Third Party Administrator's Role in Health Insurance

Ernakulam Insurance Institute recently(11.12.2010) organized a national seminar on 'Evaluation of TPAs in Health Insurance'. The seminar invited lots of attention in the context of public sector general insurance companies removing leading hospitals in metros from Preferred Provider Network(PPN) list, for fraudulent practices like inflating hospital bills.

Mr.P.J.Joseph, General Manager, United India Insurance Co. Chennai, who was the key speaker, observed that a comparison of prices charged by metro hospitals with Central Government Health Scheme(CGHS) governed major hospitals showed huge variations. For example CGHS charges just Rs.15,000 for a caesarean delivery compared with Rs.1,35,000 charged by leading hospitals. He said, the data collated by the insurance companies revealed that a majority of the tertiary-plus-care hospitals in the country have formed a cartel and are stoking medical inflation.

While health-care costs have been rising, health insurance premium rates haven't risen at the same pace. This situation leads to a bleeding health insurance portfolio of the insurance companies. General insurance companies have a claim ratio of around 140 per cent on health business, which means that for every Rs.100 earned, insurance companies spend Rs.140 to service service the claims, Mr.Joseph said. General insurance companies garnered more than Rs.8,000 crores during the financial year 2010 as health insurance premium.

The Third Party Administrators-Heal Services(TPAs) was introduced in health insurance as part of the reforms in insurance sector by special notification of the IRDA, in 2001. TPAs are mandated to perform functions like arranging cashless claim service, speedy and effective claim processing, controlling claims cost, reducing incurred claims ratio etc by use of special expertise.

Dr.George E Thomas, Secretary(General Insurance), Insurance Institute of India, Mumbai, in his presentation explained that a Committee under Regulation 23 of the IRDA(TPA) Regulations, 2001, was constituted with the terms of reference such as:1)To examine the role of TPAs in the current health insurance market scenario and to make suitable recommendations clarifying their utility to the furture growth of the health insurance industry, 2) To evaluate the performance of the TPA system till date, with particular reference to the objectives behind the introduction of the TPA system and specially with regard to the provision of Cashless facilities, data management, timely settlement of claims and reducing claims ratios, 3) To suggest standards of best practices for TPAs, 4) To devise customer service bench marks for TPAs including TAT for ID cards, settlement of claims etc. with optimum and maximum time lines for different process.

Quoting the report Dr.Thomas said the Committee recognized the lack of standards for grievance redressal in the health insurance delivery system and sought to address the same. The core of this task was to keep the process simple for the consumer and also guide him to the right level for the most efficient redressal of his/her grievance. Standardization of discharge protocol is also suggested by the Committee, after consultation with hospitals and TPAs, he said.

Quoting the CAG report No.10 of 2010-11(http://www.cag.gov.in/html/reports/commercial/2010-11_10PA/chap5.pdf), Dr.Thomas pointed out that the cashless settlement has been achieved to the extent of 55 per cent only and cases of delay in issue of ID cards, and claim settlement beyond working days were noticed in respect of 72 per cent of the cases.

CAG report has further recommended:1)To review and introduce a system of payment of service fee with suitable incentive/disincentive differentiating between group and individual policies; 2) To develop a mechanism to evaluate the performance of TPAs on issue of identity cards, settlement of claims on cashless treatment/reimbursement; 3) To strive to achieve standardization of the hospital charges and clinical procedures through negotiation with the service provides to contain cost.

CAG Report has concluded that "the main objective of introduction of TPAs for providing cashless services to the policy holders, remained largely unfulfilled."

In their research paper titled “Third Party Administrators and Health Insurance in India: Perception of Providers and Policyholders” Ramesh Bhat, Sunil Maheshwari and Somen Saha(http://www.iimahd.ernet.in/publications/data/2005-01-02.pdf) of Indian Institute of Management, Ahamedabad, observed that, “General awareness about TPAs existence and services they provide is low. Policyholders relay more on their insurance agents than on the insurance companies or Third Party Administrators.”

Mrs.Ajitha Menon, Senior Manager, TTK Healthcare TPA Pvt. Ltd. highlighted services rendered by TPAs and argued that they performed value-added services in the health insurance industry. Best way to control the cost of hospital treatment is for the insurance companies to set limits for specific treatment, Mrs.Menon said. The New India Assurance Co. recently, set the limit for cataract surgery and is accepted by most hospitals. Mr.Sharad Shrivastava Secretary General, Insurance Institute of India, Mumbai, highlighted the efforts of the Institute in promoting research and education activities, by assisting the regional centers. The Institute has initiated a thorough restructuring of the academic programmes, he said.