Choosing a TPA for a self-funded health plan

Employer Playbook

In a self-funded plan the third-party administrator pays your claims with your money. The selection deserves the same care as a carrier decision, and the contract is where most of the protection sits.

Key takeaways

• A TPA administers claims, networks and member service for a self-funded plan. It does not take the insurance risk. You do, with stop-loss as backup.
• The things that separate TPAs are data access, audit rights, fee transparency, stop-loss alignment and who owns the network relationships.
• The annual gag clause attestation is due each December 31, and liability stays with the plan sponsor even if the TPA files it.

What a TPA does, and does not do

A carrier insures a group and pays claims from its own funds. A TPA is hired by the employer to process claims paid from the plan’s funds, to arrange access to a network, and to provide service. The employer bears claims risk up to the stop-loss attachment point, so the quality of the administrator decides whether claims are paid correctly. Under ERISA, whoever has discretionary control over plan assets or management can be a fiduciary. A 2025 federal appeals court ruling reinstated claims against a TPA that controlled and profited from plan assets, so a TPA’s role is not purely clerical, and you as sponsor remain responsible for choosing and monitoring it.

What to compare

• Data ownership and access: contracts must not restrict you from sharing provider-specific cost and quality data. Ask for de-identified claims files, and pharmacy data for the annual reporting.
• Audit rights: the right to audit claims payment, with an auditor of your choice, and to see the findings.
• Fees and compensation: administrative fees, network access fees and any indirect compensation, all disclosed in writing.
• Stop-loss alignment: whether the TPA coordinates with your stop-loss carrier, supports their notice requirements, and knows how runout is handled.
• Network and pharmacy: which networks and PBM are available, and whether you can select them yourself.
• Reporting and service: monthly claims reports, high-cost claimant reporting and the team that would serve you.

Process

Treat selection as a documented RFP. Define your needs, request proposals from several TPAs with the same questions, interview finalists, check references from similar-sized employers, and record the reasons for the decision in fiduciary committee minutes. Then calendar the annual items: the gag clause attestation each December 31, an annual performance review, and a market check on a regular cycle. If a vendor will not provide the compensation disclosures the law requires within the allowed time, treat that as a reason to report and to replace it.

Questions we get

Is a TPA the same as an ASO arrangement with a carrier?

They overlap. In an administrative services only arrangement, a carrier provides TPA-type services. An independent TPA gives more flexibility on networks and pharmacy, but may require more oversight.

How long does it take to change TPAs?

Typically four to six months for a full implementation, so start well before the plan year ends.

What should we audit?

Start with claims payment accuracy, then eligibility, then pharmacy. Our claims audit page describes how we approach it.

Sources: ERISA fiduciary provisions; Consolidated Appropriations Act, 2021 (gag clause prohibition and attestation); reporting on 2025 federal appeals court decision on TPA fiduciary status. This is general information and not legal advice.

Comparing administrators? Send us your renewal and we will run the TPA comparison and the contract review for you.