narayan
A recent DCIIA/TRAU study among 18 TPA senior executives registered to attend the 2026 TRAU TPA RoundTable and Think Tank described a rapidly evolving TPA industry. In the interviews, one simple question was asked: What keeps you up at night when you consider the opportunities and threats to the TPA industry, and your firm, specifically? Collectively, the TPA executives described a collection of external and internal forces that are affecting their internal processes, and more importantly, could threaten their existence if they don’t evolve—rapidly.
A Rapidly Evolving Industry: Driving Forces
The group reached consensus that the expected tsunami of new plans (either from conversion of state-mandated plans or new plan formation due to regulatory changes) is already here. This is viewed as a tailwind, certainly. But new clients’ and existing clients’ service expectations are increasing and/or changing. They are expecting greater accuracy, speed and more consultative services than what TPAs have traditionally provided. Overlaying increased expectations is fee compression and fee sensitivity. Essentially, TPAs are going to have to do more without raising overhead through efficiency gains. However, realizing the opportunity presented by the tsunami of new plans will require process changes.
A second (but no less important) external force is a changing labor market. The TPA industry has traditionally been labor-intensive. Finding trained or high-potential talent is becoming more difficult. Younger generations are not as interested in the sometimes, tedious work of a TPA. Wage expectations of younger workers are often higher than the reality of industry wages. Exacerbating this problem is “age-out.”: Boomers are retiring and taking their expertise and commitment to the TPA industry with them.
Technology is Enabling a Radical Paradigm Shift
All of these forces will require technological evolution or perhaps revolution. TPAs are looking to technology and AI as the solution. That is, technology, and particularly AI, is enabling a significant and necessary change in the role of administrators. TPAs agreed, to survive, they need to automate the “button pushing” and bring staff to a higher level of thinking—a consultative mentality. Repetitive tasks must now be performed with AI. According to TPAs, automation does not change the outcome but changes the process of getting the outcome.
But TPAs are challenged by the velocity of technological change and the number of vendors promising solutions. TPAs need to determine which technology paths are best for them before they commit to a game-changing approach.
Downstream Impact
Process changes do not change outcomes, but they do have a downstream impact. Specifically, the TPA labor profile is changing as the jobs change:
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More client-satisfaction, consulting, value-add focused
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Capable of building relationships with clients
Furthermore, maintaining employee satisfaction among these new workers is becoming more of a factor. TPAs must give employees the tools they need to meet their changing roles and growing client needs.
Will Jobs Be Eliminated?
There are two schools of thought on this issue. One school says TPAs are focusing on making employees more efficient, not replacing them. Additionally, a different type of employee will be needed for the things that require the human touch. The other school of thought is TPAs should only have sales and client service people, and no administrators. In both cases, technology and AI are seen as the solution.
What Does the Future Look Like?
All of these forces, especially the cost and rapidly changing technology, are driving some growth-minded TPAs toward consolidation. Several TPA aggregators attended the roundtable. For lifestyle TPAs (i.e., not focused on growing) these factors may be pushing them toward extinction. Finally, the issue was raised concerning the possibility that recordkeepers may perform (more) TPA functions in-house. This issue and all the others raised in the pre-event interviews and roundtable discussions will be reexamined when the TPA Roundtable convenes a year from now.
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