What is Third Party Administrator (TPA) in Health Insurance?

Role of Third Party Administrator (TPA) in Health Insurance

Introduction

Third Party Administrator (TPA) is playing a major role in providing support and increasing efficiency of health insurance industry. Thus, it can help in growing the health insurance industry in India to at a fast pace.

What is Third Party Administrator (TPA)?

Overview – TPA

• A Third Party Administrator is an intermediate body that processes insurance claims admissible under the mediclaim policy. In general, these administrators are independent but can also act as an entity belonging to the insurer/s.
• Third-party administrators operate under the license of the Insurance Regulatory and Development Agency (IRDA).
• The concept of TPA has been borrowed from the US. Some minor structural differences have been made in the way TPA is implemented in India so as to ensure the concept remains relevant to India’s needs and current status of the health care industry.
• Over the years, the number of insurers, health policies sold, types of health products and the buyers increased in considerable proportion.
• Ultimately, it got difficult to keep track of work which did not result in quality services. Hence, IRDAI came up with the Third Party Administrators. Since then, a TPA is held responsible for :
  • High quality consistent services
  • Processing voluminous health insurance claims

Objectives of TPA

• There are four key objectives of TPAs :
  1. Manage and investigate the claims
  2. Observe the cashless and reimbursement
  3. Enhance customer experience
  4. Bring in greater efficiency in health insurance claims processing
• As per the regulations of IRDAI, TPA should have its own in-house medical doctor (registered with the medical council of India), hospital managers, legal experts, insurance consultants, information technology professionals, and management consultants.
• The team of these professionals in association with the policyholders streamlines the claim process, ensures that there are no fake claims, restricts unnecessary treatment, thus improving the quality of services. It ultimately leads to the lower insurance premiums.
• TPAs receive fees from the insurance provider which is a percentage of the Premium and is typically 5.5% of the premium amount.

Role of Third Party Administrator (TPA) in Health Insurance

A TPA plays a vital role in the total processing of health insurance claims. In the practical world of health insurance, some of the key roles of a TPA are enlisted in below diagram :

• The TPA issues ID cards to policyholders, which have to be shown to the hospital authorities before availing any cashless hospitalisation services.
• At the time of a claim, a policyholder has to inform the TPA. He will be directed to a hospital the TPA has a tie up with. He can opt for another hospital, but then payment will be a reimbursement.
• TPA issues an authorization letter to the hospital, after which they track the case and at discharge all bills sent to TPAs for payment.
• TPA sends all the documents necessary for consideration of claims, along with bills, to the insurer.

Conclusion

You must always be prepared in advance so as to tackle with any of the adverse situations that may arise in life. Seeking a TPA’s support is one of the key step that empowers a policyholders to overcome a haphazard situation.

Frequently Asked Questions