Legal Question in Personal Injury in California
An insurance claims tpa administers claims programs for a client for a flat annual fee. Attorneys, health providers, and others are paid out of the trust account the tpa has for their client.
Joe Investigator normally bills the insurance claims third party administrator $100 per hour for cases referred to him (Joe) for investigation of claims by the tpa's clients. Joe has decided to discount his hourly fee to $75.00 per hour for work assigned by the tpa. The tpa pays all the bills for their client out of a trust fund.
Can the tpa bill their client $100 on the discounted investigations and collect $25 an hour? The investigation hourly fee is still $100 to the client, but now, the tpa can realize a profit because of the discount they are receiving, but not passing onto their client.
1 Answer from Attorneys
The answer depends on the contract in issue. If the tpa is offering to handle all costs and work at a flat fee, they are free to find the cheapest, competent work provider they can. Companies often out source part of their work to cheaper vendors but charge their clients at the higher rate. If it is a cost plus contract, then they have to use what the actual costs are in calculating the additional percentage they add on to the billing.
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