ERISA governed plan: Most state-mandated benefits are pre-empted by ERISA. This allows the employer to offer a consistent benefit plan to all employees across numerous states.
Pay as you go: Funding of claims is required only when the need arises. This allows the employer to hold onto its assets until they are needed to fund the claims.
Smaller can be better: Most TPA's are not as large as conventional insurance companies. As a result, lines to authority and change are usually more direct and encounter less "red tape". Efficiency and responsiveness are common outcomes.
No affiliations: Because a TPA is an independent organization, there is no requirement that it does business with certain Preferred Provider organizations or stop-loss insurers. This enables the employer to be selective for the best fit.
One stop shopping: The TPA is able to fill an employer's needs across a wide span of services and benefits. With the exception of risk taking, the TPA fills the role of an insurance company and in some instance more than one insurer. Housed within the TPA will be billing services, ID card production, prescription drug services, benefit composition, printing, PPO coordination, utilization review, COBRA/HIPAA notifications, premium remittance, claims processing, fund accounting and employee and employer client service.
Legal compliance: A TPA should be able to advise its clients of upcoming changes in the laws that affect the benefit program. The TPA will compose the announcements for distribution to your employees and issue amended pages for the Plan Document and Summary Plan Description.
Plan changes: At anniversary, should a change in stop-loss insurer be indicated, the TPA can implement the change without upsetting the benefit program and the employees. This practice brings the employer flexibility and opportunity for change that is invisible to the employees.