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Requirements for becoming a TPA Third Party Administrator In Healthh Insuance Industry

Requirements for becoming a TPA Third Party Administrator In Healthh Insuance Industry

A person can act as a TPA only with a valid licence issued by IRDA to perform the functions of a TPA. The requirements for obtaining a licence are as follows:

(a) Entity: The person applying for a licence shall be an entity which is a Company under the Companies Act, 1956

(b) Primary object: The main object as per the Memorandum and Articles of Association shall be to carry on business in India as TPA in the health services. Further engaging in any business other than TPA is prohibited

(c) Minimum paid up capital: Rupees One crore and maintenance of working capital of Rs.1 crore at all times.

Insurance
[Post Image Courtesy of AtiBodyPhoto at FreeDigitalPhotos.net]

(d) One of the Directors to be registered with Medical Council: One of the directors of the TPA shall be a qualified medical doctor registered with Medical Council of India

(e) Foreign equity restricted to 26%: TPA entity shall not have foreign holdings in excess of 26%

(f) Transfer of shares in excess of 5%: Prior approval of IRDA necessary before effecting any transfer of shares in excess of 5% either through direct transfer or through issue of fresh equity shares to new or existing shareholders

(g) Fee: A processing fee of Rs.20,000 shall be payable alongwith the application. A further sum of `30,000 shall be payable as licence fee before the licence is issued

A licence granted under these Regulations shall be valid for 3 years, after which, upon payment of a renewal of `30,000, may be renewed for a further period of 3 years.

Intimation of certain changes to IRDA

Every TPA shall inform the appointment of a new Chief Executive Officer (‘CEO’) or Chief Administrative Officer (‘CAO’) or a Director on the Board of TPA to IRD within 30 days of appointment Every TPA shall inform IRDA the details of head office or branch offices closed or relocated within 15 days of such closure or relocation.

Qualifications of CEO or CAO

Every person proposed to be appointed as a CEO or a CAO of the TPA shall possess the following qualifications:

(a) He shall hold a degree in arts, science, commerce or management or health or hospital administration or medicine

(b) A pass in the Associateship examination conducted by the Insurance Institute of India or such equivalent examination as decided by IRDA

(c) Completion of 100 hours of practical training with institutions recognized by IRDA

(d) He shall not be of unsound mind or undischarged insolvent or a person who had been subject to imprisonment for a period of 3 months by a Court on the grounds of misfeasance, misconduct or forgery etc.

Decision making on claims by TPAs prohibited

A TPA is prohibited from taking any decisions on any claims. A TPA can only assess and recommend admission of a claim or otherwise based on the guidelines provided by the insurer in terms of the agreement entered with them. Once the insurer takes a decision on the claim and communicates it to the TPA, the TPA shall clearly state as follows in their communication to the Policyholder who has registered a claim:

“As per the instructions of the insurer . the claim is being settled/denied for Rs. on account of . For any further clarifications, you may directly contact the insurer.”

Bar on Non-insurance healthcare schemes
The TPA shall offer health services only in accordance with the IRDA (Third Party Administrators)  Regulations, 2001 and shall not provide any services:

(a) directly or indirectly to non-insurance healthcare schemes or

(b) directly to health insurance schemes promoted, sponsored or approved by entities not

(c) being insurance companies, such as Governments, PSU’s etc.

(d) directly or indirectly to the policyholder or insured, except the health services as per the agreement with the insurer.

Agreement between a TPA and an Insurance company
a. The insurer and the TPA shall themselves define the scope of the Agreement, the health and related services that may be provided by the TPA and the remuneration therefore.

Provided that there shall be a clause in the Agreement for its termination by either party on grounds of mutual consent or any fraud, misrepresentation, inadequacy of service or other non-compliance or default fraud. Provided further that, there shall be no element in the Agreement which dilutes, restricts or otherwise modifies the stipulations of the IRDA in respect of Policy Holder welfare, protection, service standards and turnaround-time parameters.

b. The remuneration to the TPA shall be based on the services rendered to the insurer and shall not be related to the product/policy experience or the reduction of claim costs or loss ratios of the insurer.

c. A copy of the Agreement entered into between the TPA and the Insurance Company or any modification thereof, shall be filed, within 15 days of its execution or modification, as the case may be, with the Authority.

d. More than one TPA may be engaged by an insurance company and, similarly, a TPA can serve more than one insurance company.

e. The Authority from time to time may prescribe minimum standard clauses to be included in the agreement between insurer and TPA.

Change of TPAs for servicing of Health Insurance Policies
a. A change in the TPA by the insurer shall be communicated to the policyholders 30 days before giving effect to the change.

b. The contact details like helpline numbers, addresses, etc. of the new TPA shall be made immediately available to all the policyholders in case of change of TPA

c. The insurers shall take over all the data in respect of the policies serviced by the earlier TPA and make sure that the same is transferred seamlessly to the newly assigned TPA, if any. It shall be ensured that no inconvenience or hardship is caused to the policyholders as a result of the change. In this regard, the following aspects shall receive special attention:

i. Status of cases where pre-authorization has already been issued by existing TPA.

ii. Status of cases where claim documents have been submitted to the existing TPA for processing.

iii. Status of claims where processing has been completed by the TPA and payment is pending with the insurer/ TPA.

Data and related issues
a. The TPA and the insurer shall establish a seamless flow of data transfer for all the claims.

b. The respective files shall be handed over to the insurer within 15 days of the claim settlement or rejection.


Insurance Law And Practice - ICSI

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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