Recently, two state insurance departments took action against third party administrators operating in their respective states based on their failure to be properly licensed as a TPA.  These regulatory actions against unlicensed TPA activity demonstrate the importance for TPAs to be properly licensed, as well as for insurance companies to confirm that the TPAs they are contracted with are duly licensed as a TPA. 

The details of these actions are summarized below.

Tennessee Regulatory Action

According to the Tennessee Insurance Department (“Department”), on or about August 26, 2014, the unlicensed TPA company entered into a contract with an insurer to provide TPA services in the State of Tennessee.

The Department determined the TPA company earned revenues totaling $142,500 from providing third party administrator services to the insurer in Tennessee in 2014, and an additional $342,162 revenues in 2015. 

As a result of the above, the TPA company entered into a Consent Order with the Department, in which it was ordered that:

• The TPA company would cease and desist from conducting unlicensed third party administrator services in the State of Tennessee until it obtained an administrator license in Tennessee.
• The TPA company shall pay civil penalties in the amount of $20,000.
• All persons in any way assisting, aiding, or helping the TPA company operate as an unlicensed TPA shall cease and desist from all such activities in violation of Tennessee insurance law.

North Dakota Regulatory Action

The North Dakota Insurance Department (“Department”) recently entered into a Consent Order with an unlicensed TPA company.  According to the Department, the TPA company did not have a current third party administrator license, and its previous North Dakota third party administrator license expired in May of 2012.

The Department conducted an investigation and determined that the TPA company acted as a TPA for 94,537 insureds in North Dakota without having a valid TPA license in the state.

Pursuant to the Consent Order between the TPA company and the Department, it was ordered that:

• The TPA company agreed to comply with the prohibition against acting as a TPA in the state without a valid North Dakota TPA Certificate of Authority.

The TPA company agreed to pay a $40,000 monetary penalty to the Department.