Mediclaim costs may rise as TPAs plan to double charges

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TPAs plan to double the service charges

Come October 1 and third party administrators (TPA) that service health insurance claims will double the service charges they claim from non-life insurance companies. This may lead to a hike in health insurance premiums if insurers choose to pass it on to consumers.

At present, TPA charges 5.25 per cent of the premium paid by policyholders as service fee. This is the amount insurance companies are charged for processing health claims, storage of data, issuing pre-authorization for cashless hospitalisation and checking fraudulent claims.

“We will be asking public sector insurers to double service charges from 5 per cent to 10 per cent of the premium, as we will be out of business once public sector non-life insurance companies launch their own TPA. Since we are paid on a quarterly basis, in case the insurers refuse to pay, we will stop servicing new policies from January 1,” said the chief executive officer of a leading TPA who attended the EGM.

SK Mahapatra, a spokes­person for the TPA association, confirmed the development.

TPAs have also sought a meeting with the Insurance Regulatory and Development Authority (Irda) to present a comprehensive report, containing proof and details of wrong underwriting practices used by the public sector insurers, which are causing them losses in the health business. Similar facts were highlighted in a recent report of the Comptroller Auditor General (CAG) of India as well.

“The report will contain names of 200 companies which were charged lower premium on renewals despite bringing huge claims in the previous years. The report will also show employees of insurance companies have been consciously selling health policies to sick people. We will submit this report to the government and the media as well,” said a CEO of a TPA.

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Experts from give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from

TPAs are asking for hike in fees because they are expecting a loss in revenue when all four PSU insurers would come out with their own TPA. This cannot be the reason for fee hike. They should justify the value brought in OR should bring forward the components of various costs incurred by them and show the deficit between value/cost versus remuneration received by them. Loss in business or insurer’s faulty underwriting cannot be the basis for hike in fee percentage.

We are surprised to know that TPAs are making these comments & bringing out issues of wrong underwriting prctices only now when their existence is questioned. This shows that despite of being custodian of insurance company’s claims money (which means outflow), they did not share these concerns then & adopted an attitude of appeasement of insurers. TPAs should introspect & check what has brought them to this position. They will find that their own disregard for insurer’s interest & sloppy claims processing are major reasons why they are being blamed for overall mess in health insurance field.

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