Third Party Administrator (TPA)- Need to Strengthen the Pillars of Health Insurance Claims Management

Introduction                                                                                        

The liberalization of the Insurance sector and formation of Insurance and Development authority of India in 2000 has completely transformed the Indian Insurance Industry in the last two decades. There are currently 60 registered Insurers (including 7 standalone health Insurers) having physical presence with approximately 22,000 offices throughout the country. Further, with technological development the Insurers spread the gospel of Insurance in every nook and corner of the country through online presence. The Health insurance sector witnessed the emergence of the concept of Standalone health insurers and a new set of professional body namely the TPAs (Third Party Administrators) in the last two decades.

Health care and health Insurance awareness has tremendously increased Post-Covid in our country. Health insurance has become the most prominent segment in the insurance space today comprising 38% of the Non-Life Insurance business. Health Insurance Segment reported a growth of 21.32 percent in 2022-23 with the premium amounting to ₹ 97,633 crore (including personal accident) and the sector is further expected to grow significantly in the next few years. During 2022-23, the General and Health insurance companies have covered 55 crore lives under 2.26 crore health insurance policies (excluding policies issued under PA and Travel Insurance). They have settled 2.36 crore number of health insurance claims and paid an amount of Rs. 70,930 crores for the same. The incurred claim ratio for the year 2022-2023 stood at 89 %. With the expansion of health insurance business and large number of claims settled by the Insurers, the services provided by the third-party administrators have become more significant in building up the trust and reputation of the Insurance Industry.

The success story of increasing health insurance awareness and the trust of the public on the insurance companies for getting the benefit of cashless hospitalisation and relieving them from the double burden of sickness and financial hardship, thus depends on the ability and performance of the TPA working for it.

This study discusses the role assigned to the TPAs in the current health insurance market, the role actually being performed by them and some measures to improve their performance.

 Claims Service and the concept of Third-Party Administrators

The most important function of the Insurers being its claim settlement. It is the litmus test for the Insurance company which helps in building up its reputation to gain the trust of the customers. Inadequate service, delays in service and repudiation of claims are the major concerns from the customer perspective which an Insurer needs to manage by prompt and diligent services to the Insured customer. In order to effectively manage claims, avoid delays, unjustified repudiations and bring down the cost of health care the prologue of TPAs (Third Party Administrators) was introduced in the health insurance sector with the enactment of TPA regulations, 2001.

The concept of TPA had its origin in the United States (US), where the concept of managed health care was introduced in 1973 to keep the medical cost affordable and under control in US. TPAs in India are licensed by IRDAI and can be engaged, for a fee or remuneration by the insurance company to provide health services. They were set up to support the insurance companies at the back end for providing prompt claims management by networking the hospitals and provide cashless hospitalisation service to the insured customer. Though TPAs were set up on the lines of Health Maintenance organisations (HMO) in the US, they are quite different in their operations.

HMOs under the US managed care system, provide comprehensive health care services to their members and are remunerated by fixed periodic payment. In the US, HMO members under the managed care system select a “primary care physician” from the list of approved providers. These physicians act as “gatekeepers” and coordinate for all the basic health care needs of their patients. A specialist care can be availed by the members only on referral by their physician. This keeps a control on unnecessary care and over treatment and thereby control the cost of care.

HMOs also control the costs by providing care only within a restricted geographical area. Visits to doctors or hospitals outside the network are covered only in emergency or when the patient is travelling. These HMOs are independent organisations, and are allowed to underwrite the risk. Hospitals also provide the HMO service and they admit the patient in the hospital of their choice to curtail the cost.

In India, TPAs are required to get a license from IRDA and maintain a minimum equity paid-up capital of ₹ 4 crore and also maintain a net worth of ₹ 1 crore. They are required to identify themselves with one or more insurance companies and have to enter into an agreement with the Insurance companies and providers. They are not allowed to enter into any business activities, to do marketing and are also not allowed to advertise without the permission of the insurance companies. The selection of the hospital is the privilege of the patient and the TPA assists in the hospitalization process by issuing pre-authorisation letter to the providers for cashless claims and pay the claim on time to the hospital by liaising with the insurance companies. The policyholder can choose a non-network hospital too, for which the claims are paid through reimbursement procedure.

Most of the public and private sector companies hire TPAs for claims management. Currently, there are 22 registered TPA having network with 1,90,340 hospitals in India.

 Health Services provided by a TPAs in India:

• Servicing of claims under health insurance policies (Cashless/Reimbursement)
• Servicing of claims for Hospitalization cover, if any, under Personal Accident Policy and domestic travel policy
• Pre-insurance medical examinations in connection with underwriting of health insurance policies
• Health services matters of foreign travel policies and health policies issued by Indian insurers covering medical treatment or hospitalization outside India
• Servicing of health services matters of travel or health or medical insurance policies issued by foreign insurers for policyholders who are travelling to India

Status of Heath Insurance claim settlement in-house and through TPA in India

As per IRDAI report 2022-23, the number of health insurance claims settled by General and Health Insurers was 2.36 crore and paid ₹ 70,930 crore towards settlement of these claims. The average amount paid per claim was ₹ 30,087. In terms of number of claims settled, 75 per cent of the claims were settled through the TPA balance 25 per cent of the claims were settled through in-house mechanism. In terms of mode of settlement of claims, 56%  of total number of claims were settled through cashless mode and another 42% through reimbursement mode and 2% of the total claim amount were settled through “both cashless and reimbursement mode”.

Claims Paid under Health Insurance Business of General and Health Insurers (2022-23)

Note: Figures in bracket are per cent to total.

 IMPEDIMENTS ASSOCIATED WITH THE FUNCTIONING OF TPA

 a) Lack of proper qualified manpower at TPA office

Though the TPAs appoint qualified CEOs and qualified doctors as the directors of the company as per the norms specified by the IRDAI in TPA regulation, there is shortage of other technically qualified manpower in the TPA offices. The personal working in TPA should have adequate knowledge of the various health insurance products, about the warranties, exclusions, waiting period and benefits available under these products. In the absence of technically qualified staff who lack proper knowledge of the latent intricacies associated with health insurance contract customers’ experience is quite unpleasant and leads to following problems:

• Delays in Pre-authorization letter

Pre-authorization for cashless services requires round the clock availability of trained manpower which is a serious problem faced by health insurance customers.  In the Indian context, where most of the customers are uneducated, it is difficult for them to engage the services of TPA, only the educated and more aware customers are able to manage their services and get the treatment done on cashless basis. Even in cases of planned hospitalisation, TPAs are not able to give pre-authorisation letters on time and there are time lags due to shortage of man power.

• Denial of Pre-authorization letter /Cashless services

Lack of proper liaison with the providers, insufficient information from the hospital desk and lack of knowledge about the various conditions and exclusions clauses in insurance policies leads to delay and denial for pre-authorization of cashless treatment. Hence many claims are processed through reimbursement resulting in disputes and litigation between the policyholders and Insurers /TPAs.

• Delays in Reimbursement

In the case of unplanned treatment, customers often file claim through TPAs by reimbursement process and there are delays in these claims settlement. Proper audit/checks on the performance by TPAs can only help to control these lacunae.

e) Lack of liaising between the Provider’s desk and the TPA office

There are delays in approval for pre-authorization by TPAs also due to communication gap from the Provider’s desk. Many times, TPAs raise query to the hospitals for approving the pre-authorization which are not promptly responded by the Hospitals, resulting in delayed Pre-authorization. Often the Pre-authorization comes just before the discharge of the patient, thereby further delaying the discharge of the patient and escalating the cost.

There are dispute related to billing where the hospitals ask for authorization on the basis of information provided during admission and the actual diagnosis/treatment is totally different. Lack of knowledge and understanding about insurance policy wordings/requirements creates many disputes on payments.

f) Cashless service at an enhanced cost to the customers

The Insurers charge extra premium from the customers for cashless services. When claims is a post-sale service provided by the Insurers, it is unethical on the part of the insurers to charge a separate fee for cashless service . The TPAs are paid by the insurer for the services on a fee or remuneration basis. If the services are a part of the insurance contract, it should be made available to all the customers and the cost for this post sale service needs to be incorporated in the premium cost itself.

g) Cost escalation by the providers

Originally TPAs were required to rationalize the cost of treatment. But the reality is altogether different. The negotiated rates for various procedures and diagnosis are often on higher side for the insured customers. Thus, are working contrary to the role assigned to them and lack professional ethics.

 As there is no regulatory body of healthcare providers, the hospital industry does not self-regulate itself. Several malpractices have crept into the system, instances of charging high prices, medical negligence, over treatment to inflate bills, unnecessary tests are the ethical issues which are on rise and impacting the health of the health insurance system. These need to be checked by the TPA while negotiating with the provider. Cost containment of providers is a major challenge for the TPAs and Insurers. A closer look into the intricacies of medical treatment on the part of TPA when the patient is hospitalised could save the Insurers pocket from inflated claims.

h) Improper data capturing by TPAs

TPAs generate lot of valuable and comparable data on utilisation of services and their cost structures. Incomplete and improper data capturing makes future estimates difficult. Capturing of proper diagnostic codes at the TPAs office is essential for analysis and predicting future trends.

Only 66% of input claim data has valid diagnostic codes in the data analyses report of Insurance information Bureau report 2019-2020. Strict regulations, proper implementation of the standardisation initiatives with proper training of the personal capturing data are to be enforced effectively to make the data reliable for proper interpretation, predictions of morbidity and pricing of products.

RECENT INITIATIVES BY THE GENERAL INSURANCE COUNCIL AND IRDAI – CHALLENGE FOR THE CLAIMS SERVICING

Cashless Everywhere

The “cashless everywhere” initiative was launched January,2024 by the General Insurance council has facilitated the patients with health insurance coverage to avail treatment even at any non-network hospital besides the network hospital on cashless basis anywhere in the country. This Cashless Everywhere is subject to:

1. Intimation to be received at least 48 hours prior to the admission by Insurers for planned hospitalisation.

2.Intimation to the Insurance Company within 48 hours of admission for emergency treatment.

3. The claim should be admissible as per the terms of the policy and the cashless facility should be admissible as per the operating guidelines of the Insurance Company.

The initiative is though a great facility to the customers but there may be many practical challenges for the Insurers and TPAs. In cases of disparity in the rates being charged by the Providers and the reimbursement rates of the Insurers, the patient might have to pay the difference out of pocket leading to their grievances. Unless the Providers are regulated and rates charged are standardised at, implementation of Cashless facility in Non-Network hospitals is going to be a tough task for TPAs and Isurers.

IRDAI new norms for health Insurance claims servicing

 IRDAI recently issued a Master Circular on Health Insurance Business specifies following major servicing rules for the Insurers:

a. Every insurer to achieve 100% cashless claim settlement in a time bound manner and to go for reimbursement of claims only in exceptional circumstances.

b. Decision on the request for cashless authorization to be taken immediately in one hour from the receipt of request. Necessary systems and procedures are required to be put in place by the Insurer immediately and not later than 31^st July, 2024.

c. Insurers to arrange for dedicated Help Desks in physical mode at the hospital to deal and assist with the cashless requests.

d. Insurers are also required to provide pre-authorization to the policyholder through Digital mode.

e. To grant final authorization within three hours of the receipt of discharge authorization request from the hospital. In no case, the policyholder shall be made to wait to be discharged from the Hospital. In case of any delay beyond three hours, the additional amount if any charged by the hospital is to be borne by the insurer from shareholder’s fund.

f. In the event of the death of the policyholder during the treatment, the insurer is required to immediately process the request for claim settlement and get the mortal remains (dead body) released from the hospital immediately.

g. No claim can be repudiated without the approval of the Claims Review Committee.

h. Performance Monitoring of TPAs- Insurers to have a board approved policy not only for performance monitoring and obtaining feedback from customers but also to have criteria for claw back of remuneration/charges paid to TPA based on the customer feedback. The clawed back amounts will be passed to the customer.

The norms set by the Regulator are meant to strengthen the services and better customer experience but with the crux of the issue is, are these norms achievable considering the current claims services and impediments associated with the functioning of the Insurers/ TPAs. As per IRDA report 2022-23, considering both settlement through TPAs and In-house claim settlement only 56 per cent of total number of claims were settled through cashless mode and 42 per cent were settled through reimbursement mode. 100% cashless claim settlement seems to be a big challenge for Insurers/TPA and needs a complete Revamping and Restructuring of the current servicing practices.

SOME MEASURES FOR BETTER FUNCTIONING OF TPAS 

Although the expansion of TPA services during the last decade has reduced financial barriers for seeking healthcare for the customers opting cashless hospitalisation services but has contributed in escalating healthcare cost. The system of TPAs can work effectively and efficiently in the Indian market only if strict measures are taken to control the pitfalls in the system. Some of the measures which could make the services of these intermediaries worth is:

 a) Cashless claims service at no extra cost to the customers.

Claims management is an important aspect of post-sale service which helps the Insurers to build up their brand image. Insurers who manage their claims through TPAs, charge higher premium from the customers. Claims management expense is a component of pricing health insurance premium, hence charging a separate cost for the same to the customers is highly unethical.

 b) Effective monitoring of the services of TPA

The insurers lack of monitoring and auditing of the TPA has result in claim cost escalation. Concurrent auditing by TPA staff and verifying the facts at the time of hospitalisation if done effectively will prevent the providers from inflating the bills by over treatment. Insurers need to evaluate the customer service parameters- average cost of common procedures, delays, grievance reddressal and accuracy of claim processing frequently.

The Regulator by means of more stringent regulations needs to specify the scope of services to be provided by the TPAs to the Insurance companies. Further, the services should be monitored and objectively reviewed by the Regulator so as to control unethical practices. The new health insurance rules by the regulator are a step forward in this direction, to have clawback policy for the remuneration paid to the TPA based on customer feedback.

 c) Qualification/Training of TPAs and Hospital Desk staff

There is complete lack of dedicated customer support services to assist policyholders with queries related to cashless treatment by many TPAs. Major reason for the inadequate service is due to lack of management competencies and capabilities by the personal at TPAs office. Untrained and incompetent personal cannot handle the latent intricacies associated with health insurance contract. TPAs should engage people who understand the work and functioning of hospitals. There is a need to emphasize on the selection of adequately qualified personnel and training regime of the person in interface with the customers on helpline.

TPAs can only ensure quality services at network providers and have influence on controlling the cost only if they are themselves qualified and know the complexities of various healthcare procedures and treatment protocols of health insurance contract. Properly trained personal would further make data capturing accurate and effective for various stakeholders. Besides technical knowledge, soft skills and proper behavior of the personnel dealing with customer would result in reducing grievances and customer satisfaction.

Proper knowledge of the various health insurance products, their benefits and claims processing is also extremely important for the staff at the Providers desk who deals with the TPAs officials.

d) Embracing Technology along with human interface

Embracing technology to provide highly attentive and prompt service to the insured customers is very crucial for the TPAs and Insurers. Investment in tech tools like mobile apps, online portals and chat bots has become essential to empower the customers to communicate with the TPAs in no time to file a claim through scanned documents and know the status of the claim. Many forward looking TPAs are leveraging technology for data analysis, Machine learning and automation to deliver better services. With more use of AI /ML better solutions and services are expected from the TPAs by Tech-savvy customers.

Technological disruptions are vital for streamlining the claim process promptly but Insurance services will continue to require human intervention to provide a hassle-free experience to the hospitalized customer. For instance in situations where the primary insured is himself hospitalised and critical, he could not access the messages sent by TPA/Insurer related to queries for requirement for issuing the Pre-authorisation letter. His caregivers need to be approached by the TPA/Hospital Desk for such issues. These small communication gaps are the cause of all delays, leading to prolong treatment and delays at the time of discharge when the patient has to wait for hours to get the approval from the TPA/Insurer.

Moreover, many senior citizens and illiterate people who are not tech savvy will always require a human interface in the claim process

e) Increasing consumer awareness and educating the customers

There is less awareness about the service provided by the TPAs. All stakeholders- TPAs, providers, insurers, regulator and the government need to collectively address this issue to increase awareness about the functioning of TPA and the process involved for availing the Cashless service by the customers. Unless the customers are educated enough of the services offered, the services will remain unutilized. The recent initiatives of “Cashless everywhere” and time lines for issuing Pre-Authorization in one hour and final approval within 3 hours of receipt of discharge authorisation request, needs to be publicized widely to create awareness amongst the customers.

Conclusion

Today, a number of customer services are being provided by the TPA’s and 75% of the total number of health insurance claims are being paid through them, they are the custodian of Insurance Company’s repute, they need to bring in more professionalism in their approach to hallmark customer satisfaction and control cost. Training and soft skill development at the TPAs end, developing their network and relationship with the providers to provide appropriate quality care at reasonable cost are inevitable to gain the trust of the Insured customer. The success of health Insurers ultimately depend on the prudence, precision and skills of claim management to the satisfaction of their customers either in-house or through TPAs. Thus, TPA and Insurer needs to bring in more transparency, competition, cost containment and better services.

Implementation of the new health insurance rules from August 1, 2024 will ultimately rests with the way the TPAs function and adopt technology to comply with the time frames specified. More stringent regulations and monitoring for TPAs is imperative to achieve and manage 100% claims through cashless mode.