All third-party administrators (TPAs) operating in Illinois need to purchase an Illinois Third-Party Administrator Bond. it is a type of surety bond that is required by the Illinois Department of Insurance for any entity that administers self-funded health, dental, or vision plans in the state of Illinois. Self-funded plans are those in which the employer or plan sponsor assumes the financial risk for claims instead of purchasing insurance from a carrier. The surety bond serves as a financial guarantee to the public that the TPA will comply with all applicable insurance laws and regulations. The bond also protects policyholders and plan sponsors from financial losses if the TPA fails to perform its contractual obligations, such as administering claims fairly and accurately or remitting premiums to insurance carriers.
The bond amount is determined by the IDOI based on a number of factors, including the size and complexity of the TPA’s business, the number of plans and policyholders it serves, and the amount of premiums it collects. The bond must be maintained for the duration of the TPA’s license.
Here are some examples of TPAs who need to purchase an Illinois Third-Party Administrator Bond:
- Self-insured health plan administrators
- Employee assistance program administrators
- Dental plan administrators
- Vision plan administrators
- Life insurance plan administrators
- Disability insurance plan administrators
- Long-term care insurance plan administrators
Any person or entity that administers insurance plans on behalf of employers or other organizations in Illinois, whether they are licensed or not, is required to purchase a Third-Party Administrator Bond.
How to get an Illinois Third Party Administrator Bond
At Surety1.com we make it easy to obtain this surety bond. Our simple, three step process is:
- Complete the easy to navigate and secure online application. 1
- Review the free, no obligation quote from one of Surety1’s professional surety bond agents, usually within one business day. 2
- Sign some paperwork and pay the bond premium
Once these steps have been completed, the Illinois Third Party Administrator Bond will be shipped to the bond applicant.
1 -The name of the applicant on the surety bond application must match exactly the full legal business name of applicant for the license.
2- Subject to underwriter approval, based on aggregate surety bond exposure, additional underwriting information may be required
The cost of the TPA bond is usually between 1% and 3% of the bond amount, subject to a minimum premium and fees of $150 to$250. Surety1 will shop its many markets to procure the right price at the right terms.
Surety1.com is a service of AssuredPartners one of the largest and fastest growing insurance agencies in the nation. Representing over a dozen surety bond companies, Surety1.com is the premier online provider of surety bonds nationwide since 2003.
What is the TPA bond amount?
The amount of the TPA Bond is based on the size of the plan and the types of services provided by the TPA. The Illinois Department of Insurance requires TPAs to maintain a bond in an amount equal to the greater of 5% of projected contributions and premiums for the forthcoming plan year from Illinois residents, or $50,000, but not to exceed $1,000,000.
To be a licensed TPA in Illinois, you must follow these steps:
- Meet the eligibility requirements. TPAs must be licensed by the Illinois Department of Insurance (DOI). To be eligible for a license, you must:
- Be a corporation, partnership, limited liability company, or other business entity that is organized under the laws of the United States or a state or territory of the United States.
- Have a principal place of business in the United States.
- Be financially sound and have the ability to meet your obligations to plan participants.
- Have a qualified management team with experience in administering self-funded health, dental, or vision plans.
- File an application with the DOI. The application must include information about your business entity, financial condition, management team, and the self-funded plans that you intend to administer. You must also submit a surety bond in the amount of the greater of 5% of projected contributions and premiums for the forthcoming plan year from Illinois residents, or $50,000, but not to exceed $1,000,000.
- Pass a written examination. The DOI requires TPAs to pass a written examination that covers the administration of self-funded health, dental, and vision plans. You can register for the examination on the DOI’s website.
- Pay the licensing fee. The licensing fee is $500.
- Maintain your license. TPAs must renew their licenses every two years. To renew your license, you must pay a renewal fee and submit a report to the DOI that includes information about your business entity, financial condition, management team, and the self-funded plans that you administer.
Once you have completed all of these steps, you will be a licensed TPA in Illinois.