Third Party Administrator License

1. 🏷️ What Is a TPA?

A Third‑Party Administrator is an entity that manages insurance-related services—primarily:

• Claims administration (processing, adjusting, settling),
• Premium collection or policy charge handling,
• Underwriting and plan management,
• Employee benefits handling (like ERISA plans, HSAs, FSAs),
• For insurers, employers, MEWAs, or other benefit plan sponsors.

TPAs operate as independent administrators for life, health, annuity, or workers’ comp plans. Definitions and scope vary by state.

2. 🏛️ Licensing vs. Registration

States generally require one of the following:

• A TPA license — full authority to conduct TPA activities within the state.
• A TPA registration — limited authority for exempt or restricted TPAs (e.g., employer self-administrators).
• States differ on which plan types (health, life, workers’ comp) and activities trigger licensure.

3. State-by-State Licensing Examples

Washington (Workers’ Comp)

TPAs managing self-insured employer claims must be licensed under RCW 51.14.170. Requirements include state business registration, claims admin certification, and annual renewals via SICATS.

Connecticut

Under § 38a‑720a, TPAs doing underwriting, premium collection, or claims handling must choose licensure or registration. Fees: $500 new, $450 renewal, or free for registration (plus NIPR fees).

South Carolina

License application via NIPR costs $100, plus documents: Secretary of State cert, bond/LO/C/D, audited financials, officer affidavits.

Maryland

Registration required for life/health TPA services. Must submit NAIC application, surety bond (10% of average funds, $5k–$500k), $250 initial fee, $65 biennial renewal.

Oregon

Requires license for life/health TPA activities (excluding WC adjusters). $45 fee, biennial renewal, quarterly enrollment reporting, annual financial reports.

Iowa

TPAs with life, health, or annuities need licensing. Bond = 10% of average daily client funds, min $50k, max $1M. Renewal every 3 years.

License needed for in-state TPA activity. Fee $200, bond 10% of expected premiums ($100k–$1M), audited financials required.

North Carolina

Annual licensing via North Carolina DOI costs $300. Requires detailed application packet: forms, bylaws, agreements lists, CPA financials, E&O insurance, officer affidavits.

Oklahoma

License mandatory; non-residents can apply via home-state reciprocity. Requires NAIC affidavits, background checks for control persons .

Vermont

Life/health/stop-loss TPAs need a license. $600 initial and triennial renewal. Annual reports due by July 1

🧩 Common Licensing Elements

Across states, you’ll often need:

• Application via NIPR/Sircon or state portal,
• Fees: $45–$600 initially, periodic renewals, plus transaction costs,
• Surety bond or financial security—often 10% of administered funds (min $5k–$100k; max up to $1M),
• Audited financial statements (1–2 years),
• Officer/owner affidavits and NAIC biography forms,
• Policy admin agreements list, bylaws, corporate docs,
• Errors & Omissions (E&O) insurance in some states,
• Renewals: annual, biennial, or triennial – may require reports (annual/quarterly),
• Notifications for changes: ownership, officers, material changes

5. 🛡 Enforcement & Residency Rules

• Non-resident TPAs can access via home-state reciprocity (e.g., Missouri license enabling Kansas access)
• If a home-state license lapses, multistate privileges are rescinded
• Unlicensed practice can lead to cease‑and‑desist orders and stiff penalties (e.g., NJ’s $21 k fine for unregistered activity)

“In WA they must be licensed. You can report them to the state AG.”

6. ✅ Step-by-Step Licensing Process

1. Map your operational states where you collect premiums or adjust claims.
2. Check licensure vs. registration definitions per state.
3. Gather documentation: corporate, agreements, financials, bonds, affidavits/E&O.
4. Apply via NIPR/Sircon/state system.
5. Submit bond and financials concurrent with application.
6. Pay fees plus transaction charges.
7. Respond promptly to any information requests.
8. Receive approval/license; keep copies searchable in database.
9. Maintain compliance: renew on time, file required reports, and announce changes.

7. 🔍 Reporting & Ongoing Obligations

• States like Oregon and Vermont require annual reports (e.g. quarterly enrollment or annual fiscal summaries).
• Notify regulators immediately upon material changes — such as officer turnover, ownership shifts, or financial shifts.
• Renew licenses before expiry to avoid lapses and penalties.

8. ❗ Penalties of Non-Compliance

• Regulatory fines and administrative sanctions (NJ $21k fine),
• License suspension or revocation,
• Forced cessation of state activity,
• Legal exposure, potential civil suits or reporting to NAIC.

9. 🧠 Best Practices

• Centralize state requirements: maintain a jurisdictional tracking matrix.
• Use NIPR or OPTins for streamlined multistate filings.
• Secure flexible bond instruments tied to expected plan funding.
• Ensure document completeness—missing affidavits delay issuance.
• Plan renewals and reporting ahead (FY, quarterly).
• Set internal alerts for officer changes, plan additions, or business scope modifications.
• Audit TPA operations to ensure internal controls align with filings and maintain E&O coverage.

10. 📊 Quick Comparison Table

State	License or Reg.	Fee	Bond/Financial Requirement	Term & Reports
Washington	License (WC TPAs)	—	Claims admin certification	Annual renew via SICATS
Connecticut	License or Registration	$500/$0	—	NIPR renewal (90 days)
South Carolina	License	$100	Bond/LOC/CD & audited financials	As required
Maryland	Registration	$250	10% of funds ($5k–$500k bond)	Biennial renewal
Oregon	License	$45	—	Biennial + annual report
Iowa	License	$100	10% of funds ($50k–$1M bond)	3‑yr renewal
Wyoming	License	$200	10% of premiums ($100k–$1M bond), 2 yrs audited	As required
North Carolina	License	$300	CPA financials, E&O insurance	Annual renewal
Oklahoma	License	—	NAIC bio affidavit, background checks	Notify changes
Vermont	License	$600	—	3‑yr renewal + annual report

✔️ Final Takeaway

Navigating TPA licensing in the U.S. demands careful alignment to state-specific definitions, licensure processes, and ongoing compliance. Key action items include:

1. Determining your licensing status (license vs registration) per state,
2. Applying through NIPR/Sircon with complete documentation,
3. Securing appropriate surety bonds or financial guarantees,
4. Maintaining compliance via timely renewals, reporting, and change notifications,
5. Monitoring non-resident reciprocity and home-state license health to preserve multistate privileges.

Would you like help drafting a license tracking matrix, preparing multistate filings, or identifying bond providers?