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Third-Party Administrator (TPA)

Who is a Third-Party Administrator?

“Third Party Administrator (TPA)” is an agency company engaged by an insurer for providing health insurance related services. They act as an outsourcing entity of the insurance organization. The types of services that they can provide are specified by the authority.

TPA ties-up with the hospitals for providing hospitalization services, confirms to the eligibility criteria and obtains a TPA Licence from IRDA Authority prior to commission of functions. They act as the first point of contact for a policy holder for availing the medical and hospital facilities and other facilities under a policy term and for settlement of claims.

The essential role of a TPA is to coordinate between the insurer and hospital for the claim settlement process. They check all the bills and medical documents submitted by the claimant and cross-check all details before approving a settlement.

Service provided by a TPA

Third-Party Administrators scrutinises hospital bills and other medical documents of policyholders to settle insurance claims. However, Third-Party Administrators are not responsible for the acceptance or rejection of insurance claims. As per regulation, a TPA can perform following services only to an insurer under an agreement in connection with health insurance business:

1. servicing of claims by way of pre-authorization of cashless treatment or settlement of claims other than cashless claims or both.
2. servicing of claims for Hospitalization cover, if any, under Personal Accident Policy and domestic travel policy.
3. facilitating carrying out of pre-insurance medical examinations in connection with underwriting of health insurance policies and/or life insurance policies
4. health services matters of foreign travel policies and health policies issued by Indian insurers covering medical treatment or hospitalization outside India
5. servicing of health services matters of travel or health or medical insurance policies issued by foreign insurers for policyholders who are travelling to India for such services that are restricted to the health services required to be attended to during the course of the visit or the stay of the policyholders in India.
6. servicing of non-insurance healthcare schemes as permitted by Regulation 22 (3); and
7. any other services as may be mentioned by the Authority

However, a TPA cannot perform the following:

• × Can not pay claims
• × Can not reject a claim
• × Solicit insurance business
• × Can not do any other business other than Health insurance services.

Eligibility Criteria

• In order to be a TPA, a Company with share capital need to be set-up under the Companies Act, 2013 as only a company can operate as TPA in India.
• A TPA shall not engage itself in any other business. The main and sole object of the TPA, on being registered with the Authority, shall be to exclusively carry on business of providing health services.
• Every TPA and applicant seeking registration as TPA from the Authority shall have the words ‘Insurance TPA’ in its name to reflect that it is engaged or proposes to engage in the business of TPA for rendering health services.

Capital requirements:

• A TPA shall maintain minimum paid-up equity share capital of not less than Rs. 4 crores.

Net-worth:

• The net worth of a TPA shall at no time during the period of registration fall below rupees one crore.
• The foreign investment in the TPA shall comply with the policy and rules framed in this regard by Government of India and any regulations, guidelines or instructions issued by the Authority.

Minimum working capital:

• The minimum working capital that has to be maintained by the TPA is 1 Crore.

Fit and Proper Test:

• All directors, CEO, Principal officers shall satisfy the necessary criteria under the FIT and PROPER test.

Infrastructural Requirements:

• Should have adequate infrastructure, office space, and a trained workforce to carry out operations.

Typical Day-to-day work done by TPA

A TPA handles all the essential Administrative and management functions starting from record-keeping, issuing identity cards, admission of patient, authorising, accessing fund for treatment, treatment, processing claims and settlements of claim, processing hospital payments on behalf of insurer and providing other value-added services. TPA ensure better and high-quality healthcare by allowing policyholders easy and hassle-free access to funds for treatments.

• A Third party administrator acts as an intermediary between the insurance company and the policyholder. The third-party administrator has a dual role in acting in the insurance company's best interests and the best interests of the policyholders.
• A Third Party Administrator provides documents such as ID cards. These cards have to be produced before hospital authorities to avail of cashless hospitalization services.
• TPAs have specific agreements with hospitals. When the policyholder wants to use the services of the hospital, then the TPA must be informed. Policy Holders are allowed to use other hospitals.
• A Third Party Administrator provides authorization letters to the hospital.
• The TPA sends all documents such as bills of the hospital to the insurer for considering claims.

Registration Process:

• A company desirous of obtaining a certificate of registration as TPA from the Authority needs to first register itself on IRDAI BAP Portal. Please click here to register now.
• The application for registration shall be submitted online to the Authority, accompanied by a non-refundable processing fee of Rs. 1,00,000/- and other taxes as may be applicable, paid via payment gateway facility provided by portal.
• The Authority may ask for production of documents, as it may deem fit. It shall be incumbent upon the applicant to furnish the same online within the specified time.
• The Authority, on examination of the application and details furnished by the applicant and on being satisfied that the applicant fulfils the requirements and conditions, may issue the Certificate of Registration to the applicant.
• Every applicant approved by the Authority for grant of Certificate of Registration shall further do a Payment of Rs. 2,00,000/- and other taxes as may be applicable, to the Authority as registration fee prior to grant of Certificate of Registration

Documents required for TPA Registration

• Form TPA -1;
• Certificate of Registration of the Company or LLP as issued by the ROC;
• MOA and AOA of the Company or the LLP Agreement;
• PAN Card copy;
• Profile of the Directors/Partners of the Company or LLP;
• Profile of the Principal Officers along with the educational qualification certificates;
• Brief preview of the contents of the website proposed for License;
• Details of the CEO, CAO and CMO;
• Documents of the Medical officers;
• Details about the hosting place of the website;
• Details about the responsible persons for the website’ content;
• Net-worth certificate and shareholding pattern of the company as certified by the Chartered Accountant;
• Audited financials for the last three years or latest as on date in case of a new company;
• Details of the IT infrastructure available with the applicant;

Fee Structure

Earnings

The main source of revenue for TPAs is fees or commissions on premiums. This is regulated by IRDA. In order to grow its revenue, a TPA need to build-up good reputation of providing better services, with loyalty and integrity. This is important as in most cases, the policy holder can decide which TPA to chose for him.

A TPA can also generate additional revenue for providing other health services for example:

• Deliver Network Management
• Data administration
• Medical supervision
• Administration of claims
• Ambulance services

Insurance companies typically have a list of Third Party Administrators to choose from. A disappointed Claimant may change the TPA during the course or at the time of renewal.

Minimum Qualification:

DIRECTORS

• At least one director must hold the MBBS Qualification who is registered with the Medical Council of India or the Medical Council of a State in India. The registration should allow the individual to practice within the jurisdiction.

CEO or CAO

• The CEO or the CAO must be holding a Bachelors Degree from any University;
• and hold Associate Membership of Insurance Institute of India or any other similar institute recognized by the authority;
• and shall have completed Minimum training requirements as specified by the authority.

Training & Examination

The ISP shall undergo Fifty Hours of Insurance Marketing Firm training from an institution recognised by the Authority, and should pass an examination, at the end of the period of training, conducted by the Examination Body recognised by the Authority. However, he/she can undergo 25 hours of training in case, the ISP has any one of the following qualifications :

• Associate/ Fellow of the Insurance Institute of India, Mumbai.
• Associate/ Fellow of the Institute of Actuaries of India.
• Associate/Fellow of Chartered Insurance Institute, London.
• Postgraduate qualification of the Institute of Insurance and Risk Management, Hyderabad.

Examination & Certificate

• (i) The online examination is conducted by approved institutes in their centres spread across India.
• (ii) The candidate, on completion of required training, shall be eligible for appearing in the online examination.
• (iii) The examination shall cover Life, General, and Health Insurance syllabus as prescribed by the Authority.
• (iv) There shall be no limit to the number of attempts for appearing in the examination.
• (v) Candidates who are declared 'pass' in the examination will be issued a Certificate by the Examination Body.
• (x) The examination institute will forward a copy of the certificate and the data of candidates who have passed the exam to the Authority in the electronic format prescribed by the Authority.
• (xi) The Authority will process the application of the Applicant and consider issuance of registration, as per eligibility conditions prescribed in the Regulations.

Further Information

For detailed information, refer to Insurance Regulatory and Development Authority of India (Third Party Administrators - Health Services) Regulations, 2016 on www.irdai.gov.in.