We have recently been hearing a lot about the health insurance industry in India- its growth and its dynamics. The insurers, healthcare providers, the policyholders and the third party administrators (TPAs) are the major stakeholders of this booming industry. Amidst the various headlines pertaining to this industry, we have also heard about accusations being made by the insurers about the inefficiencies introduced into the system due to the TPAs. Currently the four public sector units (PSUs) viz. National Insurance Company, The New India Assurance Co. Ltd., United India Insurance Co. Ltd. and Oriental insurance Co. Ltd. are the dominant players of the health insurance industry in India that accounted for almost 60% of the non-life insurance segment in 2011-12. After IRDA Act 1999, the private companies have been allowed to enter into the Indian insurance market and since then they have been steadily eating into the market share of these PSUs by the virtue of their aggressive marketing and impeccable customer service. However, the PSUs have not lost their niche and thankfully a lot of its credit goes to the TPAs.
The concept of TPAs was in fact the brainchild of the PSUs which were introduced in order to provide cashless services to the policyholders for multiple insurers. Hence, promoting cost efficiency by pooling the administrative costs in the then relatively small market. Since then the health insurance segment has continued to surge ahead registering an annual growth rate of 18.44% in 2011-2012 accounting for around 22% of the total non-life insurance segment as per the IRDA Annual Report 2011-12. And with that the TPA industry has flourished and grown considerably matured with the expertise to deal with both healthcare providers and the policyholders while being answerable to the insurers. There are as many as 16 TPAs licensed by the IRDA catering to both the PSUs and the private insurers. However, only a few of them are currently noteworthy given their vast experience and credibility. These include MD India Healthcare (TPA) Services Private Ltd., Medi Assist India TPA Private Ltd., Paramount Health Services (TPA) Private Ltd., Raksha TPA Private Ltd., E Meditek (TPA) Services Ltd. and TTK Healthcare TPA Private Ltd. to name a few.
Recently a few of the private sector insurers have resorted to developing their own in-house TPAs and this trend continues with more of the private insurers adopting this practice given the prospects of the expanding health portfolio. The urge for having in-house claim processing units rather than the TPAs comes from the fact that it would provide them better control over their processes and enable them to generate valuable data which can be utilized effectively to reduce the incurred claim ratio through various mechanisms and thus rescue this bleeding health portfolio.
Simply put the growth and sustainability of any insurer is based on three factors the number of new policies underwritten, the renewal of existing policies and the incurred claim ratio each year. For a customer who is the policyholder or the insured in this case, the prompt and hassle free services especially when they are undergoing the emotional trauma due to illness or hospitalizations is of utmost importance. This ensures customer satisfaction which in turn ensures renewal of policies and enables capturing new customers by word of mouth and reputation. An efficient customer relationship management (CRM) team makes all the difference in providing customers satisfaction and retaining clients especially considering that a huge chunk of health insurance business comes from the corporates buying group policies for their employees which makes them extremely demanding customers given the size of their premiums. If the PSUs were to do away with the TPAs, can they ever imagine serving such demanding customers which requires a great deal of professionalism which by the long standing history of any public sector institutions has most often been lacking. PSUs will not only fall short of performing without the TPAs but will also lose their customer base to the private players who at this point have built their capacities and are only waiting for an opportunity for the PSUs to falter.
The incurred claims ratio is a function of the policy terms and conditions and the provider management and control. The underwriting of the policy is exclusively done by the insurers and does not involve the TPAs. Designing policies which provide sufficient coverage to the insured and at the same time do not generate losses for the insurer is typically an art that insurers need to master. Introducing sublimit, capping and co pays into the policies is based on intricate analysis of the claims settled by the TPAs. The required data needs to be recorded and compiled by the TPA on the instructions of the insurers. Most front runners of the TPA industry have built their competency to capture and analyse all such data which can be effectively utilized to decrease the claims ratio by designing better policies.
As for the provider management, unfortunately in India, there is no regulation over the healthcare providers and hence price control is solely market driven. Tariff Rates and Packages are pre-decided by the TPAs by negotiations with network hospitals. Tripartite agreements by the insurers and practices such as investigations for the fraud management are a few mechanisms through which the healthcare providers can be better controlled if not completely regulated. Further the operations of the TPAs are well controlled by the PSUs through frequent audits for quality assurance purposes.
The disappointment of the PSUs has not germinated due to the inefficiency or underperformance of the TPAs but has in fact arisen out of insecurities mounting due to the threat from the private players. If only the PSUs consider for a moment the skills offered by the TPAs and their own capabilities in controlling the operations rather than indulging into the blame game, it might be an eye opener. Presently, the idea of doing away with the TPAs has been pushed to the back burner following the opposition by the TPAs, an industry which is the breadwinner for a huge human resource. But this chapter has not been closed yet. Sooner or later the PSUs will have to take a look at the big picture, which is in the best interest of their own sustainability in the long run.
-Aarati Nadkarni
B.Pharm, MHA (TISS)
The concept of TPAs was in fact the brainchild of the PSUs which were introduced in order to provide cashless services to the policyholders for multiple insurers. Hence, promoting cost efficiency by pooling the administrative costs in the then relatively small market. Since then the health insurance segment has continued to surge ahead registering an annual growth rate of 18.44% in 2011-2012 accounting for around 22% of the total non-life insurance segment as per the IRDA Annual Report 2011-12. And with that the TPA industry has flourished and grown considerably matured with the expertise to deal with both healthcare providers and the policyholders while being answerable to the insurers. There are as many as 16 TPAs licensed by the IRDA catering to both the PSUs and the private insurers. However, only a few of them are currently noteworthy given their vast experience and credibility. These include MD India Healthcare (TPA) Services Private Ltd., Medi Assist India TPA Private Ltd., Paramount Health Services (TPA) Private Ltd., Raksha TPA Private Ltd., E Meditek (TPA) Services Ltd. and TTK Healthcare TPA Private Ltd. to name a few.
Recently a few of the private sector insurers have resorted to developing their own in-house TPAs and this trend continues with more of the private insurers adopting this practice given the prospects of the expanding health portfolio. The urge for having in-house claim processing units rather than the TPAs comes from the fact that it would provide them better control over their processes and enable them to generate valuable data which can be utilized effectively to reduce the incurred claim ratio through various mechanisms and thus rescue this bleeding health portfolio.
Simply put the growth and sustainability of any insurer is based on three factors the number of new policies underwritten, the renewal of existing policies and the incurred claim ratio each year. For a customer who is the policyholder or the insured in this case, the prompt and hassle free services especially when they are undergoing the emotional trauma due to illness or hospitalizations is of utmost importance. This ensures customer satisfaction which in turn ensures renewal of policies and enables capturing new customers by word of mouth and reputation. An efficient customer relationship management (CRM) team makes all the difference in providing customers satisfaction and retaining clients especially considering that a huge chunk of health insurance business comes from the corporates buying group policies for their employees which makes them extremely demanding customers given the size of their premiums. If the PSUs were to do away with the TPAs, can they ever imagine serving such demanding customers which requires a great deal of professionalism which by the long standing history of any public sector institutions has most often been lacking. PSUs will not only fall short of performing without the TPAs but will also lose their customer base to the private players who at this point have built their capacities and are only waiting for an opportunity for the PSUs to falter.
The incurred claims ratio is a function of the policy terms and conditions and the provider management and control. The underwriting of the policy is exclusively done by the insurers and does not involve the TPAs. Designing policies which provide sufficient coverage to the insured and at the same time do not generate losses for the insurer is typically an art that insurers need to master. Introducing sublimit, capping and co pays into the policies is based on intricate analysis of the claims settled by the TPAs. The required data needs to be recorded and compiled by the TPA on the instructions of the insurers. Most front runners of the TPA industry have built their competency to capture and analyse all such data which can be effectively utilized to decrease the claims ratio by designing better policies.
As for the provider management, unfortunately in India, there is no regulation over the healthcare providers and hence price control is solely market driven. Tariff Rates and Packages are pre-decided by the TPAs by negotiations with network hospitals. Tripartite agreements by the insurers and practices such as investigations for the fraud management are a few mechanisms through which the healthcare providers can be better controlled if not completely regulated. Further the operations of the TPAs are well controlled by the PSUs through frequent audits for quality assurance purposes.
The disappointment of the PSUs has not germinated due to the inefficiency or underperformance of the TPAs but has in fact arisen out of insecurities mounting due to the threat from the private players. If only the PSUs consider for a moment the skills offered by the TPAs and their own capabilities in controlling the operations rather than indulging into the blame game, it might be an eye opener. Presently, the idea of doing away with the TPAs has been pushed to the back burner following the opposition by the TPAs, an industry which is the breadwinner for a huge human resource. But this chapter has not been closed yet. Sooner or later the PSUs will have to take a look at the big picture, which is in the best interest of their own sustainability in the long run.
-Aarati Nadkarni
B.Pharm, MHA (TISS)
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A well written article Aarati!! Keep writing more...
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