February 28, 2020 — Blog
The TPA Industry is Growing
According to the latest market research from IBIS World, the Third Party Administrators (TPA) and Insurance Claims Adjusters industry is expected to increase 2.4% in 2020 with projected revenues of $262.4 billion this year. In the United States, this sector is ranked the eighth largest within the finance and insurance industry. It is also growing much faster than the U.S. economy. The TPA industry’s growth is not expected to wane anytime soon.
Self-Insured Plans Driving TPA Growth
The TPA industry’s steady growth is being fueled by increasing regulations, a more complex employee benefits arena, and perhaps most significantly, rising costs of healthcare insurance driving more organizations to self-insure. These self-insured plans, in an effort to mitigate risks relating to regulatory non-compliance, are opting for the services of experienced TPAs to manage and process their health and dental claims, handle pension and annuity administration and recordkeeping, health and welfare fund administration, payroll audits, and full fiduciary and regulatory compliance.
The Insurance Industry’s Reliance on TPAs
The insurance industry also has a deep dependence on TPAs. Insurers increasingly are turning to TPAs to help expedite their customers’ claims and effectively manage all related communications and documentation. This frees the insurer to focus on its underwriting, product development and marketing. There is also the cost advantage of having a TPA assume these responsibilities on an outsourcing basis rather than having an extensive in-house claims department.
The TPA’s Specialized Staff
The TPA’s growth is also an outcome of the development of highly trained and credentialed specialists with expertise in various areas of employee benefits administration. Among these professionals are licensed claims analysts who have passed rigorous licensing exams, experienced finance and eligibility process professionals, and payroll auditors with decades of experience. These individuals stay abreast of the latest regulatory developments and the application of state-of-the-art technologies used to ensure data integrity and facilitate accurate claims handling.
TPAs Maintain Strong Client Relationships
With their distinct expertise and skills, and commitment to service quality, many TPAs enjoy longstanding relationships with their clients. A recent study by Hynes Associates found that 95% of TPAs report client retention rates in excess of five years. Approximately 50% of those surveyed indicated the client tenure was five to nine years with the remainder of those ranging from 10 to 20 years.