Third Party Administrator (TPA) handles claims processing, collection of premiums, manages workers' compensation, and wellness programs. Insurance companies use third party administrators as a way to save money and time. Some insurance companies outsource compete administrative work related to health insurance whereas others choose to outsource only part of the program. The technical nature of employee health insurance and benefit plans makes outsourcing a cost-effective choice for many companies.

TPAs are remunerated by insurers and remuneration is fixed on a mutually agreeable terms. However Insurance Regulatory and Development Authority of India (IRDA) plays down a maximum ceiling on the commission that can be given to a TPA, which stands at 15 percent of premium amount. Each TPA may tie-up with any number of insurers and like wise each insurance company can empanel any number of TPAs.

From the time the policyholder informs the TPA about issuance of policy, the records will be transferred to the TPA. The TPA will issue identity cards to all policyholders, which they have to show to the hospital authorities before availing any hospitalization services. In case of a claim, policyholder has to inform the TPA on a 24-hour toll-free line about the treatment and hospital. In case of cashless, he will be directed to a hospital where the TPA has a tied up network. However, the policyholder will have the option to join any other hospital of their choice, but in such case payment shall be on reimbursement basis.

TPA issues an authorization letter to the hospital for treatment, and pays for the treatment.

TPA will track the cases of the insured at the hospital and at the point of discharge all the bills will be sent to TPA. TPA makes the payment to the hospital. It sends all the documents necessary for consideration of claims, along with bills to the insurer and insurer reimburses the TPA.

TPA signs Service Level Agreements (SLA) with various insurance companies for deliverance of services. These broadly define the turn around time (TAT) for the deliverance of the services.

A copy of the agreement entered in between TPA and insurance company shall be filed, within 15 days of its execution with the IRDA Authority. The agreement shall also include the remuneration mutually fixed between TPA and the insurance company.

Agreement with Insurance Companies

A copy of the agreement entered in between TPA and insurance company shall be filed, within 15 days of its execution with the IRDA Authority. The agreement shall also include the remuneration mutually fixed between TPA and the insurance company.

Review and investigate all claims reported to TPA.

Appoint parties necessary to evaluate claims.

Appoint defense counsel for insured, where appropriate, in consultation with underwriters.

Establish appropriately documented claim files for all claims and incident or suspense files for any incidents reported whether or not a formal claim is subsequently made.

Establish reserves that reflect the amounts expected to be ultimately payable in both indemnity and expenses, which reserves shall be periodically reviewed and adjusted in light of updated information. Initial reserves ordinarily should be established for straightforward claims within 30 days of a first report and within 90 days for complex claims.

Negotiate settlements of covered claims pursuant to the authority granted by Underwriters.

Submit all issues of coverage, including denials of coverage, proposed reservations of rights, directly to Underwriters for instructions.

Perform all administrative and clerical work in connection with claims.