What is a Third Party Administrator (TPA) in Health Insurance & its Role?

5 min read

The benefits of a health insurance policy are abundant, which is now seen apparently by many, thanks to the claims made amid this epidemic. In a time when the cost of treatment is increasing, health insurance plans make it easier for people to worry less about their expenses, but instead, be focused on their overall health and recovery. If you’re an insurance policyholder or looking to buy health insurance, you might have heard of the term “TPA” and would have wondered what it meant and what is TPA in insurance. This article will assist you in understanding the TPA’s definition and its role when it comes to the health insurance industry.

Priya Shenoy, aged 32 years, works for a start-up company as a designer. She got hospitalized for a medical condition and was advised immediate surgery. In the limited time available, she informed the third-party administrator (TPA) of her health insurance company about the planned hospitalization. Fortunately, the hospital in which Priya was supposed to undergo surgery was part of the TPA network, so it was quite easy for her to get cashless approval. In the next 2 days, she underwent surgery with the entire medical expenses being taken care of by the insurer. Because of the health insurance TPA, her admission to the hospital and cashless claims were approved very quickly without any huge requirement of paperwork.

What is Third Party Administrator (TPA)?

The TPA full form is Third party administrator. According to the Insurance Regulatory and Development Authority of India (IRDAI), the third-party administrator can be defined as a business that is appointed to assist a health insurance firm in providing health insurance-related services, such as policy servicing, claims processing, and customer service to policyholders. They can be called as an intermediary for the insurance company and the policyholder, thus ensuring the process of settlement for claims is handled efficiently.

However, there’s also an internal claim department in some insurance companies, established by the insurer, under its wings, to process claims raised by policyholders. In these cases, there isn’t a TPA involved, and all needs that are related to the health insurance policy are dealt with by the insurance company directly.

The Role of Third Party Administrator (TPA)

As increasing numbers of people are brought into the health insurance fold, the task of managing everyone is a major challenge for insurance companies because it demands a lot of manpower. This is where the function of a TPA insurance is vital as a single point of communication for the policyholder who needs his/her concerns addressed. For the insurer, they can concentrate on introducing newer policies that benefit all people. The role of TPA extends in many other areas as well, as explained below:

  1. Claims settlements that are streamlined: The first and foremost obligation of TPA is to ensure that the claims settlements submitted by policyholders are filed on time. If it’s a cashless or reimbursement request, the job of a TPA is huge. Starting with filling up the health insurance claim form to reviewing the documents submitted, verifying the hospital’s acceptance, collecting all relevant evidence for the insurance company, the release of the claim, and so on. The whole process requires streamlining which is handled by the administrator of a third party.
  2. Deliver value-added services: Health insurance protects the insured from increasing medical expenses and assists their claim during a moment of need. With TPA in place, it is possible to contact the policyholder to provide additional value-added services that are based on the selected policy like emergency assistance as well as ambulance pickup, wellness programs, etc., the insured will opt to stick with an insurance company only if they can be assured of benefits that enhance their experience with the policy.
  3. Network hospital relationship: Establishing a proper relationship with hospital administration is necessary to expedite claim processing, quicken the hospitalization process, etc. A third-party administrator along with existing relationships with hospitals can be a huge benefit to the health insurance company as it is one of the major selling points and also a bang for buck deal for the policyholders.
  4. 24/7 customer service: Customer service is the lifeline for any health insurance company, and it is very much required to answer the doubts or queries of policyholders, at any time so that they are happy and satisfied. While the health insurance company may provide a dedicated client support department that can handle any questions regarding policies, TPA will be an extra advantage to any insurer since it can boost their efforts in a variety of ways.

Why TPAs are required in health insurance

While the largest insurance companies have their own in-house claims division, even then sometimes they as well as the new-age insurers collaborate with TPAs to share the work. Here are the important reasons and benefits of choosing a TPA over internal department for settlement of claims.

  • Third-party administrators enjoy a wide presence throughout the nation and can connect millions of policyholders throughout the country. They also have offices in remote regions, where insurer might not even have a physical presence.
  • TPA’s have a customer service team that is able to answer emergency calls made by customers which is an important advantage from the perspective of the policyholder since contacting the insurance company during midnight hours is not possible.
  • A third party administrator is able to gain experience over claim settlements through working with many insurers which helps them become more effective at what they do. This results in streamlined claim processing from the start as opposed to the in-house claim department in an insurance company that may not have the knowledge and expertise that TPA has.

If you’re interested in purchasing an insurance policy for you and your families health needs, we hope this article helped you to know what is a TPA in the insurance industry and how they facilitate claims processing. In the wake of covid19 and the resultant increase in claims, it would have been impossible for the health insurers to manage the claim settlements without the help of the TPA. Also without the right information reaping the best benefits of your insurance policy might not be possible. PayBima’s experts can help better understand the benefits and features of insurance policies for an informed policy buying experience.

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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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