Third Party Administrator License

Overview

Third party administration, widely known as a TPA, is an agency registered under the Insurance Regulatory and Development Authority of India (IRDAI). The Third-Party Administrator (TPA) License is required for a company and TPA helps to process corporate and retail’s insurance claims and further it also acts as an outsourcing entity of the insurance organization.

Insurance Policies are processed by TPA on behalf of a separate entity. All the processing is done by TPA when a company opts for a health insurance plan for employees. Typically, TPAs are used for health insurance policies and also the policyholders can choose the insurance third party administrator to renew their health insurance schemes.

Third Party Administrator License is required for acting as an administrator for the policyholder. Health Insurance companies (Life and Health Insurance) appoint Third Party Administrators to serve the policyholder to settle the insurance claims. Hospital bills and policyholder’s documents are used to settle insurance claims. TPAs are not responsible for the acceptance or rejection of insurance claims.

Functions of a Third-Party Administrator

They act as an intermediary between the insurance company and the policyholder. Their dual role in acting in the best interests of the policyholders and insurance company.

ID cards are provided by a TPA and these have to be produced before hospital authorities for availing cashless hospitalization services.

TPAs have specific agreements with hospitals. When the policyholder wants to use the services of the hospital, then the TPA must be informed. Policy Holders are allowed to use other hospitals.

A TPA provides authorization letters to the hospital.

The TPA sends all documents such as bills of the hospital to the insurer for considering claims.

Services Rendered By a TPA(Third-Party Administrator

Health Services by a Third Party Administrator

Third Party Administrator License is required by a company to carry out the services on behalf of a health insurance organization. There is a standard agreement between the insurance provider and the TPA. The third-party administrator renders the following services:

Servicing of claims on behalf of policyholders by cashless treatments or settlement of claims or both. This would be according to the guidelines issued by the authority.

Third Party Administrator also services claims related to hospital cover. This would also include injuries due to personal accident and travel-related injuries.

Apart from this, Third Party Administrators conduct pre-medical exams for insurance claims.

The Third-Party Administrator also covers medical expenses related to foreign travel. The Third Party Administrator also covers health matters of foreign travel policies issued by foreign insurers for policyholders traveling to India. However, servicing of foreign insurance and non-insurance claims must be done according to the rules issued by the authority.

A health insurer can engage more than one third party administrator to provide health services to policyholders.

Services which cannot be offered by a Third Party Administrator

Below are the services which cannot be offered or carried out by a TPA:

Making payment in respect of a claim.

Rejecting the claims .

Handling the service claims other than health insurance.

Soliciting insurance business either directly or indirectly.

Why Third-Party Administrator License required?

A Third-Party Administrator (TPA) License is required for the following reasons:

For acting in the policyholder’s best interests.

Providing efficient services to policyholders.

Since licensing ensures that information of policyholders is secured.

To improve standards of diligence and governance wrt insurance intermediaries.

Who Regulates Third Party Administrator License?

The primary authority is the Insurance Regulatory and Development Authority of India (IRDAI).
The law behind TPA License is the Insurance Act 1938 and the Insurance Regulatory and Development Authority Act 1999. The principal regulations are the IRDAI (Third Party Administrators - Health Services) Regulations, 2016.

Eligibility Criteria

For securing a Third-Party Administrator License, the applicant needs to fulfil the below requirements-

Registration Requirements
No Individual or Company can carry out the TPA business and provide health services without having the registration requirements and valid license as per the authority.

Main Objects

A TPA needs to carry out the rendering of health services business and hence, Health services are the main objects of the TPA.

Name

An individual or an organization providing such services should use 'Insurance TPA' word in their name to reflect the activities that are carried out by the business.

Main Business

TPA shall carry only the business of health insurance administration and no other activity.

Minimum Capital and Working Capital Requirements

The company has to be registered as per Companies Act, 2013 and with specific share capital can function as a TPA.

The minimum paid-up share capital of Rupees 4 Crores needs to be maintained.

Pre-Registered TPAs to comply with this requirement for one year.

The minimum working capital of Rupees 1 Crore needs to be maintained.

Foreign investment is allowed for a TPA, but the amount of investment would have to comply with specific requirements laid down by the Government and the authority.

Qualifications of the Directors

One of the directors must hold the MBBS Qualification. Registration is required with the Medical Council of India or the Medical Council of a State in India and which should allow the individual to practice within the jurisdiction.

Other Conditions

Non-Disqualification of Promoters and Directors under any law in force.

The Chief Executive Officer (CEO) or Chief Administrative Officer (CAO) or the Chief Medical Officer (CMO) of the applicant satisfies the necessary FIT and PROPER test criterion.

The applicant has the necessary expertise in-house related to medical experience.

Infrastructural Requirements

Adequate infrastructure, office space, and a trained workforce needs to be there to carry out operations.

Collaboration

The applicant has collaborated with hospitals with adequate infrastructure and necessary technology.

Minimum Business Requirements

An entity registered as a TPA would suffice the minimum business requirements related to health and medical services.

Process / Procedure For Applying For a Third-party Administrator License

Application for Grant of Certificate of Registration

File an application to the authority along with the application, necessary documents and submit.

Pay a Non- Refundable Processing fee of Rs. 20,000/- (along with applicable service tax [GST]) in favour of the applicant through a crossed demand draft (DD) payable at the Insurance Regulatory and Development Authority of India, Hyderabad.

Applicant has to provide further information and documents as asked by authority within the time permitted by the authority

during the interim period of deciding on the application for a grant of the TPA license, applicant shall not change the structure and nature of the business.

Also, authority’s prior approval is required in case the applicant needs to make further changes.

If such changes take place, the applicant must notice of the changes to the authority.

Post processing the application in reasonable time then the decision will be communicated to the applicant.

Grant of Certificate of Registration

First the authority will check whether the conditions are satisfied or not to grant the certificate of registration and can impose other conditions as well related to TPA License in granting the certificate

Post approval from the authority regarding the certificate, the applicant has to pay Rs. 30,000/- plus applicable service tax (GST) as a registration fee.

After the grant of certificate of registration, the TPA company needs to commence business in 12 months from the date of issuing the certificate.

The company would display the certificate of registration in a public domain, which can be viewed by anyone.

This should also contain the IRDAI registered number, validity of the period of registration, address of the registered office and corporate office of the insurers representing it.

Procedure-related to Transfer of Shares or ownership for Third Party Administrator License

Prior approval is required for any transfer of shares or change of shareholding pattern regarding the TPA.

If there is a transfer of 5% of its paid-up equity share capital, then such transfer requires prior approval from the authority. The transfer can be for a fresh issue of shares or previous share applications.

The TPA must submit documentation related to the authority for such transfer of shares.

The third-party administrator must file returns in the form as per the requirement of the authority.

The shareholding pattern must be informed to the authority. This must be made within 30 days of the change of the shareholding pattern.

Refusal for Granting Certificate

The authority can refuse to grant the certificate where applicant has not fulfilled the minimum conditions.

Reasonable opportunity of being heard to be given to applicant before refusing the grant of the certificate plus the authority needs to provide the reasons for rejecting the applicant

If application has been refused by an applicant granting the TPA License, the applicant can only make another application after two years from the refusal date.

Training Requirements for Executives

The TPA must appoint a CEO (Chief Executive Officer), or a CAO (Chief Administrative Officer), or a CMO (Chief Medical Officer) who has educational qualifications and have necessary training as per the requirements of the authority.

The executives appointed by the applicant must be responsible for managing the third-party administrator.

The appointment of the TPA executives and the Board of Directors (BOD) must be according to the requirements of the authority. Such appointments must be intimated to the authority within 30 days.

The CEO, CAO, or the CMO must not suffer from any disqualifications under any law in force.

The qualifications possessed by the CEO or the CAO must be the following:

1) Completed the Bachelor’s Degree from any University; and

2) Associate Examination conducted by the insurance institute of India or any other similar institute recognized by the authority; and

3) Completed Minimum training requirements as specified by the authority.

Documents required for a Third Party Administrator License

Form TPA -1;

Certificate of Registration of the Company or LLP as issued by the ROC;

MOA and AOA of the Company or the LLP Agreement;

Copy of PAN Card of the Company;

Profile of the Directors/Partners of the Company or LLP;

Profile of the Principal Officers along with the educational qualification certificates;

Brief preview of the contents of the website proposed for License;

Details of the CEO, CAO and CMO;

Documents of the Medical officers;

Details about the hosting place of the website;

Details about the responsible persons for the website’ content;

Net-worth certificate and shareholding pattern of the company as certified by the Chartered Accountant;

Last three years Audited financials for an existing company or latest as on date in case of a new company;

Details of the IT infrastructure available with the applicant; and

Form for Intimation of appointment or change in Director, Chief Executive Officer, or Chief Administrative Officer, Chief Medical Officer.

Validity for Certificate of Registration for a Third-Party Administrator

A certificate of registration granted to the TPA would be valid for three years subject to the revocation by the authority or the applicant.

Third Party Administrator License Renewal in India

Must File the applications for renewing the TPA license to the authority.

The application must not be made before 180 days and not later than 30 days before the Certificate of Registration of the TPA Ceases.

Pay a non-refundable fee of Rs 15,000/- with applicable service tax (GST) and the application for TPA License.

Must Pay a fee of Rs. 100/- as a penalty for the delay, if the application for renewal is filed after the period above, but before the expiry of the certificate of registration, After the expiry of the certificate of registration, if the applicant proves that the delay in applying was due to circumstances beyond the control of the applicant, then the authority may accept the application with a fee of Rs.750/-.

If the applicant satisfies all the criteria, then the certificate of renewal will be granted to the applicant for three years.

Non-compliance with Business Requirement for Renewal of Registration

The Renewal Application will be managed by authority as mentioned below, in case applicant does not fulfil the minimum business requirement as per the authority

In case, applicant not meets the criteria of minimum business requirement by a margin of 20%, but exceeds a similar margin of a different parameter in the financial year, then authority will renew the application. But the reasons are needed to be provided by the applicant for so.

In case, applicant not meets the criteria of several parameters’ requirement in a financial year but met several other requirements on an average basis, then the authority may consider renewing the application with reasons which have to be furnished.

In case, applicant not meets the minimum business requirements or the average, then the application for renewal of the TPA License would not be carried out by the authority.

FAQs

What is the difference between network and non- network hospitals?

A hospital that has a tie-up or collaboration with a TPA for providing cashless treatment is called a network hospital. Non-Network hospitals do not have any form of agreement with a TPA.

Who appoints a third-party administrator (TPA)?

An insurer appoints a third-party administrator. The first point of contact for a medical insurance policy is the TPA who helps the policyholder in securing the hospital bills and other medical expenses.

What are the benefits of securing a TPA Licence?

TPAs needs to act in the policyholder’s best interests. By this licence, the policyholders can trust TPA with sensitive information such as policy number, age and address. Therefore, it is beneficial to obtain such a licence. All grievances related to the policyholder will be handled by the Insurance Regulatory and Development Authority of India.

What is the meaning of cashless access or facility?

TPAs are having agreements with specific hospitals to have the access to cashless facility which means an individual using this facility is not required to pay the medical bills in the hospital. A hospital having no tie-up with a TPA would not have such facility.

What are the details required to be provided during the claim?

The following details are required to be provided to the company at the time of Claim Intimation:

Policy Number;
Name of the Policy Holder;
Nature of the Injury and the Illness; and
Admission Number.

Does the TPA policy cover pre-existing diseases?

No, The TPA policy does not extend to pre-existing diseases. A record of the disease would be made when the disease occurs in the individual and upon that basis, the claim would be allowed.