Role Of Third Party Administrators In The Health Insurance Industry

The insurance ecosystem has a number of entities apart from the insurer and the buyer. One such entity is the TPA (Third Party Administrators) which the health insurance owners would be very well versed with.

The TPA plays an important role in the smooth delivery of health insurance services. They act as an intermediary between insurers and health insurance subscribers by processing claims and settling payments.

In the good old days, insurers managed the claim processing and settlement on their own. However, the increase in health insurance customers led to an increase in the burden of work and a decrease in the quality of services. After this, the IRDAI (Insurance Regulatory and Development Authority of India) established TPAs to assist insurers. These bodies are recognised by IRDAI.

TPAs functioning

When a health emergency strikes a family, it could become a major hassle to deal with hospitals and bills. This is where the TPAs come in. If you are covered by health insurance, you would not be required to contact your insurer. 

If you or the family member is required to undergo hospitalisation, the TPA would arrange for cashless treatments wherever possible after it is informed. In case, the treatment is done at a hospital where a cashless facility is not available, then TPA would reimburse the expenses according to policy terms via the insurer.

The TPA also scrutinises the hospital bills and documents for their veracity and helps in the processing of the claim. 

Girish Rao, Chairman and Managing Director, Vidal Health (TPA) says, “ 90 per cent of our pre-authorisations are done within two hours. There would be an exception depending on the complexity of the cases needing more clarification. As far as the claims reimbursement is concerned almost 95 per cent of the claims are reimbursed within five days.”

Apart from this, TPAs also provide value-added services like ambulance, helpline facilities for knowledge sharing and boast a long list of network hospitals where treatment can be done on a cashless basis. 

TPA rule changes

Earlier, health insurers designated a TPA to a customer upon purchase of the policy. But, in 2019, IRDAI brought in few changes to make the service more attractive. The health insurers are now asked to give a list of TPAs to customers from which one can be picked. The customers can change the TPA at the time of renewal. 

If a policyholder does not choose a TPA at the time of purchase, then the insurer is free to allot one to the customer. If an insurer only engages one TPA then no choice would be given to the policyholder.

Another major change the TPA ecosystem witnessed recently was the setting up of internal claims processing teams by insurers in the wake of COVID-19 pandemic and increased number of claims.

Due to the higher demand and need for quick claim settlements, a large number of insurers have their internal teams working on claim settlements. The TPAs do not have the right to approve or reject claims, they are responsible for just processing the claims.

The significant value to both health insurers and policyholders as TPAs are specialist in health insurance processing of pre-authorisation and claims. “We have a very deep understanding of the health insurance process and provide an independent opinion to any claim. We provide all the visibility to all the stakeholders in terms of how the process happened”, adds Rao.

In such a value chain, there is always a little loss of time due to documents sharing between TPAs and insurers, and in seeking approval. Internal teams help insurers avoid this loss of time as they are empowered to reject or approve claims, therefore the processing takes place in a hassle-free manner.