Introduction: What TPAs Mean for Employers in 2025

As employer-sponsored health plans evolve, so does the need for more efficient and flexible solutions. That’s why more businesses are relying on third party administrators in insurance (TPAs) to manage their health benefits—especially those using self-funded insurance models.

But are TPAs always the right choice? In this blog, we’ll break down the advantages and drawbacks of TPAs, how they impact the employee benefits experience, and what 2025 trends tell us about the future of health plan administration.

What Are Third Party Administrators in Insurance?

A third party administrator (TPA) is an independent organization hired to manage various administrative functions of an insurance plan. While TPAs do not insure risk like traditional carriers, they handle day-to-day operations such as:

• Claims processing and adjudication
• Eligibility management
• Provider network coordination
• Compliance with federal and state regulations
• Customer service for members and employers

TPAs are especially common in self-funded health insurance plans, where the employer assumes financial risk and hires a TPA to manage the logistics.

Pros of Using a Third Party Administrator

TPAs bring a range of advantages for businesses seeking cost-effective, tailored health plan administration. Here's what sets them apart:

1. Cost Efficiency

TPAs help employers contain costs by identifying inefficiencies, reducing claims processing fees, and avoiding unnecessary insurance premiums. Self-funded plans managed by TPAs can significantly lower long-term healthcare expenses.

2. Customization of Benefits

Unlike fully insured plans, TPA-managed plans allow businesses to design benefit structures that align with workforce needs and financial goals. You’re not locked into pre-packaged plans from large carriers.

3. Enhanced Data Transparency

Employers receive detailed reporting and claims data that support smarter decision-making, trend analysis, and proactive healthcare management.

4. Improved Compliance Support

TPAs stay up to date on changing regulations (HIPAA, ACA, ERISA, COBRA) and ensure your health plan complies—reducing the risk of penalties.

5. Better Employee Experience

TPAs often offer more responsive and personalized support compared to larger carriers. This enhances the overall employee benefits experience, increasing satisfaction and retention.

Cons of Using a Third Party Administrator

While TPAs offer many benefits, there are some considerations businesses must weigh before partnering with one:

1. Varying Quality Across Providers

Not all TPAs are created equal. Service levels, technology, and industry expertise can differ widely. Choosing the wrong TPA may lead to poor service or compliance issues.

2. Limited Provider Networks

Some TPAs don’t have access to the expansive provider networks offered by large carriers, which could impact your employees' access to preferred doctors or hospitals.

3. Requires Active Employer Involvement

Since TPAs typically support self-funded plans, employers bear more financial risk and administrative responsibility than with fully insured plans.

4. Fragmentation Risks

In some cases, employers may have to contract with multiple vendors (pharmacy benefit managers, wellness providers, etc.), leading to fragmented administration unless the TPA can coordinate everything smoothly.

2025 Industry Insights: The Rise of TPA-Centric Models

The role of TPAs is expanding rapidly in 2025. Here are a few notable trends:

Greater Demand for Customization

With employers seeking more flexibility, TPAs are innovating their offerings—enabling micro-customized plans based on industry, demographics, or budget.

Technology-Driven Administration

Modern TPAs are leveraging AI, predictive analytics, and cloud-based tools to streamline claims, improve care navigation, and boost transparency.

Stronger Focus on Value-Based Care

TPAs are becoming partners in population health management, focusing not just on processing claims but improving overall outcomes through data-driven insights.

Rise in PEO and Hybrid Models

Professional Employer Organizations (PEOs) and hybrid TPA models are gaining traction, allowing small businesses to access enterprise-level benefits without the high overhead.

Real-World Application: How Bedrock TPA Helps Employers Win

At Bedrock TPA, we’ve seen firsthand how the right third party administrator can transform the way businesses manage benefits.

We partner with California-based employers to:

• Design customized self-funded health plans
• Streamline claims processing with modern digital tools
• Ensure regulatory compliance across federal and state mandates
• Provide hands-on support to HR teams and employees alike
• Deliver data insights that help control costs and enhance outcomes

Whether you’re exploring alternatives to traditional insurance or already managing a self-funded plan, Bedrock TPA provides the clarity and confidence you need.

FAQs About Third Party Administrators in Insurance

What is the difference between a TPA and an insurance carrier?

A TPA handles plan administration but does not take on the financial risk of paying claims. An insurance carrier both administers the plan and assumes the insurance risk.

Are TPAs only for large companies?

No. Small and midsize businesses increasingly use TPAs—especially through PEO health plans or level-funded models—to gain cost control and flexibility.

Can a TPA help reduce my insurance costs?

Yes. TPAs can negotiate provider rates, manage claims efficiently, and help design cost-effective plans, especially under a self-funded insurance setup.

What should I look for in a good TPA?

Look for experience, strong technology capabilities, transparent reporting, responsive service, and a reputation for regulatory compliance.

Do TPAs offer support for employees too?

Absolutely. Reputable TPAs like Bedrock TPA serve both the employer and the employee, helping members understand their benefits and resolve claims quickly.

Final Thoughts: Should You Work with a TPA?

Third party administrators in insurance offer a flexible, cost-effective alternative to traditional health insurance carriers. When chosen wisely, a TPA can improve compliance, cut costs, and create a more customized benefits experience for your workforce.

But success depends on picking the right partner.

If you’re exploring TPA services in California or want to simplify your health plan administration without sacrificing quality, Bedrock TPA is ready to help. We blend personalized service with scalable solutions to meet your unique needs—no matter the size of your business.

Want to explore how a TPA could transform your benefits strategy?
Contact Bedrock TPA today to schedule a consultation with our benefits experts.