Health Insurance Policyholders Can Now Select TPA of Their Choice - Outside View by PersonalFN

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Health Insurance Policyholders Can Now Select TPA of Their Choice
Dec 18, 2019

IRDAI recently came up with a new set of guidelines for issues relating to life, health, and travel insurance covers to protect policyholder's interest against unethical practices and bring in more transparency.

It issued a new circular on December 10, 2019 which states that health insurance policyholders can now choose a Third Party Administrators (TPA) for availing medical services. This can be done at the time of buying insurance or during renewal.

What is a TPA?

When a family member is in need of hospitalisation, you can just focus on taking care of them, while the TPA will provide all type of assistance related to the insurance claim settlement.

[Read: Why You Should Buy A Health Insurance Policy For Your Newborn Asap!]

TPAs are also beneficial for the insurance companies as they can assist in efficient delivery of services and minimisation of cost.

TPAs act as an intermediary between insurance companies and policy holders. Its primary role is to manage insurance claim on behalf of the policyholders. In this regard, the TPA coordinates with the hospital and the insurer to process the necessary documents, letters, and bills for consideration of claim. However, they do not take calls on acceptance or rejection of claims.

Additionally, the TPA looks after issuance of ID cards to policyholders which is required at the time of hospitalisation. Apart from this, it provides services such as customer helpline, pre-authorisation of claim, providing list of hospital networks, etc.

Policyholders can now choose from TPAs with whom the insurer has Service Level Agreement in place. The insurer may limit the number of TPAs based on the health insurance product and geographical location of the policyholders. It has to explicitly provide a list of TPAs engaged amongst whom the policyholder can choose.

In case the insurer engages the services of only one TPA, no option will be provided to the policyholder. The insurer may allot a TPA of its choice if the policyholder did not choose any of the TPAs.

The insurer will have the prerogative of engaging or terminating the services of a TPA or engaging or discontinuing the services of a TPA for a particular health insurance product.

Benefits of the regulation to policyholders:

If the policyholder previously had a good experience with a particular TPA, he/she may choose to continue to avail services of the same TPA. Earlier, the policyholder had no choice but to continue with the same TPA even if the prior experience was not satisfactory.

It will encourage the service providers (insurers and TPAs) to ensure that the customers get best quality services, which will ultimately benefit the policyholders.

TPA vs. In- house claim process - Which is better?

Some insurance companies prefer their in-house claim process department rather than relying on TPA. Each has its own benefits.

Many large private insurers have in-house claims processing department. Since, the process is in-house, the turnaround time for resolving queries and managing claims is quicker. On the other hand, the coverage of hospital network of TPAs is larger than that of in-house claim settlement department of insurers.

Overall, both have effective claim settlement process because both are governed as per the rules and regulations set by IRDAI.

Thus, the decision on purchase of policy should not depend on whether the claims are processed in-house or through TPA. You should buy health insurance as per your needs after considering the following points:

  • Types of expenses covered- hospitalisation, tests, room charges, intensive care charges, medications, and so on
  • Waiting period
  • Claim settlement ratio
  • Illnesses covered and excluded
  • Premium amount
  • Policy term
  • Availability of cashless facility
  • Wide network of hospitals, etc.

If you are unsure about the type of policy suitable for your needs, contact a financial advisor.

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Author: Divya Grover

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


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