What are TPAs or Third Party Administrators?
TPA or Third Party Administrator (TPA) is a company/agency/organisation holding license from Insurance Regulatory Development Authority (IRDA) to process claims - corporate and retail policies in addition to providing cashless facilities as an outsourcing entity of an insurance company.
TPAs function as an intermediary between the insurance provider and the insured. The stakeholders involved are as follows:
- Insurance companies
- Healthcare providers
Introduced by the IRDA in 2001, TPAs handle various pertinent aspects of insurance as listed below:
- Processing of claims and settlement includes the following:
- Accepting intimations
- Approving cashless claims
- Disbursing the claims
- Utilization review
- Provider network
- Premium collection
- Cashless processing (if and when a policyholder is admitted to a listed hospital of an insurance provider, the latter pays the bill)
- Value added services such as the following:
- Ambulance services
- Specialised consultation
- Availability of beds
- 24-hour toll-free helplines
- Lifestyle management
- Wellbeing programmes
- Medicine supplies
- Health facilities
- Database maintenance
According to experts, providing cashless hospitalization of the insured should be the primary service offered by TPAs. It is important to note that some insurance companies have a separate department which performs the functions of TPA instead of outsourcing it to another entity.
Need for Third Party Administrators:
According to industry observers, TPAs can bring in the following changes:
- Greater efficiency/quality (delivery of services)
- Improved standardisation (procedures and due diligence)
- Increase knowledge base of healthcare services
- New management system
- Greater penetration of health insurance
- Minimize costs/expenditure
- Develop protocols to streamline investigation and avoid unnecessary delays
- Pave way for lower insurance premiums
All the same, there is much discrepancy between the aims and the ground realities of functioning of TPAs. As a result, the jury is still out on the efficacy of TPAs in the growing and complex health insurance sector in the country. The institutionalisation of TPAs, therefore, leaves a lot to be desired.
Revenue model of Third Party Administrators:
There is a view that the organisation and revenue generation model of TPAs will determine the extent of their success. TPA’s major revenue comes in the form of fees or commission on premium, which is standardised by the IRDA. The other sources of revenue of TPAs include the following:
- Benefit management
- Provider network management
- Data management
- Medical management
- Claim administration
According to experts, there are several impediments to the effective functioning of TPAs. Some of the problem areas in the health insurance sector in the country adversely affecting TPA-related services are listed below:
- Information asymmetry
- Weak networking
- Inordinate delay in the issuance of identity cards to the insured
- Lack of strong standardisation procedures in terms of billing
- Under-reporting across hospitals
- Nexus between corporate hospitals and insurance companies (i.e., low claim ratio for individual insurance and high claim ratio for corporate insurance)
- IRDA has not put any strict regulations or mechanisms in place to effectively appraise the performance of TPAs. IRDA, therefore, assesses TPAs based on the latter’s financial performance in terms of policy premium rather than customer satisfaction. There is, therefore, a view that TPAs should be evaluated/accredited on the basis of quality of services provided
- Low awareness about TPAs amongst general public/policyholders. According to reports, many policyholders are unaware of the extra premium charged by insurance companies for TPA services. Likewise, pertinent information related to cashless hospitalization and exclusions listed in insurance policies is not examined by many policyholders.
- Policyholders’ dependence on insurance agents rather than TPAs. In many cases, policyholders do not see TPAs as distinct entities vis-a-vis their insurance agents and intriguingly place more faith in the latter.
- Most hospitals have no substantial evidence to prove that TPAs increased their patient turnover
- Experts point out that TPAs need to invest in developing human capital to improve their delivery of services and rein in costs.
- Inadequate knowledge about the provisions and benefits of TPAs amongst policyholders
- Healthcare providers look for well-trained TPAs to effectively deal with the operational inadequacies in the system. Poorly developed and half-baked protocols and systems instil little confidence amongst stakeholders. TPAs should have several in-house experts such as legal experts, IT professionals, doctors, management consultants and hospital managers among others given that claims management and settlement requires bargaining power and negotiation skills, i.e., combination of technical and management skills
- Hospitals which already have robust delivery mechanisms in place are more likely to pave way for hassle-free claims settlement and other related services offered by TPAs.
- While the primary purpose of outsourcing claims settlement is to minimise the claim period, claims processing, in several cases, is riddled with delays.
- The insured do not have adequate knowledge about empanelled hospitals for cashless services
- Many hospitals also report additional expenditure incurred by them in terms of smooth coordination with TPAs for efficient delivery of services to the policyholders
Some of the Third Party Administrators in India:
- Medi Assist India TPA Pvt. Ltd
- United Healthcare Parekh TPA Pvt. Ltd
- E Meditek (TPA) Services Ltd
- MD India Healthcare (TPA) Services (Pvt.) Ltd
- Family Health Plan (TPA) Ltd
- Focus Healthservices TPA Pvt. Ltd
- Vidal Health TPA Private Limited
- Heritage Health TPA Pvt. Ltd.
- Vipul Med Corp TPA. Pvt. Ltd
- Raksha TPA Pvt. Ltd
- Rothshield Healthcare (TPA) Services Limited
- Dedicated Healthcare Services TPA (India) Private Limited
- Spurthi Meditech TPA Solutions Pvt. Ltd. No.
- Ericson TPA Healthcare Pvt. Ltd
- Sri Gokulam Health Services TPA (P) Ltd
- Safeway TPA Services Pvt. Ltd
GST rate of 18% applicable for all financial services effective July 1, 2017.
Disclaimer: Premiums may vary depending upon factors like age, location and prevailing taxes/GST.