Selecting the right Third-Party Administrator (TPA) is a game-changing decision for startups and insurance brokers alike. A TPA doesn’t just handle claims—they’re integral to the customer experience, compliance, operational efficiency, and cost control. Whether you’re a startup launching an insurance product or a broker scaling benefits administration, the right partner can make or break your success.
Let’s dive into the key due diligence questions you must ask when choosing a TPA, ensuring alignment with your strategic goals, budget, and compliance needs.
1. What Industry Experience Does the TPA Have?
Before anything else, ask about their specialization. Some TPAs focus on healthcare, others on workers’ compensation, property and casualty, or benefits administration. Look for:
- Years in business
- Client industries served
- Size and scale of past clients
This helps assess whether the TPA understands the regulatory and service needs of your domain.
2. What Is Their Track Record With Startups or Rapidly Growing Companies?
Startups require flexibility and responsiveness. Not all TPAs are comfortable working with smaller teams or scaling operations quickly. Investigate:
- Experience supporting early-stage or high-growth firms
- Willingness to offer customizable service models
- Feedback from startup clients
3. How Do They Handle Claims Processing?
Claims management is the heart of a TPA’s function. Ask detailed questions about:
- Average turnaround time
- Claims adjudication accuracy
- Dispute resolution procedures
Request real metrics or SLAs. A slow or error-prone claims process can destroy customer trust.
4. What Technology Platform Do They Use?
A modern, API-friendly tech stack is critical for startups. Ensure their systems:
- Support real-time data access
- Offer reporting dashboards
- Allow integration with your systems
Bonus points if they use AI or automation for faster claims and fewer manual errors.
5. Are They Compliant With Industry Regulations and Data Security Standards?
Startups must ensure their TPA is up-to-date with HIPAA, ERISA, SOC 2, or GDPR—depending on your service geography and sector. Ask for:
- Audit reports
- Compliance certifications
- Details on data storage and encryption
6. What Does Their Customer Service Model Look Like?
Will your customers or employees receive the support they need? Look at:
- Support hours and channels (phone, chat, email)
- Languages supported
- Availability of dedicated account managers
Gauge their first-call resolution rates and whether they offer bilingual support if needed.
7. How Transparent Is Their Reporting and Data Access?
You’ll need accurate, timely data for internal analysis and reporting. Ask:
- Can you access claims trends, utilization, and costs in real time?
- Do they provide custom reports?
- How often are reports updated?
Data transparency directly affects your ability to make strategic decisions.
8. What Are Their SLAs (Service Level Agreements)?
SLAs help you manage expectations. Look for:
- Response and resolution times
- Uptime for portals
- Penalties for missed benchmarks
Be wary of vague promises without clearly defined metrics.
9. What Is Their Fee Structure?
Understand how you’ll be charged. Common structures include:
- Per-claim pricing
- Per-employee per month (PEPM)
- Flat monthly retainer
Compare multiple quotes and make sure you know what’s included (e.g., reporting, integrations, customer support).
10. How Do They Manage Transitions and Onboarding?
The onboarding process can make or break early momentum. Ask:
- How long does onboarding take?
- What’s their training process?
- Who will lead the transition?
They should provide a timeline, documentation, and dedicated onboarding team.
Comparison Table: Choosing the Right TPA
| Evaluation Area | What to Look For | Red Flags |
| Industry Experience | Proven domain knowledge, client examples | No niche expertise |
| Technology | Modern platform, API integration, dashboards | Legacy systems, no integrations |
| Claims Handling | Fast turnaround, automation, low error rates | Slow or manual-heavy workflows |
| Compliance | Certifications (HIPAA, SOC 2), secure data storage | Vague policies or outdated audits |
| Support Services | Multi-channel support, SLAs, dedicated reps | Limited hours, no reps |
Conclusion: Ask Smarter, Partner Better
Choosing the right TPA isn’t just about ticking boxes—it’s about aligning with a partner who can scale with your vision, support your customers, and protect your business from compliance and operational risks. These due diligence questions will help startups and brokers cut through the noise and find the right-fit TPA that fuels long-term success.
FAQs
What is a TPA in insurance?
A TPA, or Third-Party Administrator, is a service provider that processes insurance claims or provides administrative services for employee benefits, without being the insurer.
How do TPAs make money?
Most TPAs earn revenue through service fees—either per claim, per member per month (PEPM), or via retainers. These fees depend on the complexity and volume of services.
What’s the difference between a TPA and an insurance carrier?
An insurance carrier underwrites the risk and pays claims. A TPA manages the operational side—such as claims processing, reporting, and customer support—on behalf of the insurer or employer.
