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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 Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

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.

Insurers may expand the list of hospitals for cashless facility.

NEW DELHI: Locked in a battle with big healthcare firms over censoring cashless health insurance claims, state-run insurers on Thursday asserted that the facility would be extended only to those hospitals that agree to their rates for medical expenses.

"The purpose of working out such package rates and stabilising the hospitalisation costs, will benefit the insured in many ways," the four state-run general insurance companies -- National Insurance Co, New India Assurance Co, Oriental Insurance Co and United India Insurance Co -- said in a joint public notice.

The selected list of hospitals in Delhi and National Capital Region, Mumbai, Chennai and Bangalore, does not include big chains like Fortis and Max Healthcare and was prepared on the basis of those accepting rate packages prepared by the insurance firms for medical procedures and hospitalisation costs.

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Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

This was the resolve & will that was expected from all PSU insurers. Now that all the PSU insurers have come together & demanding the rates negotiations, the cost of treatment for Primary & Secondary treatment would reduce. However, I am not sure about how the Tertiary care is going to be managed without taking in consideration the requirements of top hospitals. They are the only ones which offer the super-speciality treatment for complex medical problems. The hospitals need to look at Cost Plus model where they must find out the cost of procedure & then decide the price. Without having rational thought process of cost & pricing, all debate would be an exercise of demands & rejection of demands.

Mahavir Chopra:

Mahavir Chopra from Medimanage.com

Though, we have always suggested Insurers lobbying against Hospitals for their inconsistent billing menace, this sudden delisting (without any prior meetings, correspondence or warnings to Customers as well as Hospitals) was clearly uncalled for.

Customers are provided the network hospital list at the start of the policy, which they rely on for the entire policy period.Customers have not been prior informed regarding the delisting of hospitals.

Moreover, Government Insurers have not foreseen how this can adversely impact the confidence of future Mediclaim customers. For instance, How would Insurance Companies ensure their future wary customers, that they won’t suddenly delist hospitals again? How do we brokers assure this?

Quality Customers of Health Insurance we have interacted with, do look at the hospital list, to check if it includes hospitals in their locality or the ones they would use in case of an unfortunate need of hospitalization.

I personally feel, Government Insurers should toy with the idea of including the PPN List as a part of the terms and conditions of the policy and promise no ad hoc delisting of hospitals, without prior notice. This will bring in much needed customer confidence.

Recently, we came across news in an online Publication, in.news.yahoo.com

Common TPA to process the health insurance claims

Chennai, July 11 (IANS) The four government-owned non-life insurers -- National Insurance, New India Assurance, Oriental Insurance and United India Insurance-- will soon be taking forward their idea of floating a common third party administrator (TPA) to process the health insurance claims.

'We will be issuing a Request for Proposal (RFP) shortly. Our requirements will be specified in the RFP so that interested parties can submit their proposals,' New India Assurance Chairman and Managing Director M. Ramadoss told IANS over phone from Mumbai.

Consulting firm KPMG had given a report on the feasibility of setting up a common TPA by the four companies a year ago.

The four insurers, which together do around Rs.6,000 crore of health insurance business selling several lakhs of polices, are not happy with the manner in which claims are being processed and settled by the existing  TPAs.

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Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

Common claims settling agency will be a death knell for the Third Party Administrators which are approved & regulated by Insurance Regulatory & Development Authority.

Already the Private Insurers like ICICI Lombard, Bajaj Allianz, Star Health & Max Bupa have gone for their own TPAs. Hence the business available for 27 independent TPAs would be negligible & that would be the end of TPAs.

As the TPA is an independent agency, the claims settlement happens in impartial manner. However, with an insurer based TPA, we would see rise in mal-practices & consumer rights violation as all disputed case may not be resolved thru’ proper escalation mechanism. The consumers may have to take those cases up in Consumer Court which may not be a path that all aggrieved member would follow for lack of time & will. This may result in dissatisfaction.

It would be interesting to recall that the insurers used to manage the claims themselves till year 2002 (before TPAs stepped in). As the efficiency levels of the PSU insurers are still very low, it would not be wrong to assume that this TPA will work with similar efficiency levels. Also, with multiple TPAs, there is competition & the TPAs are forced to improve their performance (at least at the corporate sector which amounts to 50% premium). This lack of competitive spirit may further decline the service levels of the insurance claims settlement process.  

Purandar Bhavani:

Purandar Bhavani from Medimanage.com

The PSU insurer's concern about spiraling claims is justified but the means adopted does not seem to make complete sense.
Any decision has to take into consideration the following:
1) Continued availability of affordable health insurance.
2) Ensuring convenient utilization.
3) Benchmarking and standardizing healthcare delivery.
4) Providing practical, achievable and common guidelines to TPAs to achieve the outcome desired by the insurers.

5) Ensuring that the TPAs have the desired bandwidth to offer the solutions.
All of the above are interdependent in varying degrees.

For health insurance to continue to be affordable, the insurers have to recognize the fact that unless they is some mechanism for deciding on and standardizing the healthcare delivery costs, the premiums would only continue to rise. The premiums have shot up over 50% in some age bands in the recent correction. For the mechanism to be in place the onus squarely lies on the insurers and the government. There are such structures in place worldwide and it should not be too difficult for us to implement these. Needless to say, such an activity has to involve the healthcare providers and the TPAs.

Once a rationale is decided, it is then the duty of the TPAs to implement the program and manage it efficiently. The TPAs had been instituted, among other things, for the purpose of ensuring convenient utilization of the health insurance. It is erroneous to say that the TPAs are inefficient. One has to remember that they are always in the line of fire and are still manage the show reasonable well. It is because of the TPAs that there is now a semblance of data available which can be the basis of any analysis. Yes, there should be a re-evaluation of the TPAs and those having robust processes and efficient delivery should be shortlisted by the insurers. This will automatically weed out the inefficient ones. TPAs alone are not to be blamed for high loss ratios. The insurers are to share the blame equally. Currently the 7,000 Cr health insurance premium is divided 60:40 in favour of the corporate i.e. the group policies. Almost all of these policies operate more as a finance mechanism than an insurance cover. All covers from Day 1.

True, there could be rouge TPAs, but that is what an evaluation is expected to find out. A common claims settling agency is also not the right approach.

1) It is contrary to the concept of instituting TPAs.
2) We are not functioning in a unitary environment. There has to be competition for progress and growth.
3) There is danger of monopoly.
4) The apparatus could become a monolith, another government.
5) Customer satisfaction will be compromised.
6) Fresh ideas will be hard to come by.

A better approach would be to segregate the business into about 6-8 zones and have 1 TPA for each zone. By this, we can

1) Push TPAs to capitalize on local strengths, create strong processes and improve on efficiencies.
2) Achieve greater customer satisfaction.
3) Create an environment of fair play and competition.
4) Create a strong basis for comparison between TPAs.
5) Have new thoughts and ideas coming to the fore which can be better implemented.
6) Eliminate monopoly.

I am hopeful that saner senses will prevail while deciding on a solution and the competent authorities will place the consumer’s interest above all. The cycle of high hospital bills and therefore high claim ratios, therefore higher premiums and restrictions are only making life for the common man that much more difficult. My father’s premium has gone up by 30%. Delisting hospitals and TPAs seems rather a kneejerk reaction and obviously not the solution for stemming high claims.  

Health Insurance being the corner stone of growth for the Insurance Industry; specially the Non-Life side, has been in the news. Huge growth numbers have been regular headlines in all kinds of media. Though Mediclaim is the most important growth driver and prime focus for the Insurance Industry, claims keep soaring taller and taller than the premiums in the PPT presentations of Insurance Companies.

Recently one has noticed an interesting rise in the press articles targetting the TPAs, their disputes with customers and their general misgivings with headlines such as Public Sector Insurance Companies to rationalize TPAs, TPAs to be audited for customer service, TPAs payments to Hospitals to be taxed, Doctors in city blacklist TPAs over fee row, and more!

TPAs seem to now bring a picture of a monster, in the eyes of the consumer and general public, who is the root cause of all disputes and problems and who must die or atleast be shut down.

Couple this with the Leading Insurance companies terminating contracts with TPAs and started their own in-house claims management cells. For instant last year, ICICI – the largest private insurance company, sacked its long running TPA, to start its own in-house claims management department. In fact not having a TPA (read having an in-house TPA) is the trending USP seen in product brochures, nowadays.


And now with the Consumers suing TPAs, Healthcare Providers blacklisting them along with Insurance Companies Sacking them one question is coming  to  everyone's minds- is this the end of the road for TPAs?

We contacted some experienced members/veterans from the Indian Insurance Industry to throw some light on the future of TPAs and Claims Servicing in India:

Dr. Abhitabh Gupta:

A Doctor and Radiologist by qualification, Dr. Abhitabh Gupta is a veteran in the Health Insurance Industry.  He has designed many innovative Health Insurance products for the Indian Market and is a regular faculty at the National Insurance Academy.  Currently Dr. Gupta is the CEO of Paramount Health Services, a leading TPA.

Sudhir Sarnobat:

Mr. Sudhir Sarnobat is the Director of Medimanage Insurance Broking – the only dedicated health insurance broking company in India.  A seasoned, Healthcare Professional, Sudhir has been closely studying the Health Insurance Market and its operations for years now.

KS Sankar:

Mr. Sankar has over 30 years of experience in the insurance domain. To his credit, he has been singularly responsible for bringing to fore innovative products into the insurance market. His perspective below, also comes from his experience of being a part of designing various new arrangements in the Health Insurance Industry in India, including the arrangement of the TPA, the topic in question.

Here goes an interesting collage of interesting standpoints, we received for our questions which helped us get clarity and understand the TPA scene better, for today and tomorrow! 

Q1. There are regular stories in press on how Insurance Companies and the Regulator focusing on regulating the facilitator to control the claims ratio? What is your take? Is it going overboard?

Abhitabh Gupta: Let’s look at where all this originated. Health insurance used to be a small portfolio and was also a neglected one when TPAs were introduced. It was successfully used as an entry point for other lines of businesses by most of the insurers, especially in the private sector. Portfolio approach was the mantra of those days and health insurance was only a tool. Growth of the company was measured by numbers and top line especially public sector. Since the health portfolio was very small, therefore the losses in it were always neglected. The Health business was picked up at dirt cheap rates , due to portfolio approach. Some mid size policies were even underwritten by top insurers at Re. 1/-, Service levels were talk of the town when private sector insurance companies came up. Business calls were often taken and TPAs were asked to pay the full claims amount in spite of losses while Insurance Companies were compensated by other premiums. The health product was never adequately priced and did not take into account the inflation in health care and technological advances. There were no scientific underwriting guidelines or principles, both for individual and group businesses. Agents and customers utilized this to their benefit. TPAs did not have access to proper past data or proposal forms which were in any case incomplete.

The scenario has changed after de-tariffing. Health, forms almost 25 percent of overall business of insurance companies, which in few years will go as high as fifty percent. The focus has therefore shifted to service, the TPAs and claim control is the new success mantra for insurance companies. Not all TPAs were knowledgeable and therefore partly their inability to create an effective network and control losses has added up to all this.

Sudhir Sarnobat:
In the current context , the absence of subsidy and inability to up premiums in the buyers market scenario, has increasingly resulted in Insurers having high claims ratio on Mediclaim.  Focus on claims containment was bound to happen, but holding the TPA alone responsible for this would not be correct. The claims ratio is high because there are no clear-cut benefit rationalization wordings in the policy documents of most of the insurers which limits the scope of TPA. Also the major party in this transaction is the Hospital which is not regulated at all. Even for insurance purpose, there are no guidelines set for them.   

KS Sankar: I do not see any real attempt by the Regulator regulating the facilitator to control the claims ratio. The Regulator, being a Government Body, if really keen, can certainly impress the Ministry to regulate the Hospitals. Yes, Insurers have started breathing down heavily on the facilitators. What the insurers do here varies widely from one insurance executive to another. The feet-firmly-on-mother-earth types are rightly seeking facilitators to come up with more and more scientific analysis of the claims data as a tool to control the claims ratio. My take is, facilitators can do a lot here but have been doing scarce little. Unfortunately, there are also insurance executives who rhetorically keep proclaiming the facilitator needs to control claims – as if the facilitator has a magic wand. Come the month when the renewal is around the corner, this very insurance executive would want the facilitator to pay all claims and sundry. My take here is, such insurance executives have to come out of their Utopia and in any case, arrest their pendulum swings.  

Q2. Is it true that, originally the TPAs were required to rationalize the treatment costs? Why do you think they failed in achieving this?

Abhitabh Gupta: Yes, originally the TPAs were required to rationalize costs. In fact several attempts were made by GIPSA (an association of all Public Sector Insurance Companies) and several insurance companies but the TPAs failed due to several issues including lack of clarity on several fronts, lack of unity amongst insurers, no regulatory body of healthcare providers to talk to, TPAs not being adequately compensated vis-à-vis the services that were expected, several TPAs having their own provider chain etc.

Sudhir Sarnobat:
The original agreement with TPA is for Claims Settlement only (as the claim settlement mechanism by PSU Insurers was inefficient.) To add value, all, these TPAs were asked to throw in Value Added Service, which turned out to be Cashless Treatment for patients. If you look at the agreement between TPA & Insurer, it talks about Cashless Treatment & efficient claims management only.

KS Sankar: It is true that originally the TPAs were required to rationalize the treatment costs. You know I am privileged to have been hands on associated with the evolution of the concept of TPAs in India. We (meaning insurers – past tense for me) were not expecting the TPAs to mount the wild horse in just a day or two. The road map laid out was (at least in my opinion) pretty scientific. DBMS would become easier with TPAs since all claims data will be pooled and shared. Scientific data mining will empower TPAs to legitimately position and establish instances of hospitals misusing insurance. Without TPAs, the awareness of Hospitals misusing insurance was like Australia – everybody knew it was there, but nobody bothered beyond lamenting about it. The body of TPAs was expected to provide enough data based irrefutable inputs and logic with which insurance industry could go to GOI and push MOF to open the Nelson’s eyes of MOH. You can’t go to the Government talking about what you feel or infer or even know. You need to go to them with data and details that clearly establish what you say. The body of TPAs were expected to provide this teeth to the insurers, and I would say, they have miserably failed. The simplest of the simple things – when claims data was thinly distributed among the 10000+ insurance offices, same hospital charging differently for same procedure could not get noticed. Trust me, unless you and I push them to do it, no TPA by default will notice this either, despite the data having got pooled!  

Why the failure? Merrily, all to blame. The customer is still not educated to know insurance is an indemnity and not a bank deposit. Not even that if overcharged for one hospitalization, she ends up with a lower residual for the remaining policy period.

The insurance company, by paying disproportionately low rates of fees to TPAs. Pay peanuts, get monkeys. Add to this the pendulum swing the insurers themselves indulge in that I have referred to above – what better can you expect the monkey to do?

The body of TPAs whose entire concentration is only on hunting for new accounts and thus increasing their revenues at any cost than emerging as a professional body. Turf war has not alone made the TPA market place murkier, but has also created such close chestedness with data that the fundamental expectation of a robust DBMS has itself gone for a toss.

Q3. Insurance Companies haven’t lobbied enough to get Hospitals regulated through the Government. Regulation on TPA, without regulation on Health Providers is almost futile. Comment.

Abhitabh Gupta: I agree. However few things can be still managed. Create a smaller preferred network of good hospitals. TPAs should capture more data which can establish quality parameters at a given hospital. I think insurers and TPAs should agree on reducing their network and do preferential pricing

Sudhir Sarnobat: The revenue generated for Hospital Industry through insurance is less than 15% of their total turnover & hence majority patients are “Self-Pay” customers.  Such a scenario, does not allow TPAs to enforce regulation on Hospitals. Also the self-purchased insurance penetration is high only in Urban India & not rural. Govt.’s first priority today is Primary Healthcare & hence, the Hospital’s regulation is neglected. It’s high time that the Industry (Read the Regulator) pushes this issue with Health Ministry which is detrimental to good health of PSU insurers as well as consumer rights at the hospitals. In absence of regulations (or even guidelines), the hospital charges are going up without any improvement (or even responsibility) in quality. Shoddy services are being accepted by un-informed customers, without questioning the prices.  

KS Sankar: Insurance Companies are justified in regulating the TPAs to empower themselves with scientific data base and analysis thereof. This is the sine qua non starting point for any lobbying to get Hospitals regulated through the Government.

Q4. Insurance Companies are increasingly sacking TPAs and taking up the claims processing in-house? As a customer’s representative, do you think customers are better off without TPAs in the long run?

Abhitabh Gupta: Insurance companies are not sacking TPAs, for service issues or better control, but for their own brand building. I am sure they are incurring higher costs than outsourcing it to TPAs. Lately we have seen many corporates smoving out of such insurers and opting for TPAs. I am hopeful that insurers will reverse their decision in due course. Individual companies will never be able to match the pricing ability of a TPA due to the lack of volumes and therefore also not being able to match bulk discounts offered to TPAs by providers

Sudhir Sarnobat:
Claims settlement by Insurer is anti-consumer as we see adamant & irrational claims settlement by Insurers when the Underwriter & Claims Setter is same. This can even be dangerous for corporate customers as they will be held  at ransom for outstanding claims when the company wants to move away from Insurer A to Insurer B. If there are issues with TPAs claims settlement, it’s because of  the absence of clear-cut guidelines and no proper audit/checks on performance by TPAs. If you cut your finger, you don’t chop off your hand & hence, just because there are claims issues by TPA, abolishing entire TPA eco-system is not the solution. I believe that if Insurers are starting their own TPAs, it’s not for efficiency improvement (except for Bajaj Allianz who took the plunge of self-TPA very early, all other insurer’s TPA’s efficiency & service levels are almost pathetic) or love for customer satisfaction. It is emanating more from trying to control the consumer & his/her claims.

KS Sankar: TPAs are not being done away with – Insurance companies are becoming their own TPAs, that’s all. The advantages to the customer in terms of cashless hospitalization, single point claim settling contact, etc. have come to stay. Saying customers are better off without TPAs is like saying we were better off under the British Rule. Your generation might have been luckily spared this but in my times some old people by my standards used to make statements of this kind. My blood used to boil then, it does even now if someone says she is better off without a TPA. We (again in my past tense) took up this challenge and gave the option to the insuring public to take a policy with or without TPA services. For all the yelling and shouting about TPA inefficiency, when it came to the crux, trust me, there were no takers whatever for the non-TPA option, despite premium being lower by about 6%.

Q5. Healthcare Providers are black-listing TPAs for various reasons, specially payment or authorization delay

Abhitabh Gupta: There could be some TPAs who do not have adequate infrastructure which could lead to such an issue. Mostly these situations arise due to delay in payment by the insurance companies to TPAs.

Sudhir Sarnobat:
Hospitals are giving a knee jerk reaction for an issue or problem, responsibility for which they need to own up too. The hospital industry, without any regulations, has failed to self-regulate themselves. The mal-practices, instances of charging high prices, medical negligence, ethical issues are not being tackled by the industry. Instead of creating better & workable understanding or framework, they are looking at banning the TPA. Its same like Insurer’s approach of dropping the TPAs. The payment delay is majorly due to delay for payment from Insurers to TPA as well as disputes in billings where the hospitals ask for authorization on basis of information provided during admission and the actual diagnosis/treatment is totally different. Most of the hospitals too have not invested enough time & resources in understanding the insurance policy wordings/requirements and hence, have issues on payments. Those few corporate hospitals who have made efforts of understanding the insurance policies, unfortunately use this knowledge to take advantage of the cashless facility.     

KS Sankar: This was also expected to happen even while we were at the drawing board of the TPA model. It was expected TPAs will develop enough robustness to weather this storm in the tea cup. We expected what with the rate at which Hospitals are springing up, the vast majority, especially of the newer generation Hospitals will entertain TPAs. And this expectation has come true. Therefore, the storm kicked up by some of the Healthcare providers is only inside the tea cup. Having said this, the insurers need to take onus for two things – the expected rate at which more and more people were to have been brought under Health Insurance which will make life difficult for Hospitals not to recognize the TPAs (Insurer representatives) not being even neared, leave alone achieved. And avoidable inefficiencies in payments to healthcare providers that gave some healthcare providers the stick to beat the system with.

Q6. Is it the end of road for TPAs?

Abhitabh Gupta: TPAs are here to stay but they will have to change from their current role and graduate to actual medical management by implementing clinical protocols at network hospitals etc

Sudhir Sarnobat: Unless all the stake-holders (especially consumers & hospitals) do not take this issue up, TPAs will be favorite punching bag of members and will get all the blame. With more than 27 TPAs in system & PSUs who are not geared to handle claims on their own, I don’t think its end of the road for TPAs. But if  the TPAs don’t take initiative, leverage the media to bring forward their point of view and clean-up their own house to improve efficiency, it will not be long  before that Insurers will  start looking for alternates and that would be like going from the Pan to the Fire.

KS Sankar: I hope it shall soon be the end of the road for TPAs as they exist today because I hope that would be the beginning of the customer friendly road for new generation professional TPAs. I expect quite a few TPA companies to die as I do expect the TPA concept to evolve and flourish.

Final take: The current scenario has put huge pressure on TPAs and their future. Tough times will definitely shake off the weak links in the TPA community. As always, constraints also brin in various opportunities, including opportunity to innovate and fight back as a leader.

Hope you got a good perspective of the whole story.


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