Role of TPA in Health Insurance - Institute of Actuaries of India
24th Indian Fellowship Seminar Topic: Role of TPA in Health Insurance and associated risk in having a TPA Guide Name: Murugan Eshwari Presenters Names: Keerti Singh Shivali Chopra Sanjay Gupta Date & Place: 10-11th Dec 2015 , Mumbai Indian Actuarial Profession Serving the Cause of Public Interest Third Party Administrators (TPA) TPA is an IRDAI approved Specialized Health Care Service Provider Evolution of TPA 15 years back the Key Challenges faced by health insurance industry were: No rationalization in the cost structure of treatment in private healthcare system High administrative cost of insurer Slow claim processing Lack of specialization TPAs were introduced in response to these issues. TPA was introduced through the notification on TPA-Health Services Regulations, 2001 by the IRDAI. A fixed percentage of premium is paid as fee by insurer to the TPA Currently, there are 30 TPAs in health insurance sector. www.actuariesindia.org
2 Role of TPA in Health Insurance TPAs basic role is to act as an intermediary between the insurer and insured and facilitate the cashless service to policyholders. Hospital 2 cla les aim im s s sf or m s Cl Ca sh En TPA nt
e llm ro t en em s ttl m Se clai of Patient k or tw Ne Hospital 1 Insurer Customer Insurance contract www.actuariesindia.org
3 Key Services rendered by TPA Enrollment process Provider contracting and management Claims processing Claim management and control Grievance Redressed Management Investigation and fraud control
Customer service-account management www.actuariesindia.org 4 Benefits of TPA to the insurer A new insurance entrant will have many benefits to tie up with a TPA Large network, empanelment Immediate access to highly trained claim administrators Cost saving Better services to policyholders Faster claims processing Provision of cashless services at much ease Insurer can focus more on its core tasks - Distribution, Underwriting, Business strategies
Protection of brand reputation on entry level Control of possible frauds by the private healthcare providers TPA helps insurer in analyzing the data www.actuariesindia.org 5 Risk associated with TPA (1/2) High dependency on TPA can lead to sudden halt in insurers business if the agreement with TPA gets closed Fraud by the TPA can lead to reputation damage for the insurer as well
Less control over claim processing for Insurer which can lead to lower quality TPA has lower incentive in controlling the claim cost for an insurer Poor claim management can lead to higher claim cost and thus higher premiums. e.g. poor investigation, poor claims adjudication Insurer is dependent on TPA for providing good services to its customers as TPA has a direct contact with customers Poor services by TPA may harm insurer reputation Weak hospital networking www.actuariesindia.org 6 Risk associated with TPA (2/2)
Delay in payment to healthcare providers There can be difference in understanding of terms and conditions of an insurance policy between TPA and insurer Less control over data specially in Group Schemes Inconsistency in the data formats and data definitions between various TPAs Delays in data transfer to insurer The system of TPA might not be in line with that of the insurer, in which case there is a lot of manual involvement and thus chances of error www.actuariesindia.org 7
Shrinking role of TPA (1/2) In the 2013 Health regulations by IRDAI - Every claim has to be approved by the insurer - and paid by the insurer - No direct hospital agreements by TPA - Whole enrollment process to be carried out by insurer In the most recent draft regulations, the working capital requirement has been increased from Rs. 1crore to Rs. 5crores Introduction of a new TPA (Health Insurance TPA of India):
owned by non-life insurance PSUs would mean all PSUs business moving existing TPAs to this one TPA www.actuariesindia.org from 8 Shrinking role of TPA (2/2) Maturing private insurers preferring in-house claims processing to TPA services due to - Direct link with customers, - Provide better services and - Exert greater control over claims management www.actuariesindia.org
9 Future of TPAs Regulator plays an important role in defining the future of TPAs Shrinking role and stricter regulations might lead to closure of some TPAs or merger between TPAs Entry of new insurers into health may work in favor of the TPAs. However, many insurers prefer in-house TPA and new insurers may move gradually to in-house TPAs over time. Reduction in TPAs would lead to newer negotiations in TPA fees TPA will have no benefit doing only claim processing and servicing, in the longer term
TPAs need to specialize in certain areas. TPA will have to create value added propositions in the long term by entering into wellness , preventive health services www.actuariesindia.org 10 Q&A Thank You www.actuariesindia.org 11 Annexure References 1. Third Party Administrators and Health Insurance in India: Perception of Providers and Policyholders by Ramesh Bhat, Sunil Maheshwari and Somen Saha 2. IRDAI regulation on TPA -health services 3. Regulation on Standardization in health insurance www.actuariesindia.org 12
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