAs offer administrative services, including support for self-insured health plans, implementation of employee benefit plans, and ongoing member support. To become a licensed TPA, specific requirements and procedures must be followed, which may vary depending on the region and local regulations.

Understand the role of a TPA

Understanding the role of a TPA

Third-party administrators (TPAs) are intermediaries between insurance companies and policyholders. They are neither the policyholder nor the direct insurer, but rather a third party that serves as a conduit between the two. TPAs perform operational services that help insurance companies deliver various services or benefits to their policyholders.

The role of a TPA is to provide a range of services that enable customers to receive accurate and prompt services. These services can include claims management, policy management, hospitalization support, underwriting support, and customer service. TPAs help policyholders deal with the issues that arise when filing for health insurance claims, ensuring they understand the paperwork needed for cashless claims or reimbursement, and keeping track of the requisite documentation to facilitate a prompt settlement.

In the context of self-funded health insurance plans, TPAs provide administrative services for claims and support the plan. They do not take on any financial risk for the company's health benefit claims but instead work as a connector between businesses with self-funded health plans and insurance providers. TPAs may also adjudicate claims under self-funded health plans and work with healthcare provider networks.

TPAs can also assist companies in implementing employee benefit plans and help employers familiarise themselves with healthcare options they may not have considered. They offer ongoing member support and provide access to healthcare networks, as well as sourcing additional vendors such as stop-loss insurers. Stop-loss insurance helps to limit high claims risks for employers offering self-funded health plans.

In addition to their work with self-funded health plans, TPAs may also provide support for administrative burdens that typically fall on human resources and finance teams within an organisation. These tasks can include reporting, record-keeping, consolidated billing, and detailed reporting to provide a better understanding of healthcare expenses.

TPAs are typically licensed as per local country regulations and are contracted by different insurers to provide their services. In some states in the US, such as New York and Texas, TPAs must be licensed by the relevant Workers' Compensation Board or the state government.

Research local licensing requirements

To become a licensed third-party administrator (TPA), you must comply with local licensing requirements, which vary by state and country. In the United States, as many as 46 states require licensing or other regulatory filings for TPAs.

For example, in Texas, resident and non-resident entities seeking to do business in the state may need to register with the Texas Secretary of State. Additionally, TPAs must file an annual report and pay a $200 filing fee.

In North Carolina, a TPA license is not required if a person provides services exclusively to one or more bona fide employee benefit plans. In such cases, the person must register as a TPA with the Commissioner annually.

In New York, to become a licensed TPA, you must be either a business formed in the state of New York or a business formed in the state specifically for the purpose of administering claims. Additionally, you must be licensed to adjust claims by the New York State Department of Financial Services (DFS). Licenses are issued or renewed for a period of up to three years, and there are no fees for applying or renewing a TPA license in New York.

In India, TPAs are licensed by the Insurance Regulatory and Development Authority of India (IRDAI) according to their regulations, which are periodically reviewed. These regulations outline the minimum requirements for TPA registration and the services they are expected to provide.

Meet eligibility criteria

To become a third-party administrator (TPA), you must meet the eligibility criteria set out by the relevant regulatory bodies. These criteria vary depending on the country and state in which the TPA intends to operate. Here is an overview of the eligibility criteria for becoming a TPA in different jurisdictions:

India

In India, TPAs are licensed and regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI sets out the minimum requirements for registration as a TPA, outlining the necessary service offerings and obligations of insurers who engage with TPAs. While the specific eligibility criteria are not publicly available, IRDAI regulations are periodically reviewed and updated to ensure they remain current and relevant.

New York State, USA

In New York State, TPAs must be licensed by the New York State Workers' Compensation Board. The eligibility criteria include:

• Being a business formed in the State of New York, specifically for administering claims and not as a subsidiary of an insurance carrier licensed for workers' compensation policies.
• Holding a license to adjust claims from the New York State Department of Financial Services (DFS).
• Providing proof of current insurance policies or exemption, including workers' compensation, disability benefits, or attestation of exemption.
• Submitting a valid surety bond, such as a Self-Insurer's Representative's Bond.
• Providing a list of corporate officers, including their names and positions.
• Ensuring that at least one corporate officer, known as the "qualifying officer," meets additional requirements such as being a permanent resident of New York State, over 18 years of age, a high school graduate, knowledgeable about workers' compensation law, and of good moral character.
• Furnishing references from five individuals acquainted with the character and reputation of the qualifying officer for the past five years.
• Completing fingerprinting and name search verification through the Division of Criminal Justice Services.
• Taking an oath or affirmation before the issuance or renewal of a license.
• Completing an orientation program, unless the qualifying officer is an attorney-at-law admitted to practice in New York State.

Texas, USA

In Texas, resident and non-resident entities seeking to operate as TPAs may need to register with the Texas Secretary of State. The specific eligibility criteria are not publicly available, but the application process involves submitting various forms, such as the Application for a Certificate of Authority and the Officers and Directors Page. Additionally, fingerprint and biographical affidavit requirements must be met, and certain fees may apply.

Complete the application process

Completing the application process to become a licensed third-party administrator (TPA) involves several steps and requirements. Here is a detailed guide to help you through the process:

Eligibility Requirements:

To be eligible to become a TPA, you or your business must meet specific criteria. The exact requirements may vary depending on your location, but here are some general guidelines:

• Be a business formed in the state where you intend to operate, such as being formed in the State of New York to administer claims.
• Ensure that your business is not a subsidiary of an insurance carrier licensed to write workers' compensation policies.
• Obtain a license to adjust claims from the relevant state department, such as the New York State Department of Financial Services (DFS).
• If you are an insurance carrier or a subsidiary, provide a certificate from the state department of financial services, showing your authorization to write workers' compensation policies.
• Provide a certificate from the state department of state, indicating that your corporation is licensed to do business in that state.

Application Process:

Once you have confirmed your eligibility, you can proceed with the application process:

• Complete the appropriate license application form. For example, in New York, you would complete the "Application for License to Appear on Behalf of, or Represent, Insurers and/or Self-Insurers" form (OC-403).
• Provide proof of current insurance policies or exemptions. This may include certificates of insurance coverage for workers' compensation, disability benefits, or a certificate of attestation of exemption.
• Submit a valid surety bond, such as the "Self-Insurer's Representative's Bond" (OC-407).
• Provide a list of corporate officers, including their names and positions.
• For initial applications or changes in the qualifying officer, include a corporate resolution indicating the designation of the qualifying officer and their title.
• If the qualifying officer is an attorney, provide a certificate of good standing.
• Email your completed application and supporting documentation to the relevant licensing authority, such as "[email protected]" in the case of New York.

Additional Requirements for Corporate Entities:

If you are applying as a corporate entity, there are a few additional requirements:

• Designate an officer of the corporation as the person responsible for ensuring compliance with all laws, regulations, and policies related to the administration of workers' compensation claims in the relevant state.
• The qualifying officer should be a permanent resident or have a regular place of business in the state, be over 18 years of age, and be a citizen or lawful permanent resident of the USA.
• The qualifying officer should also possess good moral character, have a high school diploma or equivalent, and be knowledgeable about workers' compensation laws and regulations.
• The qualifying officer must be able to furnish references of five persons acquainted with their character and reputation for the past five years.
• Fingerprinting and a name search with fingerprint verification are often required for the qualifying officer.
• The qualifying officer may be required to take an oath or affirmation before the issuance or renewal of the license.
• In some cases, the qualifying officer may need to complete an orientation program, unless they are an attorney-at-law duly admitted to practice in the state.

Application Review and Approval:

After submitting your application, it will be reviewed by the relevant authority. They may conduct a written examination and oral review to assess the fitness, knowledge, and understanding of the qualifying officer. Once your application is approved, you will be granted a TPA license, valid for a specific period, such as three years in the case of New York.

Please note that the specific application process and requirements may vary depending on your location and the governing body overseeing TPA licensing. Always refer to the official guidelines and instructions provided by the relevant state or regulatory body.

Stay compliant with regulations

Staying on the right side of the law is crucial when it comes to the insurance industry. Here are some key points to ensure your TPA business remains compliant:

• Licensing and Registration: Ensure your business has the necessary licenses and registrations to operate as a TPA. In the US, for example, each state has its own requirements. In New York, a TPA must be licensed by the New York State Workers' Compensation Board, while in Texas, resident and non-resident entities seeking to do business as a TPA must register with the Texas Secretary of State.
• Understand Regulatory Bodies: Familiarize yourself with the regulatory bodies that oversee the insurance industry in your region. For instance, in India, the Insurance Regulatory and Development Authority of India (IRDAI) is responsible for licensing and regulating TPAs. Their regulations outline the minimum requirements for registration, service offerings, and the obligations of insurers when engaging a TPA.
• Compliance with Health Insurance Regulations: If your TPA focuses on health insurance, stay up to date with state and federal health insurance regulations. For example, in the US, the Affordable Care Act sets out specific requirements that health insurance plans must comply with.
• Maintain Data Privacy: As a TPA, you will handle sensitive personal and medical information. Ensure you have robust data privacy practices in place to protect this information and comply with relevant data protection laws, such as the General Data Protection Regulation (GDPR) in the European Union.
• Regularly Review Compliance: Compliance is not a one-time task but an ongoing process. Regularly review your TPA business's compliance with relevant laws and regulations, and make any necessary adjustments to your policies and procedures.
• Seek Legal Advice: When in doubt, seek legal advice from professionals familiar with the insurance industry and the specific regulations applicable to TPAs. This can help you navigate the complex regulatory landscape and ensure your business remains compliant.

Frequently asked questions