Bulletin No. 86-04

Insurance agents operating as third party administrators

Issued and entered April 9, 1986 by Herman W. Coleman, Commissioner of Insurance

Public Act 218 of 1984, The Third Party Administrator Act, Section 902, MCLA 550.902(k) states:

"Third party administrator" or "TPA" means a person who processes claims pursuant to a service contract and who may also provide one or more other administrative services pursuant to a service contract, other than under a workers' compensation self-insurance program pursuant to Section 611 of the Workers' Disability Compensation Act of 1969, Act No. 317 of the Public Acts of 1969, being Section 418.611 of the Michigan Compiled Laws. Third Party Administrator does not include a carrier or employer sponsoring a plan.

Section 902 also contains the following definitions:

"Processes claims" means the administrative services performed in connection with a claim for benefits under a plan.

"Plan" means a medical, surgical, dental, vision or health care benefit plan and may include coverage under a policy or certificate issued by a carrier.

"Carrier" means any of the following:

-- An insurer which is regulated pursuant to the Insurance Code of 1956, Act No. 218 of the Public Acts of 1956, being Sections 500.100 to 500.8302 of the Michigan Compiled Laws.

-- A health care corporation regulated pursuant to the non-profit Health Care Corporation Reform Act, Act No. 350 of the Public Acts of 1980, being Sections 550.1101 to 550.1704 of the Michigan Compiled Laws.

-- A health maintenance organization regulated under Part 210 of the Public Health Code, Act No. 368 of the Public Acts of 1978, being Sections 333.21001 to 333.21099 of the Michigan Compiled Laws.

-- A dental care corporation regulated pursuant to Act No. 125 of the Public Acts of 1963, being Sections 550.351 to 550.373 of the Michigan Compiled Laws.

"Service contract" means the written agreement for the provision of administrative services between the TPA and a plan, a sponsor of a plan or a carrier.

In other words, a third party administrator or TPA means a person who performs administrative services in connection with a claim for benefits under a medical, surgical, dental, vision or health care benefit plan pursuant to a written agreement for the provision of administrative services between the TPA and the medical, surgical, dental, vision or health care benefit plan; between the TPA and the sponsor of the medical, surgical, dental, vision or health care benefit plan; or between the TPA and the insurer, health care corporation, health maintenance organization or dental care corporation.

An agent that processes claims for health care benefits pursuant to a service contract with a health care corporation, a dental care corporation, a health benefit plan, a health benefit plan sponsor, an insurer or a health maintenance organization is considered a third party administrator. Agents processing claims under an insurance policy providing medical, surgical, dental, vision or health care benefits fall within the definition of TPAs if there is a service contract providing for these administrative services between the agent and the insurance company, or if there is a service contract between the agent and the employer or sponsor of the plan for administering any self-insured retention.

That agent who is a third party administrator is subject to Public Act 218 of 1984 if any one of the following is true:

1. If he/she is domiciled in Michigan.

2. If he/she has his/her principal administrative office or principal headquarters located in the State of Michigan.

3. If he/she solicits a plan or sponsor of a plan or provides administrative services to a plan or sponsor of a plan, which plan or sponsor is either domiciled in Michigan or has its principal headquarters or principal administrative office in Michigan.

4. If he/she provides substantial administrative services to an insurer, a health care corporation, a health maintenance organization or a dental care corporation regulated by Michigan statutes for that entity's business in Michigan.

An insurance agent that is a third party administrator should contact the Insurance Bureau immediately to obtain the information and the proper forms needed to become licensed in Michigan. Failure to comply with the requirements of the TPA Act could lead to administrative compliance action, if it is later determined that an agent is acting as a TPA in Michigan without the benefit of the proper license.

Any questions concerning this bulletin should be addressed to:

Commissioner Herman W. Coleman
Michigan Insurance Bureau
P.O. Box 30220
Lansing, Michigan 48909