TPAs are essentially insurance intermediaries, which undertake the entire administration of health plans for insurance companies. Apart from settling claims, TPAs also process business, offer customer service and technical support.

The idea behind hiring TPAs is to reduce the high claim ratios by eliminating fraud cases.

While TPAs' network with hospitals and interaction with doctors is expected to reduce claims substantially, insurers also wish to improve customer relationship through their TPAs.

The entry of TPAs would also mean cashless health care delivery to policy holders, along with trauma support and other advisory services.

A cashless scheme under a TPA is a customized health insurance scheme generally devised as a Group Health insurance scheme and put in place by a Third Party Administrator ( TPA ). Here when the insured is hospitalized he/she need not pay for Medical Expenses incurred are settled by the TPA directly with the concerned medical institution as per the terms and conditions of the health insurance package. Any amount that is not payable under the insurance scheme will be borne by the insured himself/herself and will have to be reimbursed by the TPA.

This is quite unlike the original TPA policy, which was basically a reimbursement scheme where the insured, when hospitalized, pays the medical institution, submits the claim to the insurance company and gets reimbursed as per the terms and conditions of the policy.