“Texas takes unlicensed TPA activity very seriously, especially when municipalities or public funds are involved……..”
By Molly Mulebriar
In Texas, you generally must hold a Third‑Party Administrator (TPA) license if you are providing certain administrative services on behalf of a self‑funded group medical plan, unless you fall under one of the statutory exemptions found in Texas Insurance Code Chapter 4151 – Third-party Administrators
Texas regulates anyone who collects premiums or contributions under Texas Insurance Code Chapter 4151. Texas’s public TPA license database is a good source to determine if your TPA is properly licensed to do business in Texas.
We recently had occasion to do just that.
We have identified what we believe to be an unlicensed TPA who is providing certain administrative services on behalf of a Texas political subdivision. Our staff can find no parent company that could be holding the license for them.
This is a major compliance violation. Penalties include: $10,000 per violation (per day); cease‑and‑desist orders; refunds and restitution; contract voidance; criminal exposure in extreme cases; and public disciplinary posting.
Texas takes unlicensed TPA activity very seriously, especially when municipalities or public funds are involved. Any entity that bills, collects contributions, or handles money for a self‑funded employer health plan is performing regulated administrative services.
A Texas licensed third party administrator must hold a TPA Certificate of Authority; file annual financial statements; maintain a fidelity bond; maintain errors & omissions insurance; file a biographical affidavit for officers; submit a TPA annual report; follow Texas record‑retention rules; and comply with ERISA fiduciary standards (applies to non- ERISA plans too).
The Texas Department of Insurance will make the final determination as to the foregoing representations.
Stay tuned for more exciting news.
Mulebriar is an investigative reporterette from Waring, Texas and an infrequent contributor to this blog.