Health insurance isn’t what it used to be — and that’s a good thing. As premiums continue to rise and employees demand more personalized benefits, employers are rethinking how they manage group health plans. In 2025, more businesses than ever are moving away from traditional insurance carriers and exploring a smarter, more flexible solution: third party administrator (TPA) health insurance.
But what exactly is a TPA, and why are so many employers — especially in California — choosing this route?
Let’s unpack what a third party administrator is, how they work in the health insurance space, and why this model is gaining momentum across industries.
What Is a Third Party Administrator in Health Insurance?
A third party administrator is a company that handles the behind-the-scenes administration of health insurance plans on behalf of employers. While traditional insurance companies take on the financial risk and sell pre-designed policies, TPAs focus solely on managing the operational side of a plan. This includes processing medical claims, managing employee enrollment, overseeing compliance, and providing customer support to plan members.
Importantly, TPAs are often used by employers who opt for self-funded or level-funded health insurance plans. In these arrangements, the employer takes on the financial risk of covering employee healthcare expenses, while the TPA ensures that the plan runs smoothly and legally.
Why TPAs Are Gaining Popularity in 2025
The shift toward TPAs is being driven by several key factors. For one, TPAs offer employers significantly more control over their health benefits. Unlike traditional insurance carriers that offer fixed plans, TPAs allow companies to design their own benefit packages based on the needs and preferences of their workforce. This level of customization is particularly appealing to businesses that want to offer competitive, meaningful coverage without overpaying for unnecessary features.
Another major reason employers are turning to TPAs is cost control. With traditional insurance, businesses pay a set premium every month regardless of how much care their employees use. In contrast, self-funded plans administered by TPAs mean employers only pay for actual claims. When paired with stop-loss insurance, this model can help businesses significantly reduce costs while protecting against large, unexpected expenses.
Transparency is also a huge advantage. TPAs typically provide employers with detailed reporting and analytics, allowing them to track spending, spot trends, and make more informed decisions. This level of insight is rarely available with large carriers, where costs and claims data are often opaque.
In addition, TPAs offer hands-on support with regulatory compliance. From ACA filings to HIPAA protections and ERISA reporting, the regulatory landscape is complex — especially in states like California. A knowledgeable TPA helps ensure everything is done correctly and on time, reducing legal risks and administrative headaches for internal HR teams.
How Third Party Administrators Work in Practice
Working with a TPA usually starts with a consultation to help the employer design a plan that fits their goals and budget. This can include choosing provider networks, setting copays and deductibles, and determining which services to include or exclude. Once the plan is built, the TPA manages open enrollment, handles day-to-day operations, and serves as the main point of contact for employees with questions about their benefits or claims.
When an employee seeks care and a medical provider submits a claim, it goes directly to the TPA. The TPA reviews the claim, verifies eligibility, and processes payment according to the plan’s terms. They also coordinate with stop-loss carriers when necessary, provide detailed reports to the employer, and help with ongoing plan adjustments based on utilization data.
This hands-on management gives employers a much clearer picture of where their healthcare dollars are going — and offers the flexibility to make real-time changes when needed.
Who Should Consider Using a TPA?
TPAs are a good fit for a wide range of businesses, not just large corporations. In fact, many small and mid-sized employers are some of the biggest beneficiaries of this model. If your company has 50 or more employees and you’re frustrated by rising insurance premiums, limited plan options, or a lack of transparency, it may be time to consider working with a TPA.
Businesses that have stable, relatively healthy workforces often save the most, but even those with higher claims risk can benefit by building smarter plan designs and managing costs more closely. TPAs are also ideal for companies that want to offer more personalized benefits, provide better employee support, or improve compliance with state and federal laws.
A Real-World Solution: Bedrock TPA
For employers in California and beyond, Bedrock TPA offers a refreshingly human approach to health plan administration. With deep expertise in both self-funded and hybrid plans, Bedrock helps businesses navigate everything from plan design and compliance to claims handling and employee engagement.
What sets Bedrock TPA apart is their focus on transparency, flexibility, and hands-on support. They work closely with employers to understand their workforce, goals, and challenges — then build and manage a plan that actually works for everyone involved. Whether you’re looking for help with PPO, PEO, or POS-style plans, Bedrock TPA has the experience and infrastructure to deliver real value.
Clearing Up Common Myths About TPAs
One of the biggest myths about TPAs is that they’re only for big companies. In reality, many small and mid-sized employers are leading the shift toward TPAs precisely because of the savings and control they offer. Another misconception is that TPAs make health benefits more complicated. The truth is that a good TPA actually makes things easier by handling all the administrative tasks that employers typically struggle with.
It’s also worth noting that TPAs don’t replace brokers. Instead, they often work closely with brokers to deliver a seamless experience. The broker helps design and recommend the plan, while the TPA runs it — from claims to compliance and everything in between.
The Future of TPAs in Health Insurance
As the healthcare system grows more complex and employee expectations continue to rise, the demand for customized, transparent, and flexible benefits will only increase. TPAs are well-positioned to meet that demand, and they’re evolving rapidly to keep pace with technology and market trends.
In 2025, we’re seeing more TPAs integrate with digital HR platforms, provide real-time data analytics, and support increasingly diverse plan types. Employers are no longer settling for one-size-fits-all insurance solutions, and TPAs are stepping in to fill that gap with smarter, more strategic services.
Frequently Asked Questions
What is a third party administrator in health insurance?
A third party administrator is a company that manages the administrative side of a health insurance plan on behalf of an employer. This includes tasks like claims processing, compliance management, and customer service.
Do TPAs provide insurance coverage?
No. TPAs do not underwrite or sell insurance policies. Instead, they work with employers who fund their own health plans and handle the administration of those plans.
Is a TPA the same as an insurance broker?
No. A broker helps design and recommend insurance plans, while a TPA manages the plan after it’s been implemented. They often work together to serve the employer and its employees.
Can small businesses use a TPA?
Yes. Many small and mid-sized businesses use TPAs to manage self-funded or partially self-funded health plans, especially when they want more control and cost transparency.
Is Bedrock TPA a licensed and experienced provider?
Yes. Bedrock TPA is a California-based third party administrator with a strong track record of helping employers build smarter, more flexible health plans with a focus on service, compliance, and savings.
Final Thoughts
The health insurance landscape is changing — and employers need to change with it. For those looking to regain control over costs, improve employee experience, and ensure long-term sustainability, partnering with a third party administrator for health insurance could be the smartest move in 2025.
By working with an experienced partner like Bedrock TPA, businesses can access a new level of flexibility and support that simply isn’t available through traditional carriers. It’s not just about cutting costs — it’s about building better benefits that work for everyone.
If you’re ready to explore smarter, more transparent health plan solutions, connect with Bedrock TPA and see how your business can benefit from a TPA-led approach.
