There are many instances where people have to keep following up on their insurance companies for settling medical insurance claims in case they get admitted in hospitals which are not in the PPN (preferred provider network) or PPN list. Insurance companies are overly dependent on third party administrators (TPAs) which has led to the sector being plagued with various malpractices.
The IRDAI has brought in multiple reforms in order to fix issues related to mismanagement of claims. TPAs have often rejected claims on grounds of discrepancies or lack of documents. They may also provide a list of deductions applied to lower the claim amount. Insurance companies provide incentives to TPAs for lowering bill amounts. TPAs also have daily targets for staff with regard to claim approval and this does not cross a specified limit. The same TPA has often sanctioned varying amounts for similar diseases at the same hospital.
For fixing the issue, IRDAI has notified a draft health insurance regulations statement where it has been stated that TPAs do not have the right to reject claims and this will exclusively be the right of the insurance company. TPAs, as recommended, should only handle cashless claims. Arbitrary claim rejection levels should be lowered on account of this decision. TPAs and insurance companies have multiple transactions in the cashless category with hospitals. When multiple bills pile up, TPAs often negotiate with hospitals for discounts before releasing the entire payment.
However, policyholders are charged with bills for rack rates at hospitals. These discounts will now be passed onto the customers. IRDAI has made it compulsory for TPAs and insurance companies to show these discounts in the final bill. There was a survey conducted by IRDAI which threw up several shocking results.
A public sector insurance company was found to lack a suitable system for administering health insurance policies that were being taken care of by TPAs while a private sector company did not possess any records of claims serviced by TPAs. Another had provided a bulk amount or float fund for claim settlement to the partner TPA.
Upon implementation of the draft guidelines, such cases will automatically reduce. For providing cashless insurance facilities, insurers often use the PPN empanelled by the TPAs. There are other cases where TPAs have asked for commissions on each claim from hospitals in order to enrol them into the PPN. However, this leads to customers being charged more by hospitals in order to account for these commissions. TPAs will no longer be able to conduct business dealings on the behalf of insurers as per the IRDAI draft proposal. Several private insurance companies, in order to avoid these issues, have their own in-house claims departments instead of tying up with TPAs. TPAs will no longer have a big role to play post implementation of these measures. TPAs have a standing on account of their partnerships but their role will now get smaller and more defined. Insurance companies are required to have more control over TPAs in order to avoid malpractices.
TPAs cannot solicit business like insurance agents and they do not have the license to sell. They can only process and service insurance claims. Insurance companies often give ratings to TPAs on the basis of the number of claims that they have rejected or accepted. There is a clear incentive for claim rejection and bonuses have often been paid to TPAs on the basis of reductions that they managed to deliver in claim amounts. TPAs pay bulk money to hospitals and ask for settlement based discounts.
TPAs take the whole amount from the insurance company, bargain for a settlement and keep the money saved with them. These regulations will now help arrest these issues. With regard to insurance companies stopping the cashless facility for specific hospitals from the year 2010, there were issues related to hospitals not receiving payments from insurance companies and not providing standardized rates for medical treatments. These solutions are also on the anvil.
Most private insurance companies have their own claims divisions and TPAs majorly function in the public sector currently. Their role will definitely be limited after the implementation of these measures.
Here are the key takeaways for the customer to keep in mind:
- Claims can now be rejected by insurance companies only on the basis of medical grounds.
- In case the claim has been delayed beyond a period of 30 days, insurance companies have to pay the policyholder interest on the amount in question.
- TPAs or insurance companies can only seek documents once.
- TPAs can only provide claim settlement recommendations.