Which term most accurately describes a plan arranged through an independent TPA?

Which term most accurately describes a plan arranged through an independent TPA?

• A. Directly insured plan
• B. Self-funded plan
• C. Third-Party Administered (TPA) Plan
• D. Captive plan

Answer: (C)

The main idea here is plan administration by an external, independent administrator. When a plan is arranged through a Third-Party Administered (TPA) arrangement, the employer or plan sponsor funds the benefits (often in a self-funded or partially funded setup) but contracts with an independent TPA to handle the day-to-day tasks like claims processing, eligibility, enrollment, provider payments, and compliance. The TPA acts as the administrator, while the insurer may not be directly involved in everyday administration and the employer still shoulders the financial risk. This is different from a directly insured plan, where a single insurer both provides coverage and handles the claims—the administration is not entrusted to an independent third party. It’s also distinct from a self-funded plan in its funding arrangement, since self-funded refers to who pays the claims rather than who administers them; a self-funded plan can still use an independent TPA, but the term itself doesn’t specify that arrangement. And a captive plan implies using a captive insurer owned by the employer to insure its risk, not an independent administrator.

The main idea here is plan administration by an external, independent administrator. When a plan is arranged through a Third-Party Administered (TPA) arrangement, the employer or plan sponsor funds the benefits (often in a self-funded or partially funded setup) but contracts with an independent TPA to handle the day-to-day tasks like claims processing, eligibility, enrollment, provider payments, and compliance. The TPA acts as the administrator, while the insurer may not be directly involved in everyday administration and the employer still shoulders the financial risk.

This is different from a directly insured plan, where a single insurer both provides coverage and handles the claims—the administration is not entrusted to an independent third party. It’s also distinct from a self-funded plan in its funding arrangement, since self-funded refers to who pays the claims rather than who administers them; a self-funded plan can still use an independent TPA, but the term itself doesn’t specify that arrangement. And a captive plan implies using a captive insurer owned by the employer to insure its risk, not an independent administrator.