Third Party Administration

Getting a Third Party Administration (TPA) program is like doing a “self-insurance” while accessing the hospital network of the HMO provider. Thus, 100% of the risk is borne by the employer and not by the insurer. TPA charges additional fees for network access, claims handling, etc.

Check if TPA is for you

Third Party Administration - Your own HMO at Your Own Terms.

The primary essence of insurance is the ability to transfer financial loss to the insurer. Thus, providing peace of mind to the insured/policyholder knowing that the insurance company will shoulder the cost of the financial loss or medical costs in the case of health insurance. In exchange, the employer will just pay a specified amount of premium at the start of the coverage.

In contrast, Third Party Administration (TPA), places the management of financial loss (medical claims) to the hands of the employer. Meaning, all costs related to the medical management of the employees will be charged directly to the revolving fund of the employer plus claims handling fees and network access fees among others. This translates to a “self-insurance” and 100% of the risk is borne by the employer.

The advantages of this setup are:

Flexibility of allocating the fund to whatever benefits the employer wants to be covered.
Employer can control who among the employees can be covered at any given time.
Employer may opt to cover some or all the exclusions of a typical HMO policy.
If the utilization is low, the employer can re-allocate the fund to any other purpose it may deem fit.
Advantageous to the insurance company since the profit margins are guaranteed; no risks on the part of the insurer

The limitations of TPA are:

Being a self-insurance program, the employer has to replenish the revolving fund when it becomes exhausted.
Since the all the risks are borne solely by employer, the unforeseen medical costs shall be shouldered directly by the employer.
Additional charges like network access fees and claims handling fees are levied on top of the medical fees.
Highly tedious to administer – approvals and paperwork are done by the employer.
Disadvantageous to the employer since they will be paying 1:1 plus fees. Instead of 0.10:1 only. For example, if the total medical bill of an employee is Php100,000 – under the TPA setup, the employer is charged the whole Php100,000 plus claims handling fees and network access fees. As compared to the premium-based setup, the employer would have just paid Php10,000 in annual premiums only.