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Third Party Administrator (TPA) in Health Insurance

TPA in Health Insurance
January 16, 2024


In the hours of a medical emergency, it becomes very difficult for a policyholder to reliably file for claims or follow complicated procedures. During such challenging times, TPAs or Third Party Administrators are very helpful for both health insurance providers and policyholders, starting from initial formalities to claim settlements. 

Read along to learn more about TPA in health insurance, roles and responsibilities, benefits, risk factors and much more.

What Is a TPA?

A Third Party Administrator is an entity that helps insurance companies in policy management and claim handling. TPAs are companies registered under the Insurance Regulator and Development Authority of India Regulations, 2016, to provide a variety of health services to insurers. 

Primarily third-party administrators assist insurance companies in handling insurance policies and managing claims raised by policyholders. They also take responsibility for the pre-insurance screening of applicants and complete the formalities involved with hospitalisation coverage. 

A TPA acts as an intermediary between policyholders and an insurance company. When a policyholder registers an insurance claim during hospitalisation, it is the Third Party Administrator in health insurance that assists you during the period of claim processing. In short, these entities engage with insurance providers, hospitals and policyholders to ensure seamless claims processing. 

Why TPA for Health Insurance?

An emergency such as the hospitalisation of a dear one can make life tough both emotionally and financially. Individuals with health insurance policies can still breathe a sigh of relief but even then it can be difficult to complete all necessary formalities for filing claims. 

An individual without a policy actually feels the burden.

As soon as an individual who is covered under a health policy is admitted to a hospital, an intimation is immediately sent to the TPA agent. Following this, the person makes all necessary arrangements to process the required formalities on behalf of the insurance company and policyholder.

Insurance companies engage Third Party Administrators to ensure they are able to deliver the benefits they have promised to policyholders. Given the huge number of claims filed in India, the services of TPAs are often needed by insurers to provide efficient claim processing. 

Role of TPA in Health Insurance

Here are some of the roles and responsibilities of a third-party administrator:

  • Issuance of Health Cards to the Policyholder:

    Upon issuance of each policy, a validation is conducted, where an authorised health card is issued to policyholders. It contains essential information, such as the policy number, which allows policyholders to avail cashless treatment at a network hospital.
  • Ensuring Smooth Claim Settlement:

    It is also the prime responsibility of the TPA to check all the submitted documents backing the claim. It also has the right to ask for additional documents to check the authenticity of the documents.
  • Arranging Other Services

    TPA in health insurance also plays a crucial role in arranging other services such as ambulances, wellbeing programs, customer service, etc. They may even provide underwriting support to the insurer. 
  • Helpline Facility

    As a policyholder, you can avail 24x7 helpline and customer services from any part of the world.
  • Strengthening the Hospital Networks

    It is also one of the prime responsibilities of TPAs to maintain communication with network hospitals. This allows you to quickly arrange a hospital visit with the best available facilities on a cashless basis.

How Does TPA in Health Insurance Work?

Primarily there are two ways of processing and settling a health insurance claim namely: cashless method and reimbursement method. Here is how claim settlement with a TPA in health insurance works in these two scenarios:

Reimbursement Method:

  1. In case if you avail hospitalisation services from any non-network hospitals, you will have to make upfront payments for your treatment.

  2. You will have to carefully preserve all your medical bills, receipts, prescriptions and other relevant documents in order to provide valid support for the claim raised.

  3. Now, after conducting a check of all the submitted documents, the TPA will then forward the claim to the concerned insurance company.

  4. Upon approval of the claim, the TPA will then reimburse the entire amount directly through a bank transfer.

Cashless Treatment: 

  1. To avail a cashless treatment, you have to get hospitalised at one of the insurer’s network hospitals.

  2. The hospitals will then forward the treatment costs and details to the TPA. The TPA will then verify the policyholder’s eligibility and coverage of the policy offered to the patient and inform him/her about what will be covered. 

  3. If everything goes fine, the TPA will issue a pre-authorisation to the concerned hospital where the policyholder can avail hospitalisation services without making any upfront payment.

  4. The TPA will then settle the hospital dues directly on behalf of the insurance company.

Advantages of Third-Party Administrators in Health Insurance for Policyholders

There are several benefits that a TPA in health insurance provides to the policyholders which are as follows:

  • Guidance on appropriate documentation

  • Offering support throughout hospitalisation

  • Streamlining the cashless claims settlement process

  • Providing round-the-clock customer support

  • Simplifying of claim settlement process

  • Issuing ID cards to policyholders or patients

  • Providing value-added services preventive check-ups, wellness programs, second opinion services, etc. 

How Is TPA Helpful in Claiming Benefits?

Raising health insurance claims and getting them approved can become a bit of a hassle and might seem complicated and time-consuming, especially for a person getting hospitalised. Here a Third-Party Administrator or a TPA plays a crucial role in claiming benefits of health insurance

Moreover, it acts as an intermediary between the hospital and the insurance company. They are responsible for possessing and settling health insurance claims efficiently.

What Is the Difference between TPA and Insurance Providers?

Insurance providers are the insurance companies who offer health insurance coverage to the policyholders and in return receive a fixed amount of premium. It not only offers health insurance services to individuals but also to groups, families etc.

On the other hand, TPA in health insurance primarily acts as an intermediary between insurance companies and policyholders. Responsibilities of a Third-Party Administrator include providing smooth and hassle-free claim and settlement processing, management of premium payments and effective customer care. These entities serve as an administrative foundation in the Indian health insurance industry.

What Is the Need for Third Party Administrators?

Listed below are some of the changes that a Third-Party Administrator can bring into the industry, according to industry experts:

  • Handling a massive volume of claims efficiently

  • Implementation of a new management system

  • Enhanced standardisation of procedures and due diligence

  • Expansion of the knowledge base in healthcare services

  • Enhanced efficiency and quality in service delivery

  • Increased reach of health insurance

  • Facilitation of lower insurance premiums

  • Cost and expenditure reduction

  • Establishment of protocols to prevent unnecessary delays and streamline investigations

What Is the Process of Cancelling TPA in Health Insurance?

If you feel like cancelling a TPA’s services and want to switch to a different one, you can do it by following the steps given below:

Step 1: Firstly, contact your insurance provider via. email or call.

Step 2: Consider sharing UID (unique ID) and policy details.

Step 3: Then, you may have to explain the reason for TPA cancellation.

Step 4: Once the insurance provider approves your request, you will have to select another TPA from the provided list.

What Are the Risks Involved with TPA?

There are certain risk factors associated with Third Party Administrators for individual or family health insurance plans. We have witnessed that certain TPA agents became fraud sources leading to financial losses for both policyholders and insurance companies. 

To avoid such risks, insurance companies must carry out certain measures such as regular audits and risk management controls on their TPAs to prevent fraudulent activities.

Moreover, a Third Party Administrator in health insurance must also essentially comply with the regulatory requirements and maintain updated accurate records and deliver customer service of the highest quality. 

To sum up, Third Party Administrators or TPAs are intermediaries registered under IRDAI Regulations, 2016 to provide claim processing support to insurers. These entities streamline the process of health insurance claim processing and settlement helping both insurance providers and policyholders.

Frequently Asked Questions

1. What does a TPA do in insurance?

TPA primarily acts as an intermediary between an insurer and policyholders. It is responsible for carrying out responsibilities like processing and settlement of claims, issuing ID cards to the policyholders and much more.

2. Which TPA is best for health insurance?

There are numerous TPA service providers available in the market. There is no such thing as the best TPA as it varies from person to person based on their requirements. Hence, one should check all records of a TPA from the IRDA website before choosing a health insurance policy. 

3. Does TPA in health insurance charge money?

No, TPAs or Third Party Administrators do not charge any kind of fees from policyholders for the service.

4. What kind of individuals are there in the team of TPA?

A TPA team is composed of professional experts such as legal experts, doctors, insurance consultants, IT professionals, etc.

5. Who hires the TPA?

Usually, an insurance company hires a TPA to streamline the process of claim processing and settlement.

ARN - MC/01/24/7456

Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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