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Third Party Administrator Licence

Package inclusions:

Advice on the procedure to obtain a Third Party Administrator Licence.
Assistance on the application for the Third Party Administrator Licence.
Liaising with the Authority on Third Party Administrator licence.
Advisory work related to the licence.
Assistance with applying with the IRDAI.
Regular follow up with IRDAI concerning the Third Party Administrator Licence.

Third Party Administrator License

A third party administration, also known as a TPA, is an agency that is registered under the Insurance Regulatory and Development Authority of India (IRDAI). The Third Party Administrator License is required for a company. A third party administrator helps in processing insurance claims related to corporate and retail insurance. Apart from this, the Third Party Administrator also acts as an outsourcing entity of the insurance organization.

A third party administrator also processes insurance policies on behalf of a separate entity. When a company opts for a health insurance plan for employees, then the processing of such policies is done by a Third Party Administrator. Third-Party administrators are typically used for health insurance policies. Policyholders can choose the insurance third party administrator for renewing 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 for settling the insurance claims. Third-Party Administrators use hospital bills and documents of policyholders to settle insurance claims. Third-Party Administrators are not responsible for the acceptance or rejection of insurance claims.

Functions of a Third Party Administrator

A third party administrator acts as an intermediary between the insurance company and the policyholder. The third-party administrator has a dual role in acting in the insurance company's best interests and the best interests of the policyholders.
A Third Party Administrator provides documents such as ID cards. These cards have to be produced before hospital authorities to avail of 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 Third Party Administrator 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 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

The following services cannot be offered or carried out by a Third Party Administrator:

Making payment in respect of a claim.
Reject the claims .
Handle service claims other than those related health insurance.
Solicit insurance business either directly or indirectly.

Why Third Party Administrator License required

A Third Party Administrator License is required for the following reasons.

To act in the best interests of the policyholders.
To provide efficient services to policyholders.
Being licensed by the IRDAI would ensure that information related to policyholders is secure.
Licensing helps improving standards of diligence and governance related to insurance intermediaries.

Who Regulates Third Party Administrator License

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

Eligibility Criteria

For securing a Third Party Administrator License, the applicant has to satisfy the following:

Registration Requirements

No Individual or Company can carry out the third-party administrator business and provide health services without having the registration requirements and valid license as per the authority.

Main Objects

A Third Party Administrator has to carry out the business related to the rendering of health services.
Health services are the main objects of the Third Party Administrator.

Name

An individual or an organization providing such services should have in their name the words of 'Insurance TPA'. This is required to reflect the activities that are carried out by the business.

Main Business

A TPA should engage only in the business of health insurance administration. The TPA should carry no other activity.

Minimum Capital and Working Capital Requirements

A company with a specific share capital can function as a third party administrator. However, the company has to be registered according to the requirements of the Companies Act, 2013.
The minimum paid-up share capital, which has to be maintained by the TPA is 4 Crores.
Third-Party Administrators who have already registered have to comply with this requirement for one year.
The minimum working capital that has to be maintained by the TPA is 1 Crore. (Working Capital is understood as the difference between the aggregate assets and the liabilities).
Foreign investment is allowed for a Third Party Administrator. However, 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 of the TPA must hold the MBBS Qualification. Registration is required with the Medical Council of India or the Medical Council of a State in India. The registration should allow the individual to practice within the jurisdiction.
Promoters and Directors must not be disqualified 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 criteria under the FIT and PROPER test.
The applicant has the necessary expertise in-house related to medical experience.

Infrastructural Requirements

The TPA should have adequate infrastructure, office space, and a trained workforce to carry out operations.

Collaboration

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

Minimum Business Requirements

An entity that is 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

The applicant has to make an application to the authority for granting the third party administrator license. Along with the application, necessary documents have to be submitted.
A Non- Refundable Processing fee of Rs. 1,00,000/- (along with applicable service tax[GST]) must be paid with the application. This must be paid in favor of the applicant through a crossed demand draft (DD) payable at the Insurance Regulatory and Development Authority of India, Hyderabad.
Before reviewing the application, the authority can ask the applicant to furnish further information and documents. The applicant has to provide such information within the time permitted by the authority.
The applicant shall not change the structure and nature of the business during the interim period of deciding on the application for a grant of the TPA license. If the applicant needs to make further changes, then prior approval is required from the authority.
If such changes take place, the applicant must notice of the changes to the authority.
The authority will take reasonable time in processing the application, and the decision will be communicated to the applicant.

Grant of Certificate of Registration

The authority will check the conditions satisfied by the applicant before granting the certificate of registration.
The authority can impose other conditions related to the Third Party Administrator License while granting the certificate of registration.
After securing approval from the authority regarding the certificate, the applicant has to pay Rs. 30,000/- plus applicable service tax (GST) as a registration fee.
The Third Party Administration company, which has been granted a certificate of registration, will commence business after 12 months. Commencement of business will be 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 have 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 if the applicant has not fulfilled the minimum conditions.
Before refusing the grant of the certificate, the applicant should have a reasonable opportunity of being heard.
The authority will provide the reasons for rejecting the applicant.
If an applicant has been refused an application granting the Third Party Administrator License, the applicant can only make another application after two years from the refusal date.

Training Requirements for Executives

The Third Party Administrator 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) Bachelors 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) Complete 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;
Audited financials for the last three years in case of 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 that is granted to the third-party administrator would be valid for three years. The validity is subject to the revocation by the authority or the applicant.

Third Party Administrator License Renewal in India

Applications for renewing the third party administrator license must be made 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.
A non-refundable fee of Rs 15,000/- and applicable service tax (GST) must accompany the application for the Third Party Administrator License.
If the application for renewal is filed after the period above, but before the expiry of the certificate of registration, then a fee of Rs. 100/- must be paid as a penalty for the delay in the application.
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 applicant does not fulfill the minimum business requirement as per the requirement of the authority, then the application for renewal will be dealt with the authority in the following manner:

Where the applicant does not meet the minimum business requirement criteria by a margin of 20%, but exceeds a similar margin of a different parameter in the financial year, the authority will renew the application. However, the applicant has to provide reasons for not meeting the criteria.
Where the applicant does not meet the criteria of requirements of several parameters in a financial year but has met several requirements on an average basis, then the authority may consider renewing the application with reasons which have to be furnished.
If the applicant does not meet the minimum business requirements or the average, then the application for renewal of the Third Party Administrator License would not be carried out by the authority.

How can TAP GLOBAL help in securing Third Party Administrator License

We file the application form on your behalf to get the Third Party Administrator License for your business.
We will also help you securing approval for the license from the authority.
We monitor and track the status of the application on behalf of the client.
We value your time and money.
We also offer post compliance services for your Third Party Administrator License.

Frequently Asked Questions

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

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

Who appoints a third-party administrator?

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

What are the benefits of securing a Third Party Administrator License?

Third Party Administrators have to act in the best interest of the policyholder. Through this license, the policyholders can trust TPA with sensitive information such as policy number, age and address. Therefore it is beneficial to obtain such a license. All grievances related to the policyholder will be handled by the Insurance Regulatory and Development Authority of India.

What is the difference between an Insurance Broker, Web Aggregator, and Third Party Administrator?

An insurance broker is an individual or a company that connects prospective customers to insurance companies. Web Aggregator is an insurance intermediary or an insurance company that provides information on insurance-related to different companies. Third-Party administrator is a company that acts on behalf of health insurance companies.

What is the meaning of cashless access or facility?

Third Party Administrators who are having agreements with specific hospitals have the facility of cashless access. This means an individual using this facility would not require to pay the medical bills in the hospital. A hospital which has no tie-up with a TPA would not have the facility for cashless access

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

The following details have to be provided to the company at the time of Intimation of the claim:

1. Policy Number;

2. Name of the Policy Holder;

3. Nature of the Injury and the Illness; and

4. Admission Number.

Does the TPA policy cover pre-existing diseases?

No. The Third Party Administrator license policy does not extend to pre-existing diseases. A record of the disease would be made when the disease occurs in the individual. Based on that, the claim would be allowed.