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

Remember playing on the seesaw as a child and then knowing about the physics of the same as an adult? The magic sort of vanished, didn’t it?Unfortunately, that’s what we will be doing today - taking away the magical veil between the insurance providers and the policyholders.

So, why did we start with the image of a seesaw? Here’s why -

That fulcrum is our TPA or Third-Part Administrator - the middleman, the Genie granting you, the policyholders, all the claim and settlement amount you seek!

And such cumbersome financial management would have been impossible without the TPAs, who ensure the proper disbursal of the claimed amount after thorough verifications and validations.

They strike a balance (much like the fulcrum in the seesaw) between maintaining profitability for the insurers and the rightful access to claims for the policyholders.

But are the TPAs all white and no black, or are they a darker shade of grey in the roles they play across the healthcare insurance sector?

Are they a mandate for insurance companies, or do they optionally exist to lighten the financial burden of insurance providers?

Let’s understand these Insurance Genies, a.k.a. the TPAs!

What is a TPA in health insurance?

Third-Party Administrators are usually a person or a company that deals with the claim settlement process and assistance.

The healthcare inflation has led to a majority of the population leaning towards seeking financial assistance and a security net that would offer optimum coverage. Usually, insurers provide the policyholders with two approaches to financial coverage -

1. Cashless:

Insurance providers have tie-ups with multiple hospital networks. In fact, when determining the best health insurance company, you should check the ones that offer the most suitable and wide range of network hospitals.

If a policyholder is hospitalized across one of the partnered hospitals, the said insurer offers complete cashless coverage for the generated bill.

2.  Reimbursement:

Unfortunately, individuals often don’t have access to a partner hospital in case of specific medical emergencies. Such a situation is precisely why opting for health insurance coverage is mandatory. Under such happenstances, a policyholder pays off the initial payment, and the insurance provider offers reimbursement later.

Across these approaches, the claim settlement is handled by an authoritative body called the TPA, which acts as an intermediary. It is under a contract with either the hospital or the insurance companies and offers services that include - negotiation of claims, adjudication, maintaining and keeping records, etc.

In an insurance ecosystem, where the policyholder, the healthcare provider, and the insurer are the main stakeholders, the TPA or the Third Party Administrator are the intermediaries.

What is the role of TPAs in Health Insurance?

Across the last decade, the healthcare industry has witnessed significant inflation that has led to many compromising the quality of healthcare. This was majorly true for those without access to healthcare insurance policies.

However, even for those with insurance coverages, one of the most common concerns is the reimbursement or the claim settlement process and the processing time. While in the cases of partnered hospitals, where the medical charges are paid off by the insurance coverage during the time of patient discharge, for hospitals that do not have tie-ups, the reimbursement plan raises a concern.

The common questions that trouble the policyholders are -

1. “When will I get reimbursed by my insurer?”
2. “Will the insurer reimburse 100% of my bill?”
3. “What kind of complicated process will I be chasing while making a claim?”

-and honestly, these queries and doubts are not without foundation, considering multiple cases where choosing the wrong insurer has often resulted in complications.

But, once you have made the perfect choice for your insurer (how to do so? - here’s where you can learn about the top insurance companies with the highest Claim Settlement Ratio, TPAs come into play, easing your claim process.

And since the healthcare policyholders are the ones that require immediate prioritization, the role of TPAs is specifically crucial across the healthcare insurance sector -

1. Record maintenance for policyholders

Remember when you first availed of your health insurance policy and provided your updated medical and financial history to the insurer? Well, those details and records are maintained by the TPA, which accesses those in cases of claims and settlements.

Also, in case you have opted for health insurance portability, your details are passed on to your new insurer, and subsequently to their TPA.

2.  Issuing health insurance cards

Take a look at your existing health insurance card. You can see -

• The policyholder’s name
• The policy number
• The TPA responsible for your claim settlement
• The dependents for the health insurance policy and more

The card is produced during hospitalization, ensuring that both their TPA and the insurer stay informed about the ongoing treatment procedures and their charges.

To issue this card, the TPA validates all the details of the policyholder - their medical and insurance history.

3.  Ensure dedicated helplines for policyholders

TPAs provide and maintain a 24*7 customer care support helpline number. Here, policyholders can reach out and forward their queries related to partner hospitals, cashless coverages, pending reimbursements and claims, eligibility of their claims, and more.

4.  Hospitalization assistance

Honestly, hospitalization on account of near-fatality cases and emergency surgeries are the worst-case scenarios for anyone. But, unfortunately, even the most decisive of people lose their cool.

During such a stressful period, the TPAs ensure a bit of hand-holding with their emergency, back-end services, payments, etc. It helps one direct their complete attention towards the one being hospitalized and not get stressed out about the financial aspect of the same.

5.  Build a robust and efficient network of hospitals

Let’s say, one fine morning, you suddenly start experiencing chest pains and shooting pains up and down your arm.

One of your family members gets an immediate on-call consult from your physician, who suggests immediate hospitalization because this might indicate a coronary issue.

Would you/your family members look for a partnered hospital 10 km away from your home, or would they go for one the closest?

Again, it’s not just about partnered and non-partnered hospitals (in the case of the latter, you will get a reimbursement of the charges/bills); it’s actually about how many partnered hospitals you have at your disposal.

Because let’s be honest - a cashless claim process is always preferred over the reimbursement option.

So, you would want to opt for an insurer that offers a diverse range of network hospitals, not thinned-out ones. TPAs are instrumental in arranging that pool of network hospitals responsible for offering you a premium healthcare service.

To ensure that the chosen partner hospitals are suitable for the policyholders, the TPAs take into account the following -

• The infrastructure of the hospital
• Their track record
• Available level of automation and computerization
• Medical facilities
• IT services
• Administration and management background

6.  Expedite the claim processing and settlement time

Healthcare is expensive and will only get more expensive, yet it is a priority. Under such circumstances, any financial coverage offered for medical facilities needs to be swiftly activated or reimbursed - only then is the purpose of availing insurance policies sufficed.

However, insurance companies already have a lot on their plate - launching new financial products, ensuring the transparency of the policies by full disclosure to potential policyholders via unbiased insurance advisors, and more.

Such workload might affect the time spent dealing with the claim process and settlement time. To ensure that this doesn’t happen and there is no compromise on the client services, TPAs are appointed, who significantly mitigate the entire processing time.

[Please note that not all insurers appoint TPAs. They rather build their in-house team to handle the claim and settlement process, thereby eradicating the need for any intermediary or middleman.]

7.  Effective assistance during the cashless claim process

In cases where the policyholder gets hospitalized for more than 24 hours in a  partner medical facility, they can avail of the cashless coverage option. In such cases, TPAs play a crucial role by reimbursing the entire medical bill after validating all the relevant documents from the said hospital.

8.  Provision of value-added services for the plans availed

The best insurance providers ensure that the financial aid offered doesn’t just cover the treatment charges but also the additional hospitalization-related expenses. Such value-added services are arranged by the TPAs and comprise -

• Ambulance fare,
• Lifestyle management,
• Well-being programs,
• 24*7 helpline,
• Emergency assistance, etc.

9.  Claim Assistance

The process of claim assistance as carried out by the Third Party Administrators varies based on if the process involves reimbursement or cashless claims -

1. Reimbursement - The TPAs ask policyholders to submit the required documents and bills.
2. Cashless - TPAs reach out directly to their partnered hospital seeking the supporting medical documents for the policyholder in question.

In both these cases, the TPAs validate and cross-check all the details offered and speed up the claim settlement process.

Considering their experience and expertise in the process, they are far more efficient and productive in settling the process sans involving the policyholder or the insurer unless required.

The comprehensive and holistic role that the Third Party Administrators play across the claim and settlement process makes them an integral part of the insurance ecosystem.

However, appointing them is a choice for the insurance providers. Also, there are multiple challenges and limitations to the role played by this authoritative body.

What are the limitations and challenges of TPAs?

TPAs DO NOT have all the power, nor is their role a plain sailing one. More often than not, there is significant chaos and confusion surrounding their role. There have also been talks regarding how TPAs might not be the catalysts in speeding up the settlement process.

Here are a few hurdles in the path of TPAs and the ones they pose in the path of insurers and policyholders. Make sure to check these out before you rely on a TPA from your insurer -

Issues for policyholders/insurers

• Hidden charges: Most insurers and policyholders are unaware of the charges placed for offering the services of TPA on their policies. For the policyholders, this also suggests a hiked premium amount.
• Not always instrumental in time management: In some cases, TPAs do not help speed up the claim and settlement process but rather delay the same. It means the policyholders paying higher premiums are doing so in vain.
• The gap between the insurers and the TPAs: For TPAs to be effective in their role, they have to be trained well enough and brought up as subject experts. However, if they are not trained well, TPAs will never be as effective in helping policyholders and might even mislead them.

Issues for TPAs

• The measure of performance: The IRDAI (Insurance Regulatory and Development Authority)has not put forward any specific parameters to measure the efficiency and performance of the TPAs. This indicates the only way to measure the performance of the members of the body is to oversee their financial performance, not taking into account the client satisfaction with their services.
• Hiring and training challenges: For effective performance and service, the body must appoint doctors, legal experts, hospital managers, etc. However, hiring all these experts and training them for the role is a cumbersome and time-consuming process for the body that also puts a financial strain.

Now that you know the challenges faced by the TPAs and the problems they might pose for you and the insurance company that you are relying on, make sure to choose the best possible TPAs in the market for your policy.

Usually, insurers disclose their TPAs on their website or in the policy sent to you. So, compare and find out about the body dealing with your claim settlement process to ensure a smooth claim plan.

Take a look at the top TPAs available in the health insurance market -

Meet the Industry-Best TPAs for the Healthcare Insurance Sector!

Frequently Asked Questions:

1. Should I choose a health care insurance provider based on their TPAs?

You can choose your insurer based on the TPA that you will be provided. However, do not prioritize this factor while choosing the best insurance company for you.

Choosing your insurer needs to be based on much more important factors that have been included in our guide -  Best health insurance companies in India

2.  How can I know who the TPAs are for my insurance provider?

Usually, any insurer discloses their TPAs either on their official website or via their insurance advisors. However, if they haven’t disclosed them to you, you can request them to let you know about the TPA.

3.  Are TPAs mandatory for an insurer?

No, it is not. At times, insurance providers may have an in-house team that deals with the claim and settlement processes that eradicate the requirement of this middleman, TPA.

4.  Can I cancel my current TPA and switch to a different one? How?

Yes, you can. Here’s how -

STEP 1: Reach out to your insurer by mail or call.

STEP 2: Share your policy details (policy number) with the insurance provider.

STEP 3: Request cancellation of your current TPA by citing them the relevant reasons.

STEP 4: Your insurer will get back to you with either approval or rejection of your request.

STEP 5: If your request is approved, send a request suggesting the name of your preferred TPA.

5.  Who/What is a Health Administration Team (HAT)?

An in-house team tasked with the claim and settlement process for health insurance policyholders is called Health Administration Team (HAT). The team ensures a hassle-free claim settlement process and deals with the grievances of the policyholders.

6.  What is the role of the Third-Party Administrator?

The Third-Party Administrator's authoritative body handles the claim and settlement process across the health insurance sector. It includes -

• Speeding up the reimbursement and claim process
• Resolving issues related to claim eligibility, settlement process, and claim management.
• Offers assistance to the policyholder during hospitalization.
• Ensures smooth cashless coverage for hospitalization of policyholders that lasts more than 24 hours.
• Offers additional value-added services on the offered insurance plan.
• Issues health insurance cards.
• Builds a pool of network hospitals for insurance companies.