How is "third-party administrator" (TPA) defined in health insurance?

A third-party administrator (TPA) is defined as an organization that manages health benefits on behalf of an employer or insurer. This means that TPAs typically handle administrative functions such as processing claims, maintaining records, and managing member services for health insurance plans, acting as an intermediary between the insurer and the insured. By doing this, TPAs help streamline the management of health benefits, allowing employers or insurers to focus on other core business activities while ensuring that policyholders receive the healthcare services they require.

The role of a TPA is particularly crucial in self-funded insurance plans, where the employer assumes the financial risk for providing health benefits to its employees. In such cases, the TPA provides the employer with the necessary administrative support to effectively manage and operate the plan.

In contrast, the other options do not capture the full scope of a TPA's role. An organization that processes claims for insurers focuses solely on claims management rather than the broader responsibilities of managing health plans. A person who navigates clients through insurance policies suggests a more personalized advisory role that does not align with the administrative focus of TPAs. Lastly, an entity responsible for underwriting insurance policies pertains to risk assessment and decision-making regarding policy issuance, which is a separate function from the administrative services provided