What is a Third-Party Payor (TPP), and How Does it Work?

What is a Third-Party Payor (TPP), and How Does it Work?

The world of insurance and employee benefits can be very confusing, especially when you’re trying to understand how it all works behind the scenes.  Because it’s so confusing, many companies are now buying their employee benefits through third-party administrators (TPAs) or third-party payors (TPPs), like us. In this blog, we’ll explain what a third-party payor is, how it compares to other methods of insurance providers, and why they can be a good option for companies that aren’t experts in employee benefits.

What's the Difference Between a TPA vs. a TPP?

While researching different employee benefits plans and providers, you may have come across the term Third-Party Administrator (TPA); which is more commonplace than a Third-Party Payor (TPP). They both have a lot of similarities, but there is one key difference.

  • TPPs adjudicate AND pay claims so employees and dependents have only a company to submit health and dental claims, get reimbursed, and customer support. 
  • TPAs do not adjudicate and pay claims and typically leave that duty up to the insurance carrier they are buying the insurance from. 

While it may not seem like a significant difference, from an employee's perspective, the process of submitting claims and being reimbursed is less efficient and can take longer (for some employees, waiting numerous days or weeks to get reimbursed can impact budget).

Since TPPs receive, adjudicate and pay claims all within one company and platform, if/when there are any problems with the claim, TPPs can respond and resolve issues faster making the overall user experience more efficient. 

What exactly is a Third-Party Payor (TPP)? 

  • A third-party payor is a company (like Simply Benefits) that provides operational services/processing, employee benefits management, AND takes care of claims administration, settlement, adjudication, and reimbursement (the main difference from a TPA).
  • Third-party payors are less common than third-party administrators because they require more resources dedicated to claims adjudication.
  • The key distinction of a TPP from an insurance company is that they don’t hold any insurance risk. TPP's buy the insurance from larger insurance companies called underwriters that provide the coverage to clients.
  • Simply works with multiple underwriters to provide clients with more options and pricing.

Why Work with a TPP vs Direct with an Insurer?

TPPs were created to fill the gap in the insurance world. When an increasing number of employers started offering complex plans that contained different classes and divisions, they needed more administrative support and resources to manage the growing complexity. TPPs were born to help employers with benefit plan administration.

As mentioned earlier, the main difference between TPPs and traditional insurers is that insurers hold all the risk and TPPs don’t hold any risk but offer administrative services and payout claims only.

Most TPPs work with multiple underwriters to find employers the best price with oftentimes better coverage than if an employer works with one insurer for all benefits. 

How Does It Work with a TPP?

Here’s an example of a typical 5-step scenario working with Simply Benefits:

  1. Plan Design - The benefits advisor works with their employer client to discover their needs and then design their employee benefits plan. Then, the Advisor provides the plan design to Simply Benefits (and likely other insurers) to quote. With Simply Benefits, online and offline plan design options are possible.
  2. Quoting - Simply Benefits then works with our underwriter(s) to finalize the price on the provided plan design and then forwards the pricing proposal to the Advisor. 
  3. Proposal Presentation - The Advisor presents the pricing proposal to their employer client and discusses the best options. The Advisor then communicates the employer client's decision to the insurance companies.
  4. Onboarding - If the employer chooses Simply Benefits, then their company will be added to our system (or happens automatically if the plan design is completed online). We handle the setup in our platform, assist Administrators and employees with enrollment.
  5. Claim Submission - Once the set-up is complete (oftentimes within days with Simply Benefits), Employees (and their dependents) submit their health and dental claims digitally to us via their desktop computer or our app (Apple and Google Play). Simply Benefits then adjudicates their claims and reimburses typically within 48 hours. The process is so easy for the members!

Benefits of TPPs

There are many advantages, but here are some of the most significant ones that will make the lives of employers and employees easier: 

  • Administrative Duties are Looked after

One of the main benefits of using a TPP is that administrative duties are managed by the TPP. The employer won‘t have to worry about paying claims or looking after insurance details. For many businesses, this makes sense because they don’t have the time or resources to take care of all the claim details. This not only saves time but also saves money because employers won’t have to pay someone for these administrative duties. 

TPPs, since they are usually smaller than big insurance companies, can also provide employers and admins with reports and documentation that is typically not sent through an insurer, for example, a taxable benefits report. These resources can greatly help employers with internal banking and accounting tasks. 

  • Easy to use Digital Platform and Customer Service

Another advantage of TPPs is that they typically have technology that streamlines the process. For example, Simply Benefits provides flexibility and all necessary administration in an easy-to-use platform. Additionally, since TPPs are usually much smaller than their insurance counterpart, they are able to provide more personalized service and offer support systems to help with fast and efficient onboarding and enrollment

  • Best Price and Plan

Because TPPs shop around for different underwriters, you can be sure that you get a comprehensive benefits program that is unique to each organization - at the right price. Traditional insurers typically offer set plan designs with limited flexibility to tailor a plan to an employer's unique organization. Working with a TPA/TPP and a knowledgeable advisor helps employers provide a plan to employees that is tailored and works within a company's budget. The combination of good price and flexible plan design makes for a great advantage to getting your benefits directly through an insurance provider. 

Advisors Essential Part of Process

A core part of Simply Benefits’ solution is that we partner with employee benefits advisors as opposed to doing direct businesses with companies. This makes us different compared to a lot of TPAs/TPPs that remove advisors from the process.

We understand that advisors bring a lot of value to the employee benefits business because they are highly skilled and knowledgeable. This means that companies will get a more personalized experience working with an advisor and won’t have to worry about having to settle for a cookie-cutter plan that doesn’t fit with your organization. 

Watch our CEO Jeff Cox Speak to the Value of Advisors:

How Do Advisors Fit into the Process?

A Benefits Advisor (aka Consultant or Broker) help employers navigate the complexities of benefits and design to deliver a plan that attracts and retains top talent.

Advisors educate employers on plan design and funding options for each unique business and provides valuable knowledge about effective taxation for both employers and employees, how to avoid skyrocketing premiums, how to minimize potential liabilities and negotiate with insurers to find the right carrier at the price price.

After you’ve purchased your employee benefits, advisors provide ongoing support and at plan renewal each year. Read How Simply Benefits is Putting Advisors First.

If you're an employer interested in buying employee benefits and don't have an Advisor or are looking for a change, contact us and we'll facilitate an introduction to one of our Advisor partners.

Find Me an Advisor

Final Thoughts

Purchasing employee benefits through a TPP will ensure that you’ll be in good hands and won’t have to worry about the nitty-gritty details. Hopefully, this blog taught you something about the behind the scenes of the employee benefits world and gave you insight into how Simply Benefits works. 

Other Helpful Resources

You may also like:

About Simply Benefits

Simply Benefits is a Third Party Payor (TPP) that provides Employee Health Benefits 100% digitally through our Canadian Advisor partners. Our all-in-one digital solution provides three portals that enable Benefits Advisors to digitally manage all client plans online, Employers to efficiently administer employee coverage, and Employees to view, update and use their benefits 24/7 via desktop or smartphone app.

We help ENGAGE Employees Anytime, Anywhere, SIMPLIFY the Benefits Experience and EVOLVE an Advisors’ Benefits Business.

Connect with us at simplybenefits.ca or on LinkedIn, Twitter, Facebook, Instagram and YouTube.

Employee Benefits Made Simple. 

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Simply Benefits Inc. (“us”, “we”, or “Simply Benefits”) is committed to privacy and the protection of your information. By using Simply Benefits’s website, mobile and other applications, and related Services made available through the Apple App Store, the Google PLAY Store, or otherwise on the Internet (together, the “Simply Benefits Applications” or “Applications”), you acknowledge that you accept the practices and policies outlined in this Privacy Policy (“Privacy Policy“). Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms set forth in the Terms of Service and which incorporate this Privacy Policy by reference.

At Simply Benefits Corp ("Simply Benefits") we are concerned with safeguarding and protecting the privacy of your personal information.

In accordance with Canada's *Personal Information Protection & Electronic Documents Act* ("PIPEDA") we have established policies on how we collect, use and protect any information that you give us when you use our website or services.

What We Collect

Required Regulatory Information

Simply Benefits collects information needed to provide services and meet the regulatory requirements of our industry. When you open an account or sign up for services, we collect personal information which may include but is not limited to the following:

  • Your name and date of birth

  • Contact details

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  • Other information relevant to the services we provide

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What is a cookie?

Cookies are text files containing small amounts of information which are downloaded to your device when you visit a website. Cookies are then sent back to the originating website on each subsequent visit, or to another website that recognizes that cookie. You can get more information about cookies here.

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We use analytics tools and other third party technologies, such as Google Analytics, to collect non-personal information in the form of various usage and user metrics when you use our online Sites and/or Services.

We also use online advertising to reach new potential clients and remarketing tools that allow us to target ads to specific groups of people who have previously interacted with WealthBar’s websites.

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Google has additional information available about their Remarketing Privacy Guidelines, and Restrictions.

Where do we store it

Simply Benefits may use third parties to store and process data. Simply Benefits will ensure that such third party service providers have significant expertise with data and digital privacy. Simply Benefits will ensure that personal data is stored and transmitted in encrypted format using technology such as SSL. Third party data storage and processing providers may be located in the United States and as a result personal information may be subject to U.S. privacy law which may differ from Canadian privacy law.

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The information we collect is used so we can communicate with you, provide benefits and insurance management services, improve our products and services, and meet our regulatory obligations.

We share only the information which is reasonably required in the normal course of business with third parties such as our custodians, securities regulators, auditors, legal counsel, or law enforcement agencies, to enable them to fulfill their obligations to Simply Benefits and our clients. We may also disclose your personal information to third-party service providers, affiliates and agents in order to assist us in providing the services you requested and to fulfil the purposes for which your personal information has been collected. Outside of this we shall not sell, distribute or lease your personal information to third parties unless we have your permission or are required by law to do so.

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We are committed to ensuring that your information is secure. In order to prevent unauthorized access or disclosure, we have put in place suitable physical, electronic and managerial procedures to safeguard and secure the information we collect online. In the event that we share your personal information with third-party service providers, affiliates and agents, these parties will be required to adhere to strict confidentiality obligations and practices.

If you have a question, concern or complaint about our privacy policy, please send your comments and your contact details to our Privacy Officer in writing to the following address:

Simply Benefits Corp.

601-460 Doyle Ave,

Kelowna BC

V1Y 0C2

product@simplybenefits.ca

If you believe that any information we have on file for you is incorrect or incomplete, please write to or email us as soon as possible, at the above address. We will promptly correct any information found to be incorrect.