JP Pattanaik,
Healthcare Business Analyst,
United Health Group Information Services Pvt Ltd

Health insurnace is one of the fast growing sectors in India. Though, the concept is a few decades old, the sectors has witnessed tremendous growth recently

The evolution of Third Party Administrators (TPAs) and cashless facility go hand-in-hand. TPAs have contributed significantly in streamlining the processes and providing unbiased services to millions of customers. Of late, the industry is experiencing a shift in thought. Many insurance companies have in-house claims administration units. Health insurance may be defined as an individual or group purchasing healthcare coverage in advance by paying premium to meet the expenses of unforeseen health related ailments. Thus, it is an arrangement that helps to reduce the financial risks involved with an individual or a group when falling sick and in need of medical attention. Health expenditure in India is nearly six percent of the entire GDP with current public spending of 1.4 percent as against five percent recommended by the World Health Organisation (WHO). At present, the insurance coverage is negligible, covering about 15 percent of total population through different forms of the total health insurance. Most of the public funding is for preventive, primitive and primary care programmes while private expenditure is largely for curative care. High financial burden, due to health related expenses, is a major cause of debt among the lower middle class and  poor families. New diseases, lifestyle diseases for example bring enormous challenges to healthcare financing system today. Given the fact that cost  of healthcare expenses is growing at a rapid pace, the importance of health insurance as a financial risk management tool is bound to grow.

Evolution of TPAs in India
The evolution of health insurance can be divided broadly into two phases. The first phase can be referred as the phase before dawn of the millennium and the second phase post dawn of the millennium to the present. The year 2001 witnessed the rise of the Third Party Administrators (TPAs) in health insurance industry. TPAs are regulated by Insurance Regulatory and Development Authority (IRDA) and mandated to provide healthcare related services. The claims servicing and other administrative activities are now outsourced to the TPAs, at a remuneration of four to six percent of the premium collected. Till date, 29 TPAs are in operation. With the introduction of TPAs, insured could avail cashless benefits. It was felt that the introduction of TPA will ultimately benefit the consumers. The objective of introducing TPAs was to improvise on customer services, and also bring about a reduction in the claims ratio by greater pro-active involvement in the area of claims administration. Introduction of TPAs as an important stakeholder brought in its own the health ecosystem.

Role of TPAs
TPAs perform a varied range of functions. Right from bringing the providers on-board for creating a network of hospitals to providing cashless service to the insured, TPAs play an important role. TPAs being in the center of provider and payer relationship, their role are very critical for smooth ution of health insurance transactions and keeping the operational hurdles at bay.

Issues and challenges
TPA intervention in the health insurance industry seemed to be the right choice during the first few years. The belief that the TPAs would provide unbiased service and will be able to maintain a healthy relationship with all stakeholders seems to be fad. The industry as a whole facing issues in the current model, some of which are as follows:


Health expenditure in India is nearly six percent of the entire GDP with current public spending of 1.4 percent as against five percent recommended by World Health Organisation (WHO). At present, the insurance coverage is negligible; covering about 15 percent of total population through different forms of health insurance


In-house claims administration
During the initial days, almost all insurance companies were associated with one or more TPAs for claims administration, i.e. while the policies were sold by the insurance companies, TPAs used to take care of all administrative aspects of claims management. TPAs were paid for the services provided, usually a fixed percentage of the premium collected from the enrolled members. The fee varies from four to six percent based on the individual negotiations. However, few companies like Bajaj Allianz have been processing the claims on its own (inhouse claims administration) for years now. The stand-alone health insurance companies such as Max Bupa and Star Health Insurance have their own in house claims administration units and they do not rely upon any TPAs. The public sector insurers have plans to set up a joint internal TPA for in-house claims administration. The joint TPA would serve only the public sector insurers. The market share of the public sector insurers is over 60 percent.


The public sector insurers have plans to set up a joint internal TPA for in-house claims administration. The joint TPA would serve only the public sector insurers. The market share of the public sector insurers is over 60 percent


 Advantages
It is expected that insurance companies have better control over the processes when carried out internally. Currently insurance companies pay around 4-6 percent to TPAs towards administration fee which is perceived as a higher amount by the insurance companies. Insurance companies also believe that the influential providers will have very little say on manipulation of claims thereby preventing fraud. The general perception is the customers do not have to run  around TPAs, the customer service will be more efficient and the insurance companies can bring control over claims ratio. At the same time, since insurance companies will have all the controls, the transparency of the processes still remains a question. Insurance companies may try their best to show case their dominance in the industry.

 Industry impact
The recent trend of moving towards in-house claims administration by the health insurance companies is going to have huge impact on the existing TPAs. Once the proposed TPA by public insurers appears on the scene, it is going to take away most of the current volume from the existing TPAs. Public sector insurers have over 60 percent market share and many private insurers have their own in-house claims administration units. Thus the move might prove unfavorable on existing TPAs. So what is in store for them? The TPAs have the vast experience due to their involvement as key stakeholder in the healthcare industry which can be leveraged up on.

Conclusion
Over the past decade and half, TPAs have played an important role in health insurance industry. Inspite of the issues and challenges their contribution to growth of the industry cannot be ignored. The industry is still taking baby steps. The TPAs have been influenced by payers which have not given them enough authority to deliver. If the industry loses out TPAs, customers are going to be impacted at large. The growing trend of adopting in-house claims administration practice gives an upper hand to the insurance companies. In the age of consumerism, unless the regulatory authorities take bold initiatives, we may witness unavoidable friction among the stakeholders inviting new hurdles impacting the industry growth.

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