TPA tangle in health insurance

Among the many moving parts of a hospitalization insurance policy is an important middleman – the Third Party Administrator (Healthcare) or TPA.

TPAs handle claims management on behalf of insurers. Previously, such work was carried out by insurance companies’ claims departments specializing in the special requirements of fire, marine, health or motor vehicle insurance. The idea of ​​outsourcing healthcare claims emerged in 2001 when the Insurance Regulatory and Development Authority (then known as IRDA) issued regulations allowing TPAs ​​to operate.

These TPAs ​​were intended to act as a bridge between insurers, hospitals, and policyholders, assisting customers with documentation, processing claims within the insurance company’s rules, and paying hospital bills directly under a “cashless” system so that insureds do not have to make advance payments and wait for reimbursement.

early problems

In the beginning, it took time for TPAs ​​to deal with both the insurance and healthcare processes. Customers complained of arbitrary claim reductions or outright rejections. Then came the “float” problem: Insurers funded TPAs ​​for approved claims, but some TPAs ​​delayed payments to hospitals to earn interest on idle funds. This led to disputes and tighter regulations.

Meanwhile, hospitals found that despite the paperwork, the insurance system was bringing in paying customers. Even public hospitals began to prefer insured patients instead of free services as a source of income.

cashless crisis

As medical costs soared, insurers created closed hospital networks with agreed-upon package prices to control pricing inconsistencies. However, this regulation often left the policyholder in a difficult situation; hospitals charged one rate, insurers reimbursed another, and the patient quietly picked up the difference.

Eventually, hospitals also began protests, citing delays in updating tariff agreements and receiving compensation payments from TPAs. Many have turned the concept of cashless treatment on its head by demanding full refund from patients of the upfront payment when the insurance company/TPA pays the claim!

Tensions have risen in recent months as insurance companies and hospitals blacklist each other, leaving patients helpless. So much so that hospitalization cover has been at the top of the list of general insurance complaints with Insurance Ombudsmen for decades.

What needs to be fixed

India’s healthcare operates in a liberalised, market-driven environment; But the lack of price discipline and uniformity harms everyone. Although differences in facilities and location are taken into account, a measure of standardization is essential in hospital tariffs. Market segmentation is good; It is not unregulated pricing.

Expanding and improving the network of public, community and charity hospitals can ease the burden on both private healthcare services and the customer’s wallet. Quality should be benchmarked, monitored and rewarded. The NABH accreditation system has established a basic level of quality for hospitals. A similar rating system for TPAs ​​(importantly including customer ratings) would provide much-needed transparency and accountability. Come to think of it, independent customer ratings on a variety of factors for hospitals, from pricing to standards to quality of service, would also be very useful.

Ultimately, although the insurer-TPA relationship is contractual, the real test is the service provided to the insured. After all, the customer is not only the policy owner but also the patient.

(The author is a business journalist specializing in insurance and corporate history)