“TPA” means a Third Party Administrator who, is licensed by the IRDA, and is engaged, for a fee or remuneration, by whatever name called as may be specified in the agreement with an insurance company, for the provision of health services in India.
Right now there are 29 TPA’s in India providing services in the health insurance sector.
Third Party Administrators and Health Insurance in India
Background and Introduction
The Third Party Administrators (TPAs) are licensed by IRDA which undertakes the implementation and administration of Heath Insurance schemes. A TPA acts as nodal agency between the Insurance companies, Insured member and the Hospitals (provider of services) for rendering the right service, at right time, to the right person, at a right price.
The TPAs can contribute largely in transforming the old health insurance mechanism into the newer user friendly, efficient and cost effective instrument, through assisting in designing suitable product of Health Insurance or Self Funded schemes.
The advent of Third Party Administrators (TPAs) is expected to play an important role in health insurance market in ensuring better services to policyholders. In addition, their presence is expected to address the cost and quality issues of the vast private healthcare providers in India.
However, the insurance sector still faces challenge of effectively institutionalizing the services of the TPA. A lot needs to be done in this direction.
The health infrastructure in India is facing daunting challenge of meeting the health goals and complexities merging from the changing disease pattern. The proliferation of various healthcare technologies and increase in cost of care has necessitated the exploration of health financing options to manage problems arising out of increasing healthcare costs.
Health insurance is emerging fast as an important mechanism to finance the healthcare needs of people. Further, the uncertainty of disease of illness is accentuating the need for insurance system that works on the basic principle of pooling of risks of unexpected costs of persons falling ill and needing hospitalization by charging premium from a wider population base of the same community.
However, the complexity of health insurance industry has been much talked about but less understood, especially in Indian scenario. With the advent of Third Party Administrators (TPAs) this sector has assumed a new dimension.
TPAs are presumed to infuse new management system and enrich knowledge base of managing healthcare services and costs. Their presence is aimed at ensuring high efficiency, standardization and improving penetration of health insurance in the country. TPAs potentially have a wider role to play in standardization of charges and managing cash-less services in health insurance.
However, their actual roles and responsibilities have remained less understood, less clear and much debated.
There are questions that in what ways the TPA is going to influence the developments in the health sector. The influence of TPAs to a large extent would be determined by their activities, the way they organize their services and their revenue generation model.
In present from, TPAs earn their major revenue from fees charged as commission on insurance premium. Insurance Regulatory and Development authority (IRDA), the regulatory body for insurance sector in India has standardized this rate.
Besides this, TPAs have a potential source of revenue from benefit management, medical management, provider of network management, claim administration and information and data management.
However, the insurance sector still faces challenge of institutionalizing the TPA service and there is substantial scope for improvements. TPAs also face challenge of developing appropriate system of financing their operations.
It has been argued that the current health insurance sector would require substantial amount of working capital and bank guarantee of finance operation of TPAs. These include lack of data to determine price of products and ability to negotiate payment rates with providers, a regulatory framework that does not recognize the unique features of health insurance products, lack of quality assurance measures for health providers, and lack of consumer awareness about the benefits of health insurance.
Third Party Administrators and their role
Third Party Administrator (TPA) was introduced through the notification on TPA-Health Services Regulations, 2001 by the IRDA. Their basic role is to function as a intermediary between the insurer and the insured and facilitate the cash-less service of insurance.
For this service they are paid a fixed percent of insurance premium as commission. This commission is currently fixed at 5.5 per cent of premium amount.
Following are the major responsibilities of a TPA:
1. Â Enrolment and issuance of member card
2. Â Claims Management
3. Â 24 hours call centre services for information
4. Â Pre authorization and Organizing cashless treatment