What is TPA & How does it work

Third Party Administrator is an organisation or an agency that is licensed by the IRDA to review and process both retail and corporate insurance policies apart from executing cashless benefits as an outsourced entity of an insurance company. An insurance company can choose to hire an in-house team for claim processing or rely on a TPA for claim processing and settlement. But, before we delve deeper into what is a TPA, it is important to understand how the insurance industry evolved and why the need for TPA was created.

What Created the Need for TPAs in the Insurance Industry?

Health insurance is a complicated product that is created to share the unexpected financial loss of an individual incurred due to the expenses of hospitalisation. But earlier, health insurance entailed the settlement of the hospital bill directly by the insured himself and this was followed by a reimbursement claim. This process was tedious and time-consuming so to make the product more convenient for the consumer insurance companies came up with the model of hospital network. As the sector witnessed growth, insurance companies were able to unlock the purchasing power of the policyholder with cashless benefits. But now, give the massive scale and complex nature of operations, insurance companies needed specialized players to oversee the execution of cashless claims. So the IRDA initiated cashless hospitalisation through Third Party Administration services in 2002 for processing health insurance claims. Third Party Administrator Services were employed to verify and validate the admissibility of claims. With a TPA, insurance companies could fast track the entire cross-referencing of factual data and physical verification of documents. TPAs also introduced the use of advanced technology for the processing of claims and brought about transparency in the claim process

Who is TPA?

TPA is short for third party administrator. A TPA is an intermediary firm between the insurance company and the insured, and has a license from the IRDA. A TPA knows all the aspects of the insurance industry and provides assistance to the insurer with claim processing and settlement.

How Does the TPA Work?

When a policyholder needs medical treatment, he/she needs to contact the TPA of the insurance company. The TPA will then assist the insured with the claim process. When it is time for discharge, all the bills and receipts will be submitted to the TPA for payment. The TPA will then examine the medical bills and verify them against the terms of the insurance policy. Once all the documents and medical bills have been verified and approved, the medical costs will be reimbursed or settled directly by the company.

What is the need for TPA?

During medical claims, the TPA will facilitate timely claim processing. The TPA will accept the intimation, administer the terms and decide to either reject the medical claim or pass it. This includes:

  • Accepting Intimations
  • Approving Cashless Claims
  • Reimbursing Claims

The TPA is responsible for reviewing the request for medical treatment and confirming if it is medically necessary and covered by the plan.

The TPA also manages the operations of the insurance company’s healthcare provider network for all insured members while helping them make a cost-effective and convenient choice.

The TPA facilitates the enrolment and generates the ID card against your health insurance policy so you can easily avail all the medical services without any hassles.

 In case of cashless claims, they will collect all the documents, examine the policy terms and pass the medical claim.