TPA is also involved in handling employee benefit plans such as processing retirement plans. Handling healthcare or employee benefit claims requires using a specialized set of manpower and technology, therefore hiring a TPA for the same is a more cost effective method.
The Insurance Regulatory and Development Authority of India (IRDA) defines TPA as a Third Party Administrator who, for the time being, is licensed by the Authority, and is engaged, for a fee or remuneration, in the agreement with an insurance company, for the provision of health services. TPA was introduced by the IRDA in 2001.
Being one of the prominent players in the managed care industry, it has the expertise and capability to administer all or a portion of the claims process. The services include claims processing, premium collection, enrollment and cashless processing. Insurance companies setting up its own health plan often outsource certain responsibilities to a TPA.
The TPA acts like a claims adjuster for the insurance company. In some cases the insurance company sets up an entire department within their own company to act as TPA as opposed to hiring a commercial TPA company.