Posted on Jan 11, 2011 by Sergio Ulloa
India's General Insurers Public Sector Association (GIPSA), have shortlisted 9 companies to create a captive joint-venture third party administrator (TPA) to manage their cashless claims services.
GIPSA's group of four public sector general insurance companies -- New India Assurance; United India Insurance; Oriental Insurance and National Insurance; own 80% of India's cashless claim insurance market and are set to make their decision on their partner for the TPA in two months. Among the 9 who are considered for the TPA are US companies Aetna and United Healthcare.
GIPSA aims to utilise technical support from the proposed joint-venture TPA to control and recover its recent health insurance losses that have resulted from mismanagement of its cashless service claims. GIPSA are currently undergoing a process of change in their approach to health insurance and therefore announcing their decision to build their own TPA.
GIPSA has in turn caused turmoil among the existing TPA's in India, given that GIPSA accounts for over 80 per cent of business for TPAs; TPAs are concerned that a captive company will overthrow the market. The TPA's have addressed their concerns
to the Competition Commission of India (CCI), and have asked GIPSA to refrain from a decision until the CCI responds, which is expected sometime in the next few weeks.
On July 1st 2010, GIPSA set forth the Preferred Provider Network (PPN), setting new requirements for hospitals offering cashless services in India. Under the PPN, GIPSA fixed the cost for 43 common surgical packages, offered as part of the cashless claims insurance policy. Hospitals enrolled in the PPN would have to meet these requirements and agree to the fixed costs of procedures in order for their patients to be able to utilize the cashless claims insurance services. Shortly after the PPN was established, the number of facilities offering cashless services fell from 900 to just over 70 hospitals. A number of hospitals were said to be reviewing and adjusting their fees in order to participate in the PPN.
Healthcare providers have argued that the fees set by the PPN are too low and in turn are damaging the quality of services that the hospitals can offer. The medical fees set by insurance companies were said to fall 50 percent lower than other hospital rates. On 13th of August 2010, the Association Medical Consultants
, Mubai (AMC) publicly urged
all hospitals listed on the PPN to withdraw their enrollment and for all remaining hospitals to refrain from offering cashless services.
According to M. Ramadoss
, MD of New India Assurance, 'Rates could vary from hospital to hospital, based on location, facilities, and equipment. It's not a one-size-fits-all solution. If there is an industry standard for standard rates, we will welcome it. Due to the absence of it, I have to step in, but not to rob hospitals of their profits. We have benchmarked average costs of the previous two-three years and have used recommendations of doctors on panels for frozen standard rates for procedures and treatments'.
GIPSA is hoping to increase the number of hospitals listed on their network, however, given the discrepancy of healthcare fees, the number of hospitals listed on the PPN may drop in return.
However, given that an increasing number of recognizable hospitals are joining the PPN, including Jaslok Hospital, some hospitals in India fear they may lose customers over competition. Recently established Medanta Hospital joined the PPN in order to increase its patient numbers, as well as Sir Ganga Ram Hospital which recently had several top doctors leave. A couple of other big institutions are also said to be in negotiation with GIPSA to join the PPN including hospital chains Max and Apollo as well as the Bombay Hospital and Kokilanben Dhirubhai Hospital. Fortis Group is also another large hospital chain that is likely to enroll in the near future.
GIPSA has argued
that the PPN is a 'policy-holder friendly system', given that the low hospital rates would reflect in its low premiums. It also allows policyholders to claim directly, without going through the reimbursement process and therefore not having to worry about insurers not covering the treatment.
However on July 1st 2010, the Union Government of India introduced a 10.3% service tax charge to every cashless claim made by patients under the insurance policy. Although the service tax is paid through TPAs, as they reimburse the hospital claim, the patient's policy is ultimately affected - given the accommodation needed for the service tax fees which is likely to increase the insurance premium in the long run. Patients who claim through the reimbursement system are not charged the service tax fee.
GIPSA have experienced considerable losses on their cashless service claims, as the medical costs incurred from claims has so far outweighed their premium revenue. The loss ratio, in some instances, was calculated as high as 130 per cent. The PPN have therefore set tight limitations on hospital packages, with the aim to avoid future mismanagement of claims.
Media outlets have questioned whether the losses faced by GIPSA were partially due to over inflated or falsified bills submitted by hospitals, however the AMC argued
that this claim was 'preposterous'. The AMC believe the losses faced by GIPSA are 'over-exaggerated; due to faulty product designs and mistakes made in working out the premiums; and due to connivance of the TPA's in passing false/over-exaggerated claims'. The AMC says they will negotiate with GIPSA to get a 'fair deal for all our members'.
There are currently 9 companies competing for the opportunity to be part of the joint-venture TPA. Aetna is continuously seeking ways of expanding its market globally and this is one of its most recent moves. Other companies looking to become GIPSA's partners in the captive TPA include United Healthcare, Patni Computers; Coris International; Cambridge Solutions; Lason; and existing TPA's E-Meditek & Medi Assist.
Insurance Companies Mentioned:
Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioural health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labour groups and expatriates.
UnitedHealthcare, founded in 1977, is an operating division of UnitedHealth Group, a diversified health and well-being carrier in the United States. United Healthcare offers healthcare and insurance services throughout the United States.
Patni Computer Systems
Patni Computers, incorporated in 1978 and based in Mumbai, is one of the leading global providers of Information Technology services and business solutions, with international offices across America, Europe and Asia-Pacfic.
The CORIS Group is an assitive services company, operating one of the world's widest established international assistance and claims handling networks in the world. Based in Paris and founded in 1987, the network is at the disposal of independent clients in the Travel, Assistance and Insurance industries. Since its founding, CORIS now has physical locations in more than 40 countries across the globe.
Cambridge Solutions, founded in 1993, is an integrated, global service delivery system offering business solutions to large and growing companies through a broad range of IT and business process outsourcing services.
Lason India Limited provides business process outsourcing solutions. It supports global operations in the United States, Canada, China, and Mexico. The company, headquartered in India, was founded in 1992 and is a subsidiary of Lason Inc, based in Michigan, USA.
E-Meditek TPA Services Ltd
Established in 2000, E-Meditek was one of the first Third Party Administrators to receive a license from the Insurance Regulatory and Development Authority in India.
Medi Assit operate in India and were founded in 2006. Medi Assit are a Third Party Administrator, licensed by the Insurance Regulatory and Development Authority.