When you are seeking a health insurance policy, you often have a few significant concerns surrounding one single topic — claim settlement. Will it be resolved quickly? Will it be as hassle-free as the insurer claims? Will your claim get settled in full?

But sometimes, insurers look towards a third party to process these claims, banking on the age-old concept – outsourcing only improves business processes. While this may speed up the process, it also introduces another element to the supply chain. Does this bode well for policyholders and insurers? Let’s explore it in detail.

What is a Third-Party Administrators TPA?

Imagine a middleman specialising in handling these routine tasks smoothly or managing claims. This is precisely what a Third-Party Administrator, or TPA, is.

They are a link between the insurer and the insured. They handle day-to-day operations such as claims processing, network management, policy issuance, and, most importantly, customer service on behalf of the insurer.

In a nutshell, they streamline the administrative processes involved in managing these tasks.

This is one reason why PSUs such as Oriental Insurance and New India Assurance use Third-Party Administrators.

Some private insurers have also been using in-house claim settlement teams for quite some time. This further enhances the claim settlement process because both teams fall under the same management.

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Top Health Insurers that use Third Party Administrators

Across the industry, you can find many health insurance providers that bank on TPAs to lighten the load of the claim settlement process. Each insurer can tie up with different TPAs to ensure they have the maximum reach for their policyholders.

Here are a few Insurers and the TPAs that they use:

  • New India Assurance: Health Insurance TPA of India Ltd, Raksha Health Insurance TPA Pvt Ltd, Vipul Medcorp Insurance TPA Pvt Ltd, Medi Assist Insurance TPA Pvt Ltd, etc
  • Oriental Insurance: Vidal Health Insurance TPA, Raksha Health Insurance TPA, Medi Assist Insurance TPA Pvt Ltd, HERITAGE Health Insurance TPA Pvt Ltd, ERICSON Insurance TPA Pvt Ltd, etc
  • National Insurance: Vipul Medcorp Insurance TPA Pvt Ltd, United Healthcare Parekh TPA Pvt Ltd, Focus Health Services TPA Pvt. Ltd, Safeway TPA Services Pvt Ltd, Alankit Healthcare TPA Ltd, etc
  • United India: Family Health Plan Insurance TPA Limited, Health India Insurance TPA Services Pvt Ltd, Vipul Medcorp TPA Pvt Ltd, Medsave Health Insurance TPA Ltd, Medvantage Insurance TPA Private Limited, etc

On the other hand, a majority of the top-notch health insurer players in the market prefer to keep an in-house team to settle their claims. While this might mean they have an additional team to keep on their payroll, it is reassuring for their policyholders since it adds to the provider's transparency.

Now, the question is, is it true that the presence of a Third Party Administrator to streamline the claim settlement process can be all bad and no good?

Let’s take a quick look at its pros and cons to understand better whether you should steer clear of providers with TPAs or if you can still consider them an option when seeking a top-notch health insurance provider.

Should you opt for an insurer that uses a Third Party Administrator?

Whether or not you should opt for an insurer that uses a TPA boils down to two main factors. They are:

  • The TPA’s Track Record - Ensure that the TPA manages a robust network of healthcare providers and has a good history of helping settle genuine claims without hassle.
  • The Insurer’s Reputation - While TPA is a crucial factor that needs focus, it isn’t the only one when choosing an insurer. As a policyholder, you must also look into the brand’s Claim Settlement Ratio, Incurred Claim Ratio, complaint volume, and the number of network hospitals involved.

With that said, let’s talk about the advantages and disadvantages in detail now!

Advantages of using TPAs

  • Expertise: Outsourcing, more often than not, helps improve claims processing efficiency and customer service.
  • Access to a broader network: TPAs usually have tie-ups with several hospitals and healthcare providers, which policyholders can use to make cashless claims.
  • Cost efficiency: TPAs help insurers settle claims at a lower cost.
  • Lower premiums: This improved efficiency for the insurer may ultimately lead to lower premiums for the customer.

Disadvantages of using TPAs

Some significant issues for insurers and policyholders stem from one major factor – the supply chain has become longer when TPAs are involved. This gives rise to two critical problems:

  • Dependency on the TPA: Since the insurer is outsourcing specific vital processes, they may become reliant on the TPA for these tasks.
  • Potential for communication issues: Since this is a longer supply chain, communication issues may be increased, and the policyholders may not have direct contact with their insurance provider. Errors in administrative tasks by the TPA could lead to slight delays or inaccuracies in claims settlement.

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Conclusion

When buying an insurance plan, you look at the three primary metrics — CSR, ICR, and Volume of Claims. Analysing these metrics gives us a broad overview of how the insurer settles claims. While there are advantages and disadvantages to using TPAs, insurers with and without TPAs are doing equally well. Even top-notch players that bank on TPAs are doing well in terms of company metrics and the policies themselves.

This raises the question of whether using TPAs truly improves the overall quality and effectiveness of claims settlement. While the TPA itself cannot sway your decision to choose an insurer and a policy, it is important to look into the insurer's credibility for the past three years and compare it with the industry average. This determines whether the insurer is worthy of being approached for a policy.