Claim settlement process in Health Insurance

Claim settlement process is one of the main issues that people are usually concerned about while buying insurance, specifically health insurance. In case of health insurance, claims get settled either via Third Party Administrator (TPA) or via the in-house department of the insurance company. TPA is something which is only available for processing health insurance claims. No other claims such as life or general insurance claims get settled via TPA. To understand these process better it is important to know what is TPA and what is in-house claim settlement?

What is TPA?
The third-party administrator (TPA) is a middle man who facilitates health insurance’s claim settlement. There are 26 TPAs in India who are authorised by the IRDA (Insurance Regulatory and Development Authority) and insurers can appoint anyone among 26 TPAs by getting in contract with them. TPAs help insured process their health insurance claims using various required documents such as hospital bills, etc. However, they don’t decide on whether to reject the claim or accept the claim as it is the job of the insurance company and not the TPA.

What is HAT?
Health Administration Team or HAT is the in-house department of the health insurers to process the health insurance claims. This means that there is no TPA in between the policyholder and the insurance company while processing and settlement of the claims which would indeed speed up the process of claim settlement. That said, both these ways of claims processing have their advantages over each other.

Advantages of HAT
1. As the claims are processed in-house, the turnaround time is reduced which helps in quick claim settlement for the insured.
2. When it comes to making a decision on whether to accept or reject the claim TPAs have no say. The final decision is to be taken by the insurance company itself, thus through HAT, claims are settled faster.
3. With HAT, the efficiency in processing the claims and settling the same is better than that of TPA.

Advantages of TPA
1. In case of TPAs, they have their own list of network hospitals which are usually more than that of HAT.
2. The main job of the TPA is to streamline the claim management processes. This allows them to have a focus on same which may not be in case of HAT.

IRDA's annual report for FY 2017-18 shows that both, the TPA and in-house claim processing department have settled around 91 per cent and 91.6 per cent of claims, respectively within three months. However, the time taken to settle the claim was much less in case of HAT when compared with TPA.

What should you do?
Both HAT and TPA are efficient claim settlement processes. The decision must not be based on who settles the claim HAT or TPA? On the contrary, your decision must depend on factors such as the required cover, premium charged, features, exclusions, waiting period, co-pay, sub-limits, incurred claim ratio, etc. It is always advisable to take the help of a financial adviser in this regards.