What Is a Third Party Administrator?

A third party administrator is a company that handles certain aspects of a business's benefits package for employees. The third party administrator could help with health insurance claims and benefits, retirement plans or business insurance. Many companies use third party administrators as a way to save money and time. These organizations are generally an independent business, however, they can sometimes be associated with a particular insurance carrier.

Some companies handle all of their benefits packages in house with a trained professional. However, instead of having a full-time person or staff to handle this, other companies will outsource the process to a third-party administrator. This is a popular technique because it allows businesses to focus on what they do best instead of worrying about benefits packages and insurance. The third-party administrator is highly trained in this process and can provide great value to the businesses.

Self Insurance

In many cases, third-party administrator's are used by companies that utilize self-insurance. If a company self insures, they often rely on the administrator to handle all of the claims processing and other administrative duties. In this process, the company will set aside a certain amount of money in a fund for insurance. If an employee files a claim, it will go to the third-party administrator in order to be processed. The third-party administrator will review the claim and then pay it based on the agreed upon terms that have been set forth by the employer. 

Retirement Plans

Third-party administrators can be involved in helping with retirement plans. Investment companies often handle these retirement plans for other businesses. The investment companies may hire the third-party administrator on a contract basis in order to handle the basic functions of the plan. In this case, the third-party administrator will handle all of the functions, such as crediting individual accounts and employee distributions. 

Health Care

Third-party administrators are often involved in the process of handling health insurance issues. They will often be contracted by a health insurance company to help with the claims process. In order to be able to fulfill these duties, the third-party minister has to be highly trained in the healthcare field and have experience handling health insurance claims. The insurance company will often leave responsibilities like enrolling new customers, collecting premiums, and mailing documents to customers up to the third-party administrator as well. 

Commercial Liability

These companies are often also involved with commercial general liability insurance practices. When a commercial liability claim occurs, the commercial general liability insurance company will often hire a third-party administrator to handle the entire process. In this case, the third-party administrator will act like a claims adjuster on behalf of the general liability insurance company. The company will often have a large self insurance retainer that will pay for the services of the third party administrator. The third-party administer will be in charge of helping the company choose legal representation and they will oversee the process from start to finish.

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