Questions to Ask Before Choosing a TPA for a Level-Funded or Self-Funded Plan

A third-party administrator, or TPA, can sit at the center of a level-funded or self-funded health plan. It may handle eligibility, claims adjudication, customer service, reporting, network access, and coordination with the pharmacy benefit manager and stop-loss carrier. The name on the proposal matters less than the duties, fees, data rights, and exit terms written into the contract.

Before choosing a TPA, decide what the employer is buying and who is responsible when something goes wrong. A polished proposal does not answer whether a claim is eligible, who owns unused claims funds, or what happens after termination. Ask the questions below, require written answers, and verify that the final contract matches the proposal.

What services are included?

Request a complete scope of services. Identify who manages enrollment, eligibility changes, COBRA coordination, claims, appeals, employee support, provider questions, plan documents, required notices, reporting, and vendor oversight. Ask for service standards, escalation contacts, implementation timelines, and fees for work outside the base agreement.

Clarify which duties remain with the employer or plan sponsor. A TPA can perform administrative work, but hiring one does not automatically transfer every legal responsibility. Review the plan document, summary plan description, business associate agreement, administrative services agreement, and any separate network, PBM, or stop-loss agreements together.

How do the stop-loss attachment points work?

Stop-loss insurance limits the employer's claims risk, but the details control when reimbursement begins. Ask for the specific attachment point for an individual participant and the aggregate attachment point for the plan as a whole. Confirm whether the aggregate corridor, minimum aggregate attachment point, lasers, exclusions, and contract basis change the practical exposure.

A laser is a higher specific attachment point or exclusion applied to a known high-risk participant or condition. Ask whether lasers can be added at renewal, how they are disclosed, and whether there is a no-new-laser or renewal-cap provision. Identify the stop-loss carrier, policy term, reimbursement process, advance-funding options, claim-submission deadlines, and responsibility for pursuing reimbursement. Do not treat stop-loss as ordinary group health insurance; it protects the employer, not the employee.

What are the run-in and run-out terms?

Claims timing can create liability before implementation and after termination. Run-in coverage addresses claims incurred before the new arrangement's effective date but paid afterward. Run-out administration handles claims incurred while the plan was active but submitted or paid after it ends. Ask which incurred-and-paid period the stop-loss policy covers, how long the TPA will process run-out claims, what fees apply, and who submits late claims to stop-loss.

Match the TPA agreement, plan document, and stop-loss contract. A gap between a 12/12, 12/15, 12/18, or other contract basis can leave the employer paying claims that fall outside reimbursement. The notation and availability vary, so require a plain-language calendar showing the incurred and paid dates covered.

Who owns and controls the claims fund?

Level-funded arrangements often combine fixed fees, stop-loss premium, and a claims-funding amount into a predictable monthly payment. That does not guarantee a refund. Ask whether claims funds are held in an employer-owned account, a segregated account, or a vendor-controlled account; who receives interest; and whether the TPA may offset fees or other liabilities.

Require the contract to state what happens to unused claims funds, when any reconciliation occurs, whether renewal is required, which expenses are deducted, and how run-out claims affect the balance. For a traditional self-funded plan, confirm funding cadence, cash-call procedures, payment authority, banking controls, and audit rights. The proposal's illustration is not a promise unless the agreement says so.

How transparent are the network and PBM?

For the provider network, ask for network ownership, access fees, discount methodology, geographic adequacy, provider directory maintenance, out-of-network pricing, reference-based pricing rules if any, and the process for resolving balance-bill or access problems. Test the network against the hospitals and physicians employees actually use.

For the PBM, ask whether pricing is pass-through or spread-based; who keeps manufacturer rebates, fees, and other compensation; whether specialty drugs are steered to an affiliated pharmacy; and whether the employer receives claim-level data. Review formulary control, prior authorization, clinical programs, audit rights, termination rights, and data portability. Do not rely on a general promise of transparency. Ask for the definitions and payment flows in writing.

What fiduciary responsibilities apply?

A self-funded health plan is generally governed by ERISA, and the plan sponsor or named fiduciary may retain fiduciary duties even when vendors perform administration. Ask whether the TPA accepts any fiduciary status for claims or appeals, what discretion it has, and what indemnification and standard-of-care provisions apply. Identify who signs plan amendments, decides appeals, monitors vendors, and reviews fees.

Discuss fiduciary roles with benefits counsel. A broker or TPA can explain operations, but the employer should not assume that a service agreement removes its duty to act prudently, follow plan documents, and monitor plan expenses.

What data, reporting, and audit rights do we receive?

Ask for sample reports before signing. Employers should understand claim trends, large claims, pharmacy spending, network use, stop-loss reimbursements, fees, and enrollment. Confirm access to de-identified and claim-level data as permitted by law, the report schedule, file formats, retention period, privacy safeguards, and rights to move data to a replacement vendor.

Include audit rights covering claims, eligibility, network discounts, PBM compensation, stop-loss submissions, and administrative fees. Ask who pays for an audit, how far back it may look, and how errors are corrected. Useful data should support renewal decisions without exposing protected health information unnecessarily.

What happens if we leave?

Review termination for convenience and cause, notice periods, early termination fees, data delivery, transition assistance, run-out services, claim and appeal handoff, and access to historical records. Confirm whether ending one agreement automatically ends network, PBM, or stop-loss arrangements and whether any vendor can hold data or claims funds until another dispute is resolved.

Learn more about the structure in What Is a TPA in Health Insurance? and compare funding approaches in Level-Funded Health Plan Benefits for Houston Companies. Our Texas level-funded health plan guide explains where this arrangement may fit.

Verify the contract before you commit

Build a comparison table using the same questions for every finalist. Attach each vendor's written response to the proposal, then compare it with the final agreements and stop-loss policy. Resolve conflicts before signing. Pay particular attention to attachment points, exclusions, fund ownership, compensation, fiduciary language, data rights, run-out, and termination.

PCI Solutions can help a Houston employer compare plan structures and coordinate questions among the TPA, network, PBM, stop-loss carrier, and counsel. We do not sell or bind a plan online. To review the choices with a person, contact our team.