50-State Insurance Licensing Compliance Guide
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Third-Party Administrator (TPA) Business License

Businesses involved in the insurance industry must be licensed to provide the services they offer. TPA license requirements vary by state.

What Is a Third-Party Administrator Business?

A third-party administrator (TPA) company provides operational services under contract to another company. For example, health insurance companies tend to outsource their claims operations to third parties. TPAs also handle liability insurance claims. The role of third-party administrators is growing. Other services TPAs provide include investment firms, forensic accounting, emergency response planning, and workers’ compensation.

Common services TPAs provide include claims processing, client enrollment, and employee benefits. When working for health insurance providers, TPAs help design, launch, and manage health plans.

While third-party administrator businesses are often called “TPAs,” they are also sometimes referred to as “administrative services only” (ASO) entities. While the terms are materially the same, differences can apply. For example, an ASO may offer more limited services than a typical TPA and be limited to a single health insurance company relationship.

If you are concerned about managing the business registration process on your own, you can seek guidance from the business licensing experts at Harbor Compliance. With our professional licensing services, we offer full support through all of the stages of the corporate life cycle and can provide access to expert software insights. We make preparing and filing applications easy and handle communication with government agencies on your behalf. With our software, you can track your registration status, license numbers, filing history, fees, and renewals 24/7.

The Types of Third-Party Administrators

Not all TPAs offer the same services. Businesses looking to outsource administrative duties need to consider the types of TPAs and whether the services provided meet their specific needs.

Commercial Liability Insurance

Third-party administrators for commercial liability insurance providers provide similar duties to claims adjusters. They often work in conjunction with internal claims adjusters, outside claims investigators, and defense counsel. In some instances, the third-party administrator can choose the defense counsel for a claim they’re managing. While there are third-party administrator businesses of all sizes, many are sizable multinational non-insurance entities that handle claims for large corporations.

Retirement Plan Administration

Other third-party administrator businesses manage employee retirement programs. In situations like that, the business is often owned or operated in part by an investment company. The investment company handles customer care as well as day-to-day account operations.

Independent Contractors

While most third-party administrators are businesses, independent individuals with the proper TPA certifications can work as independent contractors. Every state has its own regulations regarding licensing third-party administrators. Still, it remains consistent that a deep knowledge of the rules and regulations of the services offered is needed.

Requirements to Become a Licensed TPA

As many as 46 states require licensing or other regulatory filings to act as a third-party administrator. The licensing process often requires an immense amount of paperwork and documentation, and proof of a certain degree of education or certification.

Licensing requirements for TPA businesses vary by state. It is essential to verify the process in your state to ensure you are prepared every step of the way. You will likely need to gather all relevant documentation, including financial statements, proof of a commercial activity license, a business plan, and more.

You will also need to appoint a registered agent to receive notices of lawsuits and other legal or government notices. To manage those tasks more efficiently, Harbor Compliance offers licensing management software and managed services to help simplify the application process, allowing you to focus on other aspects of running your business.

Choosing a TPA Niche

Offering a market niche as a TPA business differentiates your business from other companies and agents. The state licensing requirements apply when choosing a niche, as well as additional certifications. The typical certification process involves attending training and taking exams to prove administrative skills.

TPA niches offer broader services and prove to potential clients that your business specializes in the services they need. Examples include companies that handle:

  • Family and Medical Leave Act (FMLA)
  • American With Disabilities Act (ADA)
  • Consolidated Omnibus Budget Reconciliation Act (COBRA)
  • Section 125/Cafeteria plans
  • Fair Labor Standards Act (FLSA)
  • Health Insurance Portability and Accountability Act (HIPAA Privacy)
  • Occupation and Safety Health Administration (OSHA)
  • 401(k) plans

Renewing a Third-Party Administrator Business License

Most states and cities require licenses to be renewed on an annual or biennial basis. Renewal ensures your business complies with all state and local regulations. Renewal fees vary, so it is a good idea to be aware of what you may owe to keep your business in good standing.

If you are currently operating a TPA business and are looking to outsource your maintenance and renewal duties, Harbor Compliance can help. We are available to review your business status, ensure you can operate uninterrupted, and can explain what steps you need to take in order to ensure you remain compliant with state and federal regulations.

In addition, our License Manager software helps professionals maintain their licenses by automating repetitive tasks such as tracking renewals and compliance deadlines. Through License Manager, you can also access LicenseIQ™ – our extensive, proprietary database of nationwide licensing requirements – to research the requirements for the states in which you work. Contact our licensing experts today to learn more.

Explore Licensing by State

Click on the links below to view TPA license requirements by state.

Adjuster - A person or firm that is paid to adjust, investigate, and negotiate claim settlements. There are 3 categories of adjusters: company, independent, and public. Company adjusters work for insurance companies and investigate claims on behalf of the company. Independent adjusters investigate claims on a contractual basis for insurance companies. Public adjusters investigate claims on behalf of claimants, usually to determine the amount of money that can be claimed.

Agent in Charge - A licensed individual responsible for the supervision of all individuals within an insurance agency. The agent in charge must be licensed in the same lines as the agency.

Insurance Agent - Insurance agents act as intermediaries between the insurance company and policyholders. Agents can be either captive or independent. Captive agents represent a single insurance company, while independent agents represent multiple insurers.

Insurance Broker - Individuals who sell insurance policies while representing the interests of the buyer. Brokers are typically independent intermediaries without an insurance company affiliation.

Insurance Producer - May be used to refer to either individual insurance agents and brokers or insurance agencies and brokerages.

Managing General Agent - An agent or broker that is involved in underwriting and has other areas of authority normally handled by insurers. MGAs are typically involved in unusual lines of coverage or in geographically prohibitive areas.

Surplus Lines Insurer - An insurance carrier that takes on risks that a licensed carrier is unwilling to insure. Surplus lines insurers do not have access to state guaranty funds and are less tightly regulated by state governing bodies.

Third Party Administrator - An organization that manages group insurance policies and works with the employer and insurance carrier to process claims, handle loss control, and provide risk management and consulting services.

Title Agent - Title agents sell insurance that protects real estate owners against loss of ownership of a property due to a legal claim.

Viatical Settlement Provider - A company that purchases life insurance policies at a discount from individuals seeking immediately available funds.

Independent Insurance Agents and Brokers of America (Big “I”)
Advocacy group of independent insurance brokers and agents.

National Association of Insurance and Financial Advisors (NAIFA)
Professional association that advocates for favorable regulatory conditions for insurance agents and financial advisors.

National Association of Insurance Companies (NAIC)
A standard setting and regulatory support organization that is governed by state insurance regulators.

National Association of Professional Insurance Agents (PIA)
Professional association that provides education and advocacy for insurance agents throughout the United States.

National Insurance Producer Registry (NIPR)
An affiliate of the NAIC that provides streamlined and uniform producer licensing processes.

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