IRDA

What is a Third Party Administrator in Health Insurance?

The word “TPA” refers to a third-party administrator who serves as an intermediary between the policyholder and the insurer. It is a business, agency, or other entity that works under the Insurance Regulatory and Development Agency’s (IRDA) licence and offers cashless services to policyholders as well as hassle-free claim processing. Administrators called the third party is referred to as TPA. As the name implies, the third party administrator is a person or an entity. Anyone who helps with the administrative aspects of the services stated in a health insurance contract but who is not the first or second party (not directly involved).

Who is a Third Party Administrator in Health Insurance?

Compared to other general insurance categories like vehicle or travel insurance, the scope of health insurance is significantly greater. Health insurance incorporates a wide range of terminologies due to its broad application. It is likely the cause of why prospective and current policyholders believe that health insurance is complicated. It initially appears to be complicated and confusing. But it is easy to understand if you concentrate on one aspect at a time rather than becoming overwhelmed. For instance, not everyone may be familiar with the administrators for a third party (TPA) in health insurance ideas.

An organisation that is a third party in a health insurance agreement and manages the claim settlement portion of the contract between a policyholder and the insurer is known as a TPA in the health insurance field. The following information can assist you in understanding the concept of TPA.

• In the event of a hospitalisation claim, TPA serves as a link between the insurer and the insured.
• The health insurance provider will choose a third party administrator.
• TPAs manage administrative responsibilities, including handling documents and paying medical bills, which aid in the claim settlement process.
• The Insurance Regulatory and Development Authority of India issues TPA licences.
• To ensure a quick and easy claim settlement procedure, insurers work with TPAs.
• One third party administrator can associate with multiple insurers.

Who can be the Third Party Administrator?

A business may submit a third-party licencing application in accordance with IRDA guidelines^[1]. The licence is granted following the requirements and following proper processes. The third party administrator can then begin collaborating with the insurer to support the policyholder in the claim settlement procedure. The insurance provider need not, however, choose a TPA. The claims management might be handled internally by the insurance company or outsourced to one or more third party administrators.

Health Services by a Third Party Administrator

A business must have a TPA License in order to perform services for a health insurance group. The insurance company and the TPA have a standard format of contract. These are the services that the TPA provides:

• The processing of claims on behalf of policyholders through cashless procedures, claim settlement, or both. This would be in accordance with the regulations that the authority imposed.
• Additionally, Third Party handles hospital insurance claim services. This would also include personal injuries and injuries sustained while travelling.
• Third Party Administrators additionally perform pre-medical tests for insurance claims.
• The TPA also pays for international travel-related medical costs.
• The Third Party also covers health-related issues for policyholders travelling to India under foreign travel insurance policies from foreign insurers. However, the authority’s regulations must be followed while handling overseas insurance and non-insurance claims.
• A health insurer may work with more than one third party administrator to offer policyholders health services.

The need for a TPA licence

The following justifies the requirement for a third party administrator licence.

1. To act in the policyholders’ best interests.
2. To give policyholders effective services.
3. The security of customer data would be guaranteed by having an IRDAI licence.
4. The licencing process contributes to higher governance and due diligence requirements for insurance intermediaries.

Functions of Third Party Administrator in Health Insurance

The following aspects will clarify the function of TPA in Health insurance.

1) Connecting the links

The policyholder is responsible for paying the TPA directly or indirectly whenever there is a hospitalisation claim. The TPA provides the patient with an ID card and a UIN, which aids in the settlement of claims. In order to obtain hospitalisation coverage and handle claims, the TPA serves as a link between the insurance provider and the policyholder.

2) Maintaining Records

The TPA keeps essential documents pertaining to the policyholder when they are admitted as a patient. The data is kept in a dedicated database.

3) Listed hospitals

TPAs are also responsible for tasks connected to hospital empanelment. They determine if the hospitals satisfy the requirements for membership in Network Hospitals (tie-ups for hassle-free claim settlement).

4) Continuous Assistance

Many TPAs offer a 24×7 support system where policyholders can ask questions and quickly receive responses. Such support is made possible with the use of call centres and mobile applications.

5) Settlement of claim 

A TPA plays a crucial part in settlement of Cashless Claims. As the bill is cleared directly between the hospital and the insurance, coordination between these parties is essential when dealing with Cashless Claims. When this occurs, the TPA provides back-end assistance.

6) Additional Services

Some TPAs might also provide the policyholder with extra services like ambulances, extra beds, medicine supplies, etc.

Benefits of third-party administrators

Better service delivery: Having a TPA on board improves the services provided by a health insurance policy. This is because customers now find it simple to cope with the numerous health insurance processes, including tasks like claim settlement, information on network hospitals, cashless treatment, etc., and the simplicity of contacting TPA is beneficial.

Better standardisation: A third party can standardise all processes more effectively if they carry them out with due diligence with their particular skill set and technology. They assist in clearing up customers’ misconceptions about the different steps involved in obtaining health insurance.

Greater reach and penetration: TPAs have also made it possible for health insurance to reach a wider audience. This is a result of the superior services they offer, which help customers understand the intricacies of health insurance with ease. As consumers learn more about the advantages of health insurance, their opinions of the product are also changing.

Although a TPA can manage various healthcare plan requirements, you can frequently choose specialised services to satisfy your demands. For instance, some companies might decide against using stop-loss insurance. Even though your TPA agreement isn’t always all-or-nothing, doing so is frequently more effective.

Difficulties in TPA Services

The following is a list of some of these difficulties:

• In the world of health insurance, there is currently very little knowledge regarding the function of third-party administrators. Additionally, policyholders need to be made aware of the additional cost that insurers charge for using these services.
• Third-party administrators must be thoroughly educated in the administrative process for the process to be effective. If they don’t have enough experience, they might be unable to meet the policyholders’ needs.
• Third-party administrators must also have staff members in order to handle the administrative requirements of health insurance. The services of doctors, management consultants, legal experts, hospital managers, etc., are required for the effective claim processing. A significant problem for a company providing this service is finding all these individuals and ensuring they receive proper training.

Services that a TPA is not permitted to provide

A Third Party Administrator may not provide or carry out the following services:

• Making a payment towards a claim.
• Rejecting the claims.
• Manage service claims that aren’t health insurance-related.
• Solicit customers for insurance directly or through a third party.

Conclusion

In health insurance, a TPA conducts all crucial management tasks. Delivering value-added services, processing claims and settlements, and maintaining records. Because TPAs make it simple and hassle-free for policyholders to obtain money for treatments, they guarantee better and higher-quality healthcare. TPAs not only simplify the process of resolving our claims, but they also broaden our understanding of healthcare services. If used properly, they can easily benefit both party’s insurer and the insured.

Also Read:
Points to check before buying Health Insurance
Importance of Health Insurance Plans: A Complete Guide