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What is the role of a third party administrator in health insurance?

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The lowdown...
  • Third party administrators perform many different functions for health insurance companies, like processing claims, collecting premiums, and processing enrollments
  • Many policyholders do not know that they have policies administered by third parties
  • Health insurance companies go to great lengths to ensure that their policyholders see no break in service or difference when third party administrators are working on the plan

It is very important that you should keep yourself informed of all facets of your health insurance. This includes whether or not your health insurer contracts out some of their services to third party administrators. Of course, it also includes learning about what a third-party administrator is and how you interact with them.

Thankfully, it is a pretty simple thing to learn about. This article will let you know what you need to know about third party administrators. If you have any more questions, you can check your policy documents, speak to your insurer, or speak to the third party administrators themselves.

Learn more about third party administrators below and make sure to use our free insurance comparison tool above today! 

Why Health Insurers Hire Third Party Administrators

adobestock_92655178-1600x1600The main reason health insurance hire third party administrators is to save money. Health insurers frequently outsource the more expensive and less profitable aspects of their operations, as do many businesses in all industries. Third party administrators also expose health insurers to less liability.

If health insurers are sued, the third party administrators will also be sued and this will dilute the liability and reduce the amount of the settlement that the health insurers will end up paying. However, not all health insurers believe they will see these benefits. This is why not all health insurers have third-party administrators.

How to Deal With Third Party Administrators

You should deal with third party administrators the same way that you deal with your health insurer. In fact, you may not even know that you are dealing with the third-party rather than with the employees of your health insurer. This is the goal of the health insurer when they hire a third-party.

They don’t want their policyholders to perceive any break or interruption in service. The goal is for the quality to be the same while still saving the insurer money. However, if you have any problems with third party administrators you can always go directly to your insurer.

How to Find Insurers That Don’t Hire Third Party Administrators

Dollarphotoclub_72254370-1600x1600When you are comparing health insurance quotes online, one of the things you might want to research is whether or not a health insurer uses third party administrators. It may be difficult to find this out, because (as previously mentioned) insurers usually do not advertise the fact they hire third-party administrators.

This is because people will look down on companies outsourcing without their knowledge, especially at the companies are sharing their own personal and private information.

However, you should keep in mind that you signed an agreement allowing do your health insurance do this when you signed your policy documents. Of course, this only applies to the health insurers that do use third-party administrators, which not all of them do.

Hospitals and Third Party Administrators

Many networks of hospitals, especially for-profit networks of hospitals, used third-party administrators to help administer their own insurance plans.

It has become more and more common for these networks of hospitals to offer their own insurance plans, because this helps them be more profitable and ensure that their patient’s insurance will be accepted.

The third party administrators strive to work with the hospitals to help manage their insurance plans operating much the same way as the third party administrators that work with health insurance companies.

Healthcare Provider Organizations and Third Party Administrators

The situation with healthcare provider organizations and third-party administrators is very similar to the situation with hospitals and third-party administrators. Like hospitals, many healthcare provider organizations offer their own health insurance.

Also similar to hospitals is the way that many of these healthcare provider organizations use third-party administrators to help them manage their health insurance plans.

Third-party administrators employed by hospitals and healthcare providers perform much the same tasks as the third parties working for big health insurance companies. More details on these tasks are included below.

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Self-funded Health Plans and Third Party Administrators

Self-funded health plans are technically not health insurance, but it is important to know about the operations of third-party administrators within these plans so that you can better understand how third-party administrators often operate when they are processing health insurance policies.

Of course, you must first know what self-funded health plans are. Self-funded health plans are often offered by employers because they are cheaper to the employer than health insurance. Self-funded health plans are comprised of contributions from both the employer and the employee into a fund that the employee can use for any healthcare expenses.

Third party administrators often work on these plans in processing the contributions from the employer and the employee, as wells as providing customer service to the beneficiary of a self-funded health plan.

How Third Party Administrators Administer Services

adobestock_62461787-1600x1600The way that third party administrators work is very similar to the way that the insurance companies work. As previously mentioned, the goal of the insurance companies is for their policyholders to not perceive any break or difference in services between their employees and third-party administrators.

Thus, health insurers instruct the third party administrators so that they can work on the insurance plans in the exact way the insurer would do themselves.

How Third Party Administrators Process Claims

The way that third-party administrators process claims is slightly different than the way that the health insurer would process these cleanse themselves, but you, the policyholder, should not perceive any difference. The only difference is that the administrators have to communicate with the health insurer to process the claims in accordance with their wishes.

The actual policyholders should simply have to submit their claims in the same way they would if their insuree did not have third party administrators. If the administrators are doing their jobs properly, the process should not take any longer than it would have otherwise.

How Third Party Administrators Collect Premiums

AdobeStock_62082716-1600x1600As with the processing of claims, administrators collect premiums in much the same way as health insurers. Third parties are under strict instructions for how the insurer wants to collect the premiums, even more strict than the instructions related to the processing of claims.

This is because they collection of payment is a very sensitive and delicate issue. Also, the administrators will have access to very private banking information from the policyholders.

The sensitivity of this area means that many administrators have their own customer service people who work on claims processing questions. Oftentimes, the insurer will also have customer service people that you can speak to.

How Third Party Administrators Process Enrollments

The way that administrators process enrollments and get people enrolled in the first place is slightly different than the relationship between administrators and health insurance for other tasks.

Many health insurers specifically want to outsource their enrollment process because they want specialized professionals who are more persuasive and to know how to close a deal better than any of the insurer’s employees.

Oftentimes, the people that health insurers outsource enrollment to are different than the organizations that the insurers may outsource other tasks to. There are many companies set up specifically to work on health insurance enrollment for big insurance companies.

Final Thoughts

In conclusion, it is vital that each person who is a health insurance policyholder knows what third-party administrators to. Health insurance can be a complex and sometimes boring issue, but its importance in the everyday life of most people means that it is worth putting in the time to understand properly.

Understanding your health insurance policy can help you save money, get a higher quality of care, and make things quicker and much more convenient for you.

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