Third-party administrator
Also called: TPA · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
A third-party administrator (TPA) is a company that handles health-insurance claims for an insurance company, in return for a fee. It checks claim papers, arranges cashless treatment (the hospital is paid directly, so the patient does not pay first and claim later), settles bills with hospitals and answers policyholders' questions. The TPA does not carry the risk and does not pay claims from its own money. The insurer still pays every claim. TPAs are regulated by IRDAI, the insurance regulator set up under the IRDA Act 1999. A TPA's decisions shape how fast claims are settled and whether they are paid in full, so they matter a great deal to patients.
Example
Health Insurance TPA of India Ltd (HITPA) is an in-house TPA. Four public-sector general insurers set it up: New India Assurance, Oriental Insurance, United India Insurance and National Insurance. A 2022 CAG report found that HITPA had enough capacity and performed about as well as leading TPAs. Yet its promoter insurers sent it only a small part of their claims work and paid private TPAs instead.
Don't confuse with
- Insurer: The insurer collects the premium, bears the risk and pays the claim. The TPA only handles the paperwork and processing for the insurer.
- Bancassurance / insurance agent: Agents and banks sell policies and earn commission when a policy is sold. A TPA comes in later, after the policy is sold, when a claim is made.