What term describes a plan administered by an independent third-party administrator?

What term describes a plan administered by an independent third-party administrator?

• A. Third-Party Administered (TPA) Plan
• B. Self-Administered Plan
• C. Managed Care Plan
• D. Fully Insured Plan

Answer: (A)

This item tests understanding of who handles plan administration. A plan administered by an independent third-party administrator is described as a Third-Party Administered plan. In this arrangement the plan sponsor designs and funds the benefits, but a separate administrator processes claims, handles enrollment, and takes care of day-to-day administration. The independence of the administrator helps ensure specialized, external administration rather than internal handling by the employer. A self-administered plan is run entirely by the sponsor, with no external administrator. A managed care plan refers to how care is delivered and organized, not who administers the plan. A fully insured plan means an insurer provides the coverage and bears the risk, rather than specifying that administration is done by an independent third party.

This item tests understanding of who handles plan administration. A plan administered by an independent third-party administrator is described as a Third-Party Administered plan. In this arrangement the plan sponsor designs and funds the benefits, but a separate administrator processes claims, handles enrollment, and takes care of day-to-day administration. The independence of the administrator helps ensure specialized, external administration rather than internal handling by the employer.

A self-administered plan is run entirely by the sponsor, with no external administrator. A managed care plan refers to how care is delivered and organized, not who administers the plan. A fully insured plan means an insurer provides the coverage and bears the risk, rather than specifying that administration is done by an independent third party.