How Medical Billers Can Finesse Third‐Party Administrators - dummies

How Medical Billers Can Finesse Third‐Party Administrators

By Karen Smiley

A third‐party administrator (TPA) is an entity hired to handle the administration of another company’s insurance plan. The TPA is usually responsible for collecting premiums and issuing reimbursements, which includes paying medical claims.

Companies who use TPAs are required to notify plan participants in writing what the responsibilities of the TPA are. Typically, companies that use TPAs self‐insure, which means that they function as insurance companies themselves. As such, they normally join a PPO network as a way to get the advantage of discounted claim pricing while retaining the right to determine deductibles, co-insurance amounts, copay obligations, and other plan provisions.

The company plans are funded by payments made by both the employer and participating employees (in the form of premiums). These payments go into a fund that the company owns and that is dedicated to paying claims made against the company’s health plan. Here are things to keep in mind about these plans:

  • They allow employers to customize what the plan covers to best serve the needs of the company’s employees. In some of these plans, injuries or conditions that are common results of work‐related duties are excluded from the plan benefit for the employee and delegated as Workers’ Compensation claims.

    For example, a condition such as carpal tunnel syndrome may be identified as a work‐related condition, in which case, all carpal tunnel claims are automatically denied upon submission. If, however, the patient is a plan dependent (an individual, such as a spouse or child, who is covered by another person’s insurance) rather than an employee, the provider needs to contact the payer and ask that the denial be reconsidered.

  • The employer or insurance company pays for the TPA’s services, not the member directly. A third‐party administrator can only collect payments for plan premiums from plan members.

  • The payer is responsible for determining the coverage benefit as it applies to each claim. The TPA only issues the payment. Therefore, if payment is not correct, you need to contact the payer, not the TPA, because the payer is the one who determines whether the claim is payable under the conditions of the patient’s insurance plan.

  • You have to determine where to send the claim. The payer pays a fee to participate in a network, and the arrangement the payer has with the network determines where you send the claim. Here are the standard options:

    • If the network collects fees from both the provider and the payer, you usually submit the claim directly to the network, which prices everything and then requests that the payer present an EOB and a check to the provider.

    • If only the payer pays the network, you send the claim to the payer, the payer sends it to the network for pricing, and the network returns the claim to the payer for payment to be issued.

    And you, oh lucky coder, get to monitor and follow up on the whole big process, sort of like a big‐time TV producer watching all of the magic from a secure location.