Health Insurance Claim Settlement Process: TPA vs In-house claim department

Shahul, a 32-year-old IT engineer, was recently discharged from the hospital after getting admitted for appendicitis treatment. However, he had to get his medical expenses reimbursed as the hospital was not on the network list of the insurer. Having to deal with a TPA appointed by the insurance company, Shahul found it very easy to get his reimbursement claim approved. The TPA guided him with all the required documentation to process his claim and was also supportive in clarifying his doubts over calls.

The adoption of health insurance has increased in recent years mainly due to the pandemic and its grave effect on human beings. Getting a health plan is only half the work done, as you need to know about the claim settlement procedure also to successfully file a claim without any last-minute trouble. The claim settlement process in insurance is handled by either a third-party administrator (TPA) or an in-house claim department. Read on to find out who they are and what is the difference between them?

Third-party administrator: It is a licensed company appointed by the health insurance company primarily for providing health insurance services, including claims handling. In other words, TPA can be referred to as an intermediary between the policyholder and the insurer and manages the health insurance claim settlement process.

In-house claim department: The insurance company might set up a dedicated claims department for processing of claims without handing them over to any TPA. This arrangement is called the in-house claim department, and they directly settle the claim requests received from their policyholders. The latest generation health insurance companies have their claims settlement division hoping to speed up the response time of claim settlement.

If you have questions like ‘what is a settlement in insurance’ and ‘what is claim processing in health insurance, here is the answer: The process of making the payment assured to the policyholder by the health insurance company at the time of policy registration, in the event of illness, death, accident or maturity is called as settlement.

Though the insurance claim settlement is routed through TPA or in-house claims department for settlement, as a policyholder, you will be concerned about the level of service extended by each and the benefit of choosing between the two.

What are the advantages of TPAs over in-house claims processing departments? 

At least 26 companies in India are authorized by the Insurance Regulatory Development Authority of India (IRDAI) to function as Third-party administrators (TPA). Since the insurers appoint them to provide insurance services, they may sometimes act as third-party health insurance companies.

• TPA’s have a vast network of hospitals under their belt, making it easy for you to choose the desired hospital in a convenient location.
• By getting admitted to a network hospital, the chances of getting your cashless claim approved are very high.
• Most TPAs have a nationwide presence allowing policyholders to contact them from any place and anytime to get their queries resolved. Some TPAs also function round-the-clock to attend emergency calls from policyholders. However, the in-house claim department may be operational only during office hours since the insurer manages them within their organization.
• TPA’s are more process-oriented and streamlined, as they settle numerous claims regularly and can exactly suggest the steps to do and avoid to ensure speedy approval of claims.

What are the advantages of the in-house claims processing department over TPAs?

 The insurance company is the main person in the settlement of claims to the policyholder as they take the final decision. Therefore, they are generally in a better position for people to believe and trust in them but still, here are some of the key factors that these in-house claim processing teams have taken over TPAs. 

• The time taken for claim processing is less compared to TPAs, as insurers take the final call over approving or rejecting a claim. TPAs rely on the insurance companies in some cases to get clarification on certain claim requests.
• The efficiency of the in-house claim processing department is high as they represent a brand, and any mistake on their part will affect the brand directly.
• Policyholders can reach out to the in-house claims department to explain the inclusions and exclusions clearly, which wouldn’t be possible with TPA if the specific person at the desk isn’t knowledgeable about the plan.

TPA vs. In-house claim department – Which to choose? 

According to the data sourced from Insurance Regulatory and Development Authority (IRDA) data, both TPAs and in-house claims department have settled claims with 91 percent and 91.6 percent, respectively, received by them within three months in the financial year 2017-18. This shows that there is not much difference between the two, and even if there is a difference, it is just minuscule. As a policyholder, you may expect few operational differences in each claim settlement process, including the time taken to resolve, accessibility, etc.

It has to be noted that many large private insurance companies have in-house claims processing departments, so they follow a uniform approach towards claims processing aligning with the brand value. Going by the size of these insurers, it makes perfect sense for them to rely on their department to lead the competitive edge against their competitors.

From a policyholder’s perspective, opt for an insurer that provides you with an extensive network of hospitals to choose from for treatment. The claim settlement ratio is another factor that will enable you to filter out companies that are low on the table and will also help you shortlist your preferred insurer. But basing your decision only on the claims processing mechanism is not suggested as you may lose out on the best plans and rates.

Therefore, the ideal solution is to make sure your decision to buy a health insurance plan suits yourself, your family members, and your budget. Assessing your needs along with the purpose and gathering all the relevant details of the plan, such as inclusions, exclusions, claim settlement ratio, waiting period, premium, etc., must feature at the top of your list while choosing the right health insurance plan.