Those opting out of TPA services won't get cashless facility; they have to follow up with company for reimbursement

While buying a health insurance policy, most compare the premium, the list of excluded diseases and the company's track record in claim settlement. Some companies offer third- party administrator (TPA) services to settle claims, while some do it in- house. Should this be a consideration while buying a policy? Also, some companies offer a discount if one doesn't opt for a TPA service. So, what are the advantages or disadvantages of a TPA? Opting out of a TPA facility means the policyholder isn't eligible for a cashless facility; the policyholder has to pay the hospital charges herself/ himself, with the insurance company subsequently reimbursing the claims. Here, there are chances the company might refuse to pay the claim, citing various reasons.

The TPA negotiates contracts with hospitals and ensures a uniform experience for customers. An advantage of this is it tends to be relatively impartial, as the TPA isn't paid on the basis of claims pay out. If the company has a good history of claim pay out and is professional, there is no need for a TPA. But if the company is very aggressive in terms of claims management, from a pure consumer- experience point of view, the TPA might be more relaxed than when the hospital handles the claims. If you are confident you can manage the claims process on your own, you don't need the TPA.

The TPA is like a relationship manager between the customer, the hospital and the insurance company

For group health insurance, most companies have TPA, as they have to handle a large number of claims. But for individual policies, some companies give customers the choice to opt out of TPA.

Even if you save money by way of lesser premium when you opt out of the TPA, if you don't get cashless facility, you will have to pay a deposit while being admitted into the hospital. So, there is a cost of finance and you have to arrange for it in advance.

For a cashless facility with TPA service, the hospital will charge customers room rent and the doctor's fee, according to the policy limit. In the case of reimbursement, the hospital might charge the customer more, as he/ she might not be aware of what the entitlement is according to the policy. That is why opting for a TPA is recommended, as the TPA will guide the customer, says an official at a public sector general insurance company. If a company doesn't have a TPA, it should ideally have in- house doctors and a parallel department for claims settlement