TPA Full Form

What is the full form of TPA? TPA stands for Third Party Administration. Imagine you’re an owner of an insurance company and there is tons and tons of work of claims of lakhs of customers and employee benefits. So, to work on them instead of hiring more employees you hire another company. And that company becomes your third-party administrator.  

So, what a TPA is? It is a company that offers operational services of employee benefits management, claims processing and other administrative services. A TPA holds the licence to work for another company from IRDA (Insurance Regulatory Development Authority). This kind of administration is common in various insurance companies to handle their claims and various policies. TPAs are state-licensed, professional organisations that provide a wide variety of facilities and services. They are regarded as specialists in assisting businesses in reducing costs and customising coverage. TPAs stay on top of government regulations, rules, and policies that influence employee benefits packages. A TPA can be owned by any insurance company or it can be of its own or even can be a multiemployer organisation. 

Role Third Party Administration Organisation

The main function of TPAs is to act as an intermediary administration between the insurance provider and the insured person/company. And the stakeholders involved in this process are the Insurance Companies, Healthcare Providers and Policy Holders.

A TPA handles the following workloads of insurance:

• Claim Collection

•  Policy regulations

• Claim processing and settlement

• Maintenance of Database

• Provider Network

• Collecting premium from the policyholders

• Employee benefits

• Also performs some value-added services such as Toll-Free helpline numbers, Health Facilities, specialised consultation, etc.

• Cashless processing of the bills or funds

• Setting up of plans and descriptions

• Customising reports

• Billing Services

So, now we’ve seen the various roles a TPA performs. But why do companies need them, they could often hire employees and let them do the task?

According to industry observers and experts, A TPA has excellence in their duties. They perform with greater efficiency than an employee as they are trained for this. And if a company hires employees, they have to train them and work on them first. TPAs have a vast knowledge of insurance and healthcare insurance and they have their management system. Also, since they work for various companies, they have a higher amount of experience than an employee working in one company. And as a result, they always minimise the cost and expenditure.

Challenges Faced by TPAs

For working as a third-party administrator for any other company there may be several challenges faced by the TPA such as miscommunication, wrong information, etc. Let us see them in brief:

1. Many policyholders do not know about TPAs or know very little.

2. Policyholders rely on Policy Agent rather than TPAs. As a lack of knowledge and benefits that can be received by a TPA.

3.Asymmetry in information between the job providing company and TPA

4.Strict regulations of IRDA as according to IRDA a TPA should be viewed on the basis of their financial performance rather than customer satisfaction.

5. Big and efficient hospitals themselves deliver their claims to their customers which work is to be done by a TPA

6. The primary operation of a TPA is to decrease the claim period. However, sometimes in several cases, the claim period gets increased.

7. Delay in getting the IDs to the insured person/company.

TPAs in Health Insurance

Most TPAs are well known for their work with health insurance companies. During a health emergency, a policyholder has to carry a document of proof of insurance and the rest work like payment of bills are done directly by the TPA to the Hospitals.

The service of a TPA is decided by the insurance provider company to facilitate the claim settlement process and handle all document dealings to facilitate the customer or policyholder. Other than providing the claims a TPA also keeps the important records of policyholders for need in time. And it provided continuous support to the policyholder and solved their queries quickly.  Even some TPAs provide services like Ambulances, Beds in hospitals, medicine supplies, etc.

Cancellation of TPA

In case any person wants to cancel the assistance of a TPA assigned by his/her insurance company. The person can directly reach his/her insurance provider via call or mail and share his/her policy details and ID and provide the reason for cancellation. After approval, the TPA allotment will be cancelled in just a few simple steps.

Conclusion

To sum up TPA stands for Third Party Administration. These are simply organizations that do the operations of an insurance company. Tasks such as claim collection, billing, policy regulations, premium collection, assistance provision, etc. are provided by a TPA. A TPA can be self-owned, owned by the insurance company or a multi company-owned organisation.  As the insurance industry is growing the need for TPA is growing more and more, due to which many big TPAs have converted into MNCs working for various companies, especially Health Insurance Companies.