By Christine Monahan, Kennah Watts, Karen Handorf, and Kevin Lucia
About 165.6 million non-elderly Americans receive coverage through an employer-sponsored health plan. The majority of them are enrolled in a self-funded health plan in which the employer (or other plan sponsor, such as a union) takes on the financial risk of paying their health care claims, rather than an insurance company. Typically, however, self-funded employers will hire a large insurance company to administer medical benefits. The insurance company, acting as a third-party administrator (TPA), negotiates with providers and builds a network, administers and manages claims, and engages in other plan management responsibilities that are outlined in an administrative services agreement (note 1).
Employer-sponsored insurance, especially large employer insurance, has long represented the gold standard for coverage in the US. But by many measures, the system is failing employers and plan members, as well as many independent providers and practices. The total average annual premium for family coverage was $27,000 in 2025, up more than 150 percent since 2015. This cost is jointly paid by employers and workers, but research shows that growth in employer spending on health care has come at the expense of employee wages. On top of this, plan members still pay out of pocket for care, which can amount to several thousands of dollars every year. Yet, even with this high, increasing spending, many clinicians and small, independent hospitals struggle to survive as major health systems dominate the market. Gaps in access also grow as costs become more burdensome.
Consolidation, corporatization, and financialization within and across segments of the health care system are largely to blame for these circumstances. Large hospitals, health systems, and other vertically consolidated providers extract exorbitant reimbursement rates and restrain competition through their contracts. Large insurer TPAs and a complex web of affiliated intermediaries have developed strategies to capitalize on high provider charges, including hefty “shared savings” fees when they reprice claims and recover overpayments. TPAs also collect fees on other services, including complex prior authorization and other utilization management that drive up administrative costs and often block access to medically necessary care. Even with increasing costs of care for beneficiaries, data reveal that per enrollee profits of the top three insurer TPAs have been consistently positive, with an upward trend since 2010.
Despite ongoing efforts to increase transparency for health plan purchasers, employers often struggle to understand what they are paying and why. Some employers have opted out of the aforementioned web by direct contracting with centers-of-excellence programs or physician practices; hiring smaller, independent TPAs; or both. But even these employers may have to contract directly or indirectly with large insurer TPAs to access broader provider networks, or for other non-network services. Consequently, employers agree—knowingly or not—to whatever terms insurer TPAs may impose, even if these terms pose cost or other concerns.
The time has come for Congress to give employers a more accountable and affordable option to administer their medical benefit plans. We call this system disruptor the Fair Pay, Fair Play TPA.
Introducing The Fair Pay, Fair Play TPA
Lawmakers in Congress—or potentially state-level policy makers—can establish a new Fair Pay, Fair Play (FP2) TPA that operates on “fair pay, fair play” terms for employers, providers, and plan members alike. The FP2 TPA would operate as a government or public corporation, a legal status that should shield it from the profit motives and conflicts of interest that can drive traditional private TPAs to prioritize shareholder interests over their clients’ interests. To further ensure its neutrality, the FP2 TPA would not outsource core functions to existing private insurers, administrative service providers, or other entities with a direct or indirect financial stake in commercial health insurance. The FP2 TPA’s activities and policies would also face robust public oversight and auditing to ensure honest operations.
The FP2 TPA would require initial government appropriations. As elaborated below, the FP2 TPA would cover ongoing operations through a transparent per member, per month (PMPM) fee schedule designed to cover the costs of doing business—and nothing more. To balance access and affordability, the FP2 TPA would offer providers fair payments pursuant to fair payment policies. Acceptance of these rates as payment in full would be mandatory for providers to continue to participate in Medicare and Medicaid. In other regards, however, the FP2 TPA would operate like, and compete against, traditional private market TPAs, and would depend on delivering high-value services to succeed (see exhibit 1).
Exhibit 1: Comparing insurer third-party administrators (TPAs) that currently dominate the market with the Fair Pay, Fair Play TPA
| Feature | Traditional Insurer TPAs | Fair Pay, Fair Play (FP2) TPA |
|---|---|---|
| Organizational Structure | For-profit private insurers accountable to shareholders | Government or public corporation focused on serving employers, providers, and plan members |
| Profit Motive | Generates profits through administrative fees and related services | Operates at cost with no profit requirement |
| Administrative Fees | Often complex and opaque; may include spread pricing and shared-savings fees | Transparent per-member-per-month (PMPM) fee schedule based on actual operating costs |
| Data Access for Employers | May limit employer access to claims and encounter data | Provides full access to deidentified claims and encounter data, subject to privacy laws |
| Provider Contract Terms | Negotiated contracts may include gag clauses and anticompetitive provisions | Provider participation rules established by statute and applied uniformly |
| Provider Payment Rates | Negotiated rates that may reflect provider market power and high commercial prices | Transparent, regulated fee schedule designed to provide fair but not excessive payment |
| Network Composition | Proprietary provider networks | Broad network tied to Medicare participation, with potential Medicaid participation requirements |
| Utilization Management | Prior authorization and other management tools may create administrative burden | Coverage standards based on accepted clinical guidelines with streamlined processes |
| Claims Processing | Processes vary and may create administrative complexity | Transparent claims procedures with interoperability and prompt-payment standards |
| Employer Flexibility | Services bundled according to contract terms | Employers can select services à la carte and retain control over plan design |
| Plan Member Impact | Potential exposure to higher costs and restrictive utilization management | Potentially lower out-of-pocket costs, broader provider access, and fewer administrative barriers |
| Oversight | Primarily corporate governance and regulatory oversight | Public oversight, auditing, and transparency requirements |
Source: Authors’ analysis.
Fair Pay, Fair Play For Employers
The FP2 TPA would provide self-funded health plans with a new choice when they shop for a TPA. Unlike the current dominant insurer TPAs, the FP2 TPA would offer “fair pay” prices on services, with “fair play” terms.
For participating employers, the FP2 TPA would charge a flat, fully transparent PMPM fee schedule based on the reasonable costs of doing business. The FP2 TPA would not engage in spread pricing or collect “savings” fees or employ other exploitive practices. Employers could pick the services they want à la carte, with fees scaled to the resources required. For example, employers could use the FP2 TPA to help with enrollment and eligibility or data reporting and analytics, while others may keep these functions in-house or use other vendors.
In the spirit of “fair play,” the FP2 would give employers full access to deidentified claims and encounter data, and other information it captures. No limits on data access and use would apply, besides those clearly delineated or required by law to protect the privacy of plan members. Provider participation rules would be set in statute and not subject to negotiation; accordingly, providers could not impose gag clauses, hidden terms, or anticompetitive clauses on the FP2 TPA. At the same time, employers that choose to contract with the FP2 TPA would retain control over critical plan decisions, including setting employee contribution levels, determining benefit coverage, and designing cost sharing. Indeed, free from anti-steering and -tiering clauses, employers could implement benefit designs that direct their members to high-value providers.
Fair Pay, Fair Play For Providers
The FP2 TPA would adopt a “fair pay” fee schedule and “fair play” coverage criteria and claims processing procedures. These steps would minimize provider monopoly power—and the multitude of harms consolidated markets cause—for the plans it administers and reduce provider administrative burden.
The FP2 TPA would create and maintain a fair provider fee schedule that offers adequate, but not excessive, payment levels. Specifically, the FP2 TPA’s fee schedule should result in lower aggregate spending for employers by eliminating the above-average rates consolidated health systems and other corporate-backed providers command. Simultaneously, the FP2 TPA could pay more than typical commercial market rates for certain services or provider types where justified, such as primary care. The FP2 TPA must engage in a transparent process with protections to minimize undue industry influence when crafting and updating its fee schedule. Policy makers should also establish reporting systems and analytical tools that allow the FP2 TPA (or an advisory body akin to the Medicare Payment Advisory Commission) to regularly evaluate access, costs, and other metrics to inform payment updates.
Even if the FP2 TPA’s payment rates generally exceed Medicare rates, some providers—particularly those with significant market power to demand the highest prices in the commercial market—may want to opt out. To ensure that an adequate number and mix of providers accept the FP2 TPA’s rates in full, participation in the FP2 TPA’s network must be a condition of participation in Medicare. Policy makers could also make Medicaid payment contingent on participation in the FP2 TPA to ensure adequate participation of pediatricians, children’s hospitals, and any other provider types that often opt out of Medicare, given the populations they serve.
The FP2 TPA also would offer providers “fair play” by establishing reasonable claims processing and coverage rules to limit provider burden. Unlike private TPAs, the FP2 TPA would have no incentive to use onerous utilization management to both balance excessive provider pricing and generate revenue opportunities for themselves or their affiliates. The FP2 TPA would, instead, center its coverage criteria on generally accepted clinical care standards and establish transparent claims processes, including federal interoperability standards and prior authorization rules. The FP2 TPA would also follow prompt payment standards to reimburse providers on a reasonable schedule and mitigate concerns that payers profit by strategically delaying provider reimbursements. To prevent abuse, Congress could create an investigative division within the FP2 TPA to monitor aggregate use levels and billing practices. This division could recommend coverage policy updates and, when necessary, make referrals to—and potentially co-prosecute cases of fraud with—appropriate authorities.
In establishing the FP2 TPA’s fair pay, fair play provider terms, Congress should look to the Medicare program. The FP2 TPA will surely need to adapt Medicare’s framework to meet the needs of the commercial market and to address Medicare’s existing shortcomings. Nonetheless, the FP2 TPA should leverage Medicare’s efficiencies and expertise when possible.
Fair Pay, Fair Play For Plan Members
Plan members would also directly and indirectly benefit from the FP2 TPA’s fair pay, fair play policies.
“Fair pay” provider reimbursement rates would likely directly reduce a plan member’s out-of-pocket costs for many services where the plan member’s contribution is tied to the rate of payment, including high-cost hospital care subject to deductibles, coinsurance, or both. To the extent the FP2 TPA institutes other payment and delivery reforms, plan members would benefit from the additional savings generated. For example, if the FP2 TPA adopted site-neutral payment policies, patients would be protected from excessive outpatient facility fees that are increasingly common in the commercial market. Furthermore, to the extent that employers’ plan spending goes down, experts posit that employers are likely to pass the savings to workers through lower premiums, reduced cost sharing, more generous benefits and coverage, and/or higher wages.
The “fair play” components of the FP2 TPA would promote broader access to care for plan members. Given that Medicare is the most comprehensive network in the nation, as nearly all nonpediatric providers accept Medicare patients, plan members’ network would become the Medicare network. With mandated Medicaid provider participation as well, this would minimize gaps within the FP2 TPA’s network to include providers that opt out of Medicare, such as pediatricians. With the breadth of this network, plan members would experience minimal, if any, service disruptions, and their preferred providers would almost certainly remain in-network. Additionally, the FP2 TPA’s use of straightforward claims processing and clinically grounded coverage rules would result in less frequent exposure to restrictive utilization management policies.
Looking Forward To Market Disruption
If this policy moves forward, significant policy decisions remain to be resolved. Whatever choices are made, the FP2 TPA offers an opportunity to introduce a fair plan administrator into the commercial market. Both self-funded employers and plan members could benefit financially from the savings generated by at-cost administrative services and lower aggregate spending. Total savings levels would vary across plans as spending does today, with greater savings more likely for employers and plan members in more consolidated health care markets where commercial prices are highest. Participating employers would also face significantly less stress and hassle compared to those that continue to navigate the complex, opaque private TPA market, while plan members could access a broad network with minimal prior authorization requirements.
This proposal is sure to face steep opposition from moneyed industry interests, as does any reform to rein in spending. Insurer TPAs are likely to argue that the provider participation rules give the FP2 TPA an unfair advantage––but unfair to whom? Surely not the US people and businesses that currently subsidize excessive provider prices and corporate profits. Yet, even taking the argument at face value, the FP2 TPA could unleash a much-needed disruptive force into a stagnant market. The FP2 TPA could, for instance, make independent TPAs more competitive. These entities, as well as the current dominant TPAs, could continue to develop low-cost, narrow networks or innovative quality-focused products, while employers leverage the FP2 TPA, rather than large insurer TPAs, as a wrap network. Independent health care providers and smaller, more financially vulnerable hospitals may also benefit from the entrance of a competitive market participant that will offer fair pay on fair play terms.
Note 1
Pharmacy benefit managers provide similar services for pharmaceutical benefits. This proposal focuses entirely on medical benefit though, and thus exclusively discusses third-party administrators.
Authors’ Note
The authors are employees of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy. Their time and research related to this article was funded by Arnold Ventures.
Christine H. Monahan, Kennah Watts, Karen Handorf, and Kevin W. Lucia “The Fair Pay, Fair Play TPA: A Proposal To Disrupt The Market For Health Plan Administration” August 7, 2026, https://www.healthaffairs.org/content/forefront/fair-pay-fair-play-tpa-proposal-disrupt-market-health-plan-administration. Copyright © 2026 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.