The advent of Third Party Administrator (TPA) begins in India with the development of Mediclaim, which was introduced in 1986 by the Public Sector Insurers. Since Mediclaim was an indemnity policy, insured person could select a hospital, avail treatment at the hospital, including any surgical treatment (in-patient only, with a minimum 24 hour stay). Once the insured patient was discharged from the hospital, the policy holder would have to submit claim to the Insurance Company, with discharge summary and all medical bills along with supporting documents for diagnostics, prescription for medicines, etc. The Insurer would process the claim and arrange reimbursement as per limits and sub-limits of the policy. Slowly, it was recognized that there was a gap in the offering for medical insurance and that some areas of policy needed to be improved. The following problems were given due consideration for improving the quality of service provided.
(a) Paying entire hospitalization expenses first, then to submit a claim to obtain reimbursement and then waiting for the insurer to process and reimburse the claim.
(b) Lacking of knowledge as to how much of the overall expenses would be reimbursed even if the claim would be admissible.
To bridge the gap of service, a novel concept of Third Party Administrator (TPA) was introduced in India through the notification on TPA-Health Services Regulations, 2001 by the Insurance Regulatory and Development Authority of India (IRDAI) and it has been updated in 2016.
Their basic role is to function as an intermediary between the Insurer and the Insured. The core product of service of a TPA is ensuring CASHLESS Hospitalization to policy holders.
There is Service Level Agreement between
- A TPA and an Insurer
- A TPA and a Network Provider(Hospital)
- A TPA, an Insurer and a Network Provider.
TPA ensures that Policyholder gets hassle-free services. Insurance Companies pay for efficient and cost-efficient service, and Network Providers get their reimbursement on time. Their activities include issuing identity cards to the Policyholders, 24-hour help-line for customer services, informing the customer regarding empanelled hospitals, arranging for specialized consultation and claim processing during admission of the policyholders. By doing this it was expected that the TPAs would develop appropriate systems and management structures aiming at controlling costs, developing protocols to minimize unnecessary treatments/investigations, improve quality of services and ultimately lead to lowering of insurance premiums.
Few Private Insurers and Stand Alone Health (SAH) Insurers do not utilize the services of TPAs for Retail Health Business. They provide service to customers through their In-House Health Administration (IHA) Team.
Therefore, the health Insurance customers are getting service either from the independent service provider (TPA) or from the In-House Service Administration (IHA).
But the present day customers are not persuaded by the age-old product-driven attitude of Insurers. They look for quality of services and past experience–specifically in the area of claim settlement. The following areas may be most important in moment of truth i.e., when a customer gets the impression about service.
| Areas: |
| Time taken for approval of pre-authorization of cashless claims to Hospital. |
| Time taken for final approval of cashless claims to Hospital. |
| Visit and guidance to patient in Hospital. |
| Negotiation of cost with the hospital on a case to case basis and getting early payment discount on bills and passing the benefit to customer. |
| Time taken for settlement of re-imbursement claims after submission of all documents. |
The outcome of this assessment of the customer experience is reflected in the selection of Insurer. Creating WOW feelings at the time of claim ensures customer loyalty and develops rock solid security in the minds of the prospective customers. Because most customers believe more in the f-factors—-friends, families, face book fans, than in marketing communications. Insurers have introduced a system through which they monitor the performance of the TPAs ensuring appropriate service provided to the customers at the time of claim. Quality of service perceived by the customer is converted into business.
Let us see some numbers on Business growth of major Insurers for Retail Health Business only. We have taken two Private General Insurers, two Stand alone Health Insurers and four Public Sector General Insurers. Since Group health Insurance and Government sponsored health Insurance have different compulsions/perspective, we discuss only Retail Health Insurance.
Premium on Retail Health for Major Insurers in Rs. Crores (Net Earned)
| Insurer | 2013-14 | Market share in % | 2016-17 | Market Share in % | Service Provider |
| Bajaj Allianz | 224 | 3.9 | 350 | 3.6 | In-house |
| ICICI Lombard | 225 | 3.9 | 466 | 4.8 | TPA |
| Apollo Munich | 329 | 5.8 | 656 | 6.8 | In-house |
| Star Health | 551 | 9.7 | 1652 | 17.1 | In-house |
| New India | 1252 | 22.1 | 1707 | 17.7 | TPA |
| National | 1040 | 18.3 | 1243 | 12.9 | TPA |
| Oriental | 708 | 12.5 | 1007 | 10.4 | TPA |
| United India | 611 | 10.8 | 993 | 10.3 | TPA |
We find, Market Share for almost all Private Insurers and Stand Alone Health Insurers have increased whereas reverse is the case for Public Sector Insurers during the same period.
Often it is said that there is peculiar relationship between the business growth and Incurred Claims Ratio (ICR). Therefore it is relevant to compare the ICR of these Insurers.
Incurred Claims Ratio(%) of Retail Health for Major Insurers (Net Earned)
| Insurer | 2013-14 | 2014-15 | 2015-16 | 2016-17 | Service Provider |
| Bajaj Allianz | 59 | 61 | 65 | 69 | In-house |
| ICICI Lombard | 70 | 62 | 61 | 50 | TPA |
| Apollo Munich | 56 | 56 | 60 | 51 | In-house |
| Star Health | 67 | 63 | 52 | 60 | In-house |
| New India | 83 | 80 | 81 | 79 | TPA |
| National | 98 | 103 | 92 | 98 | TPA |
| Oriental | 111 | 103 | 115 | 108 | TPA |
| United India | 103 | 101 | 99 | 96 | TPA |
**Source: IRDAI Hand Book
From the available data we find ICR of Public Sector Insurers (PSU) varies from 79% to 111% whereas for Private Sector Insurers varies from 51% to 70% for last four years ending FY 2016-17. Even recently published data of IRDAI for 2017-18 exhibits Health ICR of Public Sector Insurers is 109.86% whereas for Private Sector Insurers and Stand Alone Health Insurers are 71.32% and 59.58% respectively.
But it is difficult to get authentic information/data available in the public domain on the following aspects:
- In case of cashless claim, whether the hospitals get time bound payment from the Insurers; there is no mismatch between final approved amount of claim authorized by the TPA to hospital at the time of discharge of patient and the actual amount paid to hospital for the same claim.
- Whether the cost of procedure and number of days staying in hospital for medical management case varies with the payment schedule of the TPAs /IHAs to Hospital. (Earlier payment to hospital means lesser outgo on claims?)
- Whether the cost of procedure and number of days staying in hospital for medical management case is less if the customer pays upfront to the hospital and seeks claim on re-imbursement basis. (Cashless claim is costlier than Reimbursement claims?)
- Whether the TPAs provide service to the customers of the Insurer as per provisions (including Turn-around-Time for different services) laid down under the Service Level Agreement (SLA) between the TPA and the Insurer. (“Implementathons” of SLA from paper to ground?)
- Whether the TPAs get their service charges/fees timely from their Insurers as per provisions of the SLA.
This information is available with the TPAs and Insurers. All these factors have a strong bearing on the customer service and Incurred Claims. This is the time when the concerned stakeholders would critically analyze the data, discover insights, find out why something is happening in addition to what is happening and finally come out with solutions. This will drive to smoothen the process and enhance customer experience leading to the sustainable growth of Retail Health Insurance in India.
