The Largest Third-Party Administrators
Many businesses utilize the services of a third-party administrator (TPA). A TPA manages claims on behalf of another company. Businesses often hire a TPA because they have opted to self-insure a portion of their liability, property, or workers compensation risks. Companies may also utilize a TPA to administer health, dental or other benefit plans they have funded themselves. TPAs range in size from very small to very large companies.
The 10 largest TPAs appear in the table below.
10 Largest Third-Party Administrators
The following list is based on data provided by Business Insurance, an insurance news and information publication. The TPAs are ranked in descending order according to annual revenue (in U.S. dollars).
|1||Sedgwick Claims Mgt.||Memphis, TN||Multiline||1.7 BN|
|2||Crawford & Co./ Broadspire||Atlanta, GA||Multiline||1.1 BN|
|3||York Risk Services||Parsippany, NJ||Multiline||750 MM*|
|4||UMR Inc.||Wausau, WI||Employee Benefits only||724.2 MM|
|5||Gallagher Bassett Services||Rolling Meadows, IL||Multiline||718.1 MM|
|6||CorVel Corp.||Irvine, CA||Multiline||513 MM|
|7||Meritain Health||Buffalo, NY||Employee Benefits only||384.6 MM|
|8||ESIS Inc.||Philadelphia, PA||Multiline||359.9 MM|
|9||Helmsman Mgt. Services||Boston, MA||Multiline||206.3 MM|
|10||HealthSmart Holdings||Irving, TX||Multiline||194.2 MM|
*Revenue in millions except where noted
Services Provided by TPAs
The services provided by a TPA depend on the company's size and complexity.
A small TPA may provide claims processing services only. It may also specialize in certain types of claims, such as workers compensation. Many large TPAs offer administrative services for several types of claims. For instance, Gallagher Bassett can administer claims in six lines of business, including auto liability, professional liability, and medical malpractice.
York Risk Services provides claims management services for nine types of claims, including environmental, and inland and ocean marine. Some TPAs provide claim administration services to insurance companies.
A business may hire a TPA to perform a number of functions besides claims administration. Here are some examples:
- Create and implement a loss control program
- Conduct an industrial hygiene inspection
- Provide detailed loss information, including data analysis
- Design and implement a return to work program
- Manage a company's absence program (long and short-term disability, jury duty, and other types of leave)
- Conduct a workers compensation audit
- Provide insurance training to employees
Many large businesses manage their risks using a combination of insurance policies and self-insurance. For example, ABC Manufacturing has an effective loss control program and a good loss history. ABC thinks it can save money by self-insuring some of its liability risk. To that end, ABC buys a general liability policy that includes a $250,000 self-insured retention. The insurance program is arranged so that ABC is responsible for handling claims that fall below the SIR. The insurer will handle any claims that meet or exceed the SIR.
ABC wants to avoid the expense of creating and maintaining an in-house claims department. Thus, the company hires a TPA called Ace Administration to administer its liability claims. If ABC receives a claim for less than $250,000, ABC forwards it to Ace. The TPA investigates the claim, verifies coverage, sets a reserve, establishes liability, and negotiates a settlement with the claimant.
Suppose that ABC Manufacturing contracts with Ace Administration to administer its workers compensation claims as well. ABC has purchased a workers compensation policy that includes a $250,000 self-insured retention. The retention applies to losses only. It does not apply to loss adjustment expenses. ABC's insurer will pay all claims but ABC is responsible for administering those that fall below the $250,000 SIR.
Moreover, ABC must reimburse the insurer for any claim the falls below the retention. If an employee files a claim, ABC forwards it to Ace. The TPA conducts an investigation and ensures that the worker is treated promptly and receives the benefits required by law.
What to Look For When Hiring a TPA
Perhaps your company is considering hiring a TPA and you are wondering what to look for. Here are some things to consider when analyzing or comparing TPAs.
- Experience: Make sure the TPA has substantial experience performing the services you need. For instance, if you are looking for a TPA to administer workers compensation claims, you need a company that has a solid track record in that area.
- Assigned Team: Ask for details about the employees who will be assigned to your business. These individuals should be experienced handling the type of claims they will be administering.
- Work Load: Find out how many claims each adjuster is expected to handle. An overloaded adjuster will have difficulty handling your claims effectively.
- References: Ask the TPA for references. Contact the companies on the list to see whether they are satisfied with the services they have received.
- Quality Control: What types of quality checks does the TPA conduct to ensure claims are handled properly? What measures does it take to secure data? Does the TPA conduct self-audits?
- Cost Control: One of the main reasons to hire a TPA is to save money. Ask the TPA what steps it will take to control costs. For instance, a TPA that administers workers compensation claims might control costs via utilization review, medical bill reviews, and the use of nurse case managers.
- Data Reporting: Ask the TPA what types of documents it will produce to report data. Ask to see samples of these documents.