What is an insurance TPA?

A TPA, or Third Party Administrator, is an independent organization that works on behalf of insurance companies. It’s not directly part of the insurance company but serves as an intermediary. In this article, we’ll explore what an insurance TPA is, their roles and functions in health insurance, the total number of TPAs approved by the IRDAI (the insurance regulator), and the pros and cons of choosing a health insurance policy with a TPA. Whether you already have or are considering a health insurance policy with a TPA, this article will help clear up any confusion and guide you in selecting the right TPA.

Third party administrator(TPA) in health insurance

Insurance companies that offer health insurance handle claims in two ways. They either have their own in-house team, which includes doctors, insurance experts, and legal specialists, or they outsource the claims processing to a Third Party Administrator (TPA). TPAs are independent organizations, approved by the IRDAI, that have experts in medical and health insurance matters, and they process claims on behalf of the insurance company.

Typically, private insurance companies like HDFC Ergo, Star Health, Niva Bupa, and ICICI Lombard have in-house teams to manage claims, especially for retail health insurance policies. Retail health insurance refers to policies purchased by individuals or families. Group Medical Coverage (GMC), on the other hand, is when an organization buys a health insurance policy for its members, like SBI Bank purchasing GMC for its employees. While private health insurers usually manage claims internally, they might engage a TPA for GMC policies if the client requests it.

In contrast, Public Sector General Insurance Companies (PSGICs) do not have in-house claims teams and rely entirely on TPAs to handle all health insurance claims, both for retail and GMC policies. Currently, there are four PSGICs: National Insurance, Oriental Insurance, New India Assurance, and United Insurance.

So, if you’re buying a health insurance policy for yourself or your family from a private insurer, it’s likely that the company’s own team will handle your claims. However, if you’re purchasing from a PSGIC or your employer provides health insurance through a PSGIC, your claims will be processed by a TPA, not directly by the insurance company.

Role and functions of TPAs

TPAs don’t just handle health insurance policies—they also manage hospitalization claims for personal accident and travel policies, whether domestic or international. They can even process claims for life insurance policies if those policies cover hospitalisation.

However, TPAs can’t directly pay claims to policyholders or reject health insurance claims on their own. They must get approval from the insurance company before rejecting a claim, and the insurer is responsible for delivering the rejection notice to the policyholder. According to the latest IRDAI guidelines, even insurance companies can’t arbitrarily reject a claim. Every rejected claim must be reviewed by a Claims Review Committee (CRC) before the decision is communicated to the policyholder.

Insurance companies can work with multiple TPAs for processing claims, and TPAs can also partner with multiple insurers—there’s no regulatory limit on these arrangements.

Policyholders can choose from the TPAs attached to insurance company office. For example, if you’re buying health insurance from the Bangalore office of New India Assurance, and they have HITPA, MediAssist, and Paramount TPAs attached to that office, you can select which TPA will service your policy.

That said, insurance companies have the flexibility to change or terminate their TPA services or even decide not to use a TPA in the future. However, they are required to notify policyholders in advance of such changes.

IRDAI approved TPAs in India

For a TPA to operate in India, it needs to be licensed by the insurance regulator, IRDAI. The registration, functioning, and roles of TPAs are governed by the regulations set by IRDAI. As of now, there are 19 TPAs in India that are IRDAI approved

• Medi Assist
• MD India
• Paramount Health Services
• Heritage
• Family Health Plan Insurance TPA Limited
• Raksha (now merged with Mediassist)
• Vidal
• Volo ( Formerly East West Assist)
• Medsave
• Genins India
• Health India
• Good Health
• Park Mediclaim
• Safeway
• Ericson
• Health Insurance TPA of India Limited (HITPA)
• Vision Digital
• Link-K
• AKNA Health

Is opting for a policy with a TPA a wise choice?

You have probably seen ads where insurance companies promise quick claim settlement due to in-house claim settlement process and no involvement of TPAs. These claims sound great at first, but they have their pros and cons.

Benefits of in-house claim settlement

When an insurance company manages claims directly, things usually move faster because you only deal with the hospital and the insurance company. In contrast, if a third-party administrator (TPA) is involved, you might have to handle three different parties: the hospital, the TPA, and sometimes the insurance company itself, which can lead to delays and confusion.

TPAs can sometimes cause misunderstandings and confusion about what’s covered by your policy or the status of your claim. The claim process is more streamlined with in-house settlement because the insurance company has direct control over the entire process, leading to greater consistency.

Benefits of policy with TPA

When an insurance company both sells health insurance and handles the entire claim process, there is a risk that they might be biased in reducing claim payouts to protect their profits. Let’s understand this with an example: Suppose ABC Insurance Ltd. sells health insurance policies and collects ₹100 crores from them in a financial year. However, during the same financial year, a pandemic occurs, leading to a large number of claims under these policies. To avoid taking a financial hit, the company might make arbitrary deductions to claims or even deny them outright. This actually happened during the COVID-19 pandemic when some insurance companies were accused of rejecting a significant number of claims.

On the other hand, when a TPA (Third-Party Administrator) acts as a claim processor, they are regulated by the IRDAI (Insurance Regulatory and Development Authority of India), which helps ensure that the claim process is fair and less influenced by the insurance company’s financial concerns. This makes the settlement process more independent and impartial compared to when the insurance company handles it all in-house.

How to chose a TPA for your health insurance policy?

If you have decided to buy a health insurance policy that involves a TPA, you might feel uncertain about choosing the right one to handle your claims. Here are a few simple tips to help you decide, which you can easily check by visiting the TPA’s website.

First, see if the TPA has a physical office in your city or at least in a nearby city. It is generally better to choose a TPA with a local office rather than one that only offers digital services and has offices far away. A local presence can make it easier to resolve issues quickly.

Next, check whether the TPA has the major hospitals in your city, especially the larger ones that offer specialized care, in its network. This will ensure you have good options for treatment when you need it.

Lastly, consider choosing a larger TPA over a smaller one. Bigger TPAs usually have a solid reputation, well-established claim settlement procedures, and are more likely to follow regulatory guidelines.

I hope this clears up the confusion about whether to choose a policy with a TPA or one with in-house claim settlement.