It’s going to be a new ball game, albeit limited, for third party administrators (TPAs), entities that act as an intermediary between insurers and policyholders in processing insurance claims. Under the new set of health regulations laid down by the Insurance Regulatory and Development Authority (IRDA), the functions and roles of TPAs have been clearly defined, which on the face of it look more restrictive than earlier.
The new regime mandates that TPAs can no longer settle or reject a claim directly. Instead, the onus is now on insurance companies to do it directly with customers.
In the earlier set-up, clarity was the biggest casualty where TPAs and policyholders were often at odds when it came to contracts. But with the new arrangement, TPAs should approach the insurer with claims and settlement details and the insurance company, in turn, would intimate the claims status to policyholders.
Now, individual TPAs are not in the picture for intimation and payment of claims. We need to submit the details on claim settlement and insurers will contact policyholders, said Nayan Shah, MD, Paramount TPA.
The guidelines also require TPAs to include details like scope of services provided by network hospitals which insurers have tied up with and the tariff applicable. Now, insurers will have the sole power to cancel agreements with TPAs in the case of frauds, misrepresentation and inadequacy of services. Previously, TPAs used to get a hearing.
Observers feel that the move will have a bearing on small- and mid-sized insurers as their reliance on TPAs is higher. This is because they are required to service claims arising from any part of the country despite their scale of operations limited to a few cities. The role of TPAs is restrictive as per the new guidelines. Small and new insurance players will have some difficulty due to this measure as we need to depend on them initially, said Roopam Asthana, CEO, Liberty Videocon General Insurance.
At the same time, there’s a sense of relief among insurers that the current initiative would inject a dose of transparency into the structure and format of agreements between insurers and TPAs, which will ultimately benefit stakeholders. Till now, insurers have been following different formats and procedures regarding agreements with TPAs. Now, it will bring in more clarity on the roles played by insurers, TPAs and service providers, said Mukesh Kumar, head, strategic planning, HDFC Ergo General Insurance.
Manasije Mishra, CEO, Max Bupa Health Insurance, feels in-house TPAs are always a positive. Those who have in-house TPAs will get a comparative advantage as it will be easier for them to meet the specified guidelines, he added.
Apart from the TPA specifications, the insurance regulator has standardised the entire health insurance sector by specifying a common nomenclature for illness that will be covered and the exclusion list. IRDA has also defined 46 commonly used terms and harmonised 11 critical illness terms.