Comparative Assessment of External Third Party Administrators and In-house Teams of Insurers in Health Insurance Claims Settlement Process in Bangalore,India

Abstract

Claim servicing in health insurance is an important area for insurers. Third party administrators (TPAs) are a critical link in India that process health insurance claims. Several insurers have started in-house claim teams for health insurance claims instead of outsourcing the work to TPAs. The study aims to explore the role played by external TPAs in terms of value addition done by them for insurers, policyholders and healthcare providers. The study aims to find the benefits of roping in an in-house team to settle health claims and the benefits accruing out of this decision to policyholders and hospitals. The role of TPAs in claim processing, issues faced by customers while making a claim, and improvement areas in the process have also been examined. The author has tried to explore and research this area so that policyholders can choose a health insurance company without bias whether it has an in-house claim settlement process or engages an external TPA. The study brings out the concerns of customers and hospitals regarding the settlement of health insurance claims and suggests improvement areas required for both TPAs and in-house teams in claim settlements by evaluating the same.

Keywords

Third party administrators hospitals health insurance claims healthcare India

Introduction and Need for the Research

The topic of the research pertains to a constituent of the healthcare ecosystem called third party administrator (TPA) which is associated with and exists because of the health insurance sector. Therefore, it is necessary to understand and analyse all interdependent and intertwined entities that affect its working, growth and survival, including the insurance sector and healthcare sector.

Health Insurance and the Birth of TPAs in India

In 2001, the Insurance Regulatory and Development Authority of India (IRDAI) gave birth to an intermediary called TPA. The regulations enacted for TPA were IRDAI (Third Party Administrators—Health Services) Regulations, 2001. TPAs were meant to process and settle only health insurance claims on behalf of the insurer.

TPAs were then seen as a remedy to the many issues faced by public sector undertaking (PSU) insurers, as they were in between the payers and providers. They were entrusted with the responsibility of taking away the burden from the policyholders of paying healthcare providers from their own pocket. Figure 1 shows the demarcation of the role of TPA and insurer in health insurance value chain.

Figure 1.

Source: Rao, G. (2012, January 24). Problems and prospects of TPAs in the healthcare industry. IIRM National Seminar.

Health Insurance in India

The health insurance market in India has become the fastest-growing segment in the non-life insurance sector in India. The health insurance business in India saw a 23% growth in FY 18 with a premium of ₹37,897 crores and a market share of 24%. It has been the fastest-growing market segment registering a compounded annual growth rate (CAGR) of 23% for the past 10 years (India Brand Equity Foundation IBEF 2018).

Role Played by Healthcare Providers

Healthcare as a business is a huge opportunity for the private sector. The majority of providers of healthcare in the private sector are entities working for profits. There are very few not-for-profit, charitable hospitals in the private sector. There have been huge investments in this space by private equity investors and corporates due to the huge unmet demand for healthcare services. Private sector healthcare providers exist in the form of a single physician clinic to large hospitals listed on stock exchanges in India (Sengupta and Nundy 2005).

Management of Health Insurance Claims

The processing and settlement of claims are one of the most important functions of an insurer. The claims department is one of the most important departments of an insurer. TPA is an important link in the chain as a stakeholder who encounters the customer for claim settlement. The study examines his role while acting as an intermediary between the customer and the healthcare caregiver.

Figure 2 shows a snapshot of the entire healthcare ecosystem with reference to TPAs.

Figure 2.

Source: Health Insurance Inc.: The road ahead (p. 8). CII-KPMG Health Insurance Summit 2008.

During 2017–2018, general and health insurers settled 1.45 crore health insurance claims in volume and ₹30,244 crores in value was paid towards the settlement of health insurance claims.

Comparison of External TPAs and In-house Claim Teams of Insurers

The claim settlement in health insurance is happening now by insurers through:

TPAs or external TPAs

In-house claims team of the insurer or captive TPAs

External TPAs, who act as a bridge between hospitals, service providers and policyholders, have though tried to satisfy the needs of both, but the results have been a mixed experience for both hospitals and policyholders. As a result, a number of insurance companies have set up their own in-house claim settlement team for processing health insurance claims. These are also referred to as ‘in-house or captive TPAs’, a division or group within the company (Yohanan 2018).

Health insurers used to outsource their claims settlement to TPAs. This was done to save costs as well as time and help insurers focus on their core business. Many of these insurers felt they could do the activities of TPAs themselves more effectively. Many insurers had an unsatisfactory experience with these TPAs, and there were delays in the settlement of claims by TPAs. They decided to do claims management activity on their own and connect directly with the customers.

With as many as eight of the top general insurers, including ICICI Lombard, Bajaj Allianz and HDFC Ergo, and standalone health players, like Star Health, Max Bupa and Religare Health, preferring to settle claims in-house, there has been a sizeable dent in the business of external TPAs. Also, new and much smaller health insurance companies have a much lesser customer base than the older insurers. Thus, their claims are settled within the insurance company itself without external help.

In the case of outsourced TPA licensed by IRDA, information and flow of transactions involve flow between three stakeholders besides the customer. TPA coordinates with hospitals to scrutinise the bill and then shares the information with the insurance company for payment of a claim. Payment is made by the insurer to the hospital for cashless claims. In the case of non-cashless claims or reimbursement claims, the insurer, on the recommendation of TPA, makes the payment directly to the customer. The customer has to connect with the TPA for follow-up. TPA is dependent on the insurer to make the final decision on acceptance of the claim and make the payment to the customer. TPA by itself has the role of recommending authority to an insurer.

In case of in-house claims team of the insurer, the insurer coordinates and liaisons with a healthcare provider and customer deals with the insurer. There is information flow between two stakeholders besides the customer. The payer for the customer is the insurer. The payer only decides the acceptance of the claim and payment to the customer. The role of in-house team is that of the final decision maker, and insurer goes with the decision of its team. Table 1 shows key differences between an outsourced TPA and in-house team operated by employees of insurance company.

Table 1.

Key Differences between Insurance Regulatory and Development Authority (IRDA)-licensed Third Party Administrator (TPA) and In-house Claims Team.

Type of Differences	IRDA-licensed External TPA	In-house Claims Team
Turnaround time (TAT) for query resolution	TPA acts as a go-between customer and insurer; this might increase TAT	Since in-house team does settlement in-house; TAT might be reduced
Decision-making for customer cases	TPA does not make final decisions on the quantum of claim or acceptance of a claim	In-house, the team makes a final decision on both acceptance and quantum of the claim
Experience of claim servicing	Since single TPA can work for more than one insurer, the experience level is more varied, and more expertise is gained by TPA	In-house team’s experience of servicing claims is restricted to its captive base of customers
Objectivity in claim settlement	TPA is a third party with no gain either on acceptance or rejection of claim	In-house, the team has a clear conflict of interest as is part of the insurance company and gains on rejecting or reducing the quantum of a claim
Payment of fees	Paid fixed percentages of fees on the premiums charged to customers	No fees are payable. In-house team can strive and aim to work at a lower cost

The study aims at comparing the advantages of having an in-house claims processing team by the insurance companies as compared to external TPAs. The satisfaction levels as experienced by the key stakeholders in the claim process, namely the policyholders, and the healthcare providers.

Review of Literature

The review of literature went through a number of research studies that have been undertaken concerning the health insurance sector and the role of TPAs.

Bhat (1996): The author highlighted the fact that private healthcare providers have an influence on the cost and quality of healthcare in India. The healthcare sector must address the issues of the availability of quality care for all sections of society.

Jeng (1996): The author discussed the compensation paid to TPA for its services in the US market where TPAs participate in case of self-assured groups. In the context of applicability to the Indian scenario, the paper points out that the workload of TPA depends upon the frequency of claims and their severity.

Ellis et al. (2000) emphasised the need on the part of insurers to actively control claims and detect frauds. The private healthcare sector has taken a lead in comparison to public health facilities and is expected to grow, but there is a need to regulate private healthcare providers.

Mahal (2002) in his paper points out that there is excess use of healthcare when there is the existence of private health insurance cover among a population.

Bhat et al. (2005): The paper concluded by advocating the development of TPAs to take out the burden of dealing with private healthcare providers which had varied pricing for ailments and different infrastructure facilities for patient care. The healthcare providers had no standardisation relating to the cost of treatments, and claim administration systems of government-run companies were not equipped to settle claims considering this environment.

Sureka (2003): The author compares health management organisations (HMOs) in the United States with TPAs in India in this article. HMOs in the United States are allowed to underwrite risks, and TPAs in India are not allowed to do the same. TPAs are attached to one insurer or more than one insurer and are not independent, unlike HMOs.

Gupta et al. (2004) pointed out that the time taken on an average by public sector insurers to settle claims before the formation of TPAs was greater, and TPAs have brought turnaround time (TAT) down.

Mohapatra (2005): The paper emphasised that cashless facility is available to policyholders depending upon the extent of cooperation between healthcare providers, TPAs and insurers. The relationship has not been without problems.

BearingPoint (2008): The report sees consolidation happening among TPAs in the future. However, various indicators show that TPAs are unable to contain costs and ensure quality treatment to policyholders. TPAs get blamed for high loss ratios plaguing the health insurance business in India. Regulation of TPAs becomes important as with time there would be growth in the number of TPAs as well as health insurance business in India.

Srivastava (2009) in her dissertation reflected on the point that there were many TPAs and competition was intense for market share among them, and only a few of them will be able to survive in such a marketplace. Healthcare providers were in a position of power to dictate terms, and it was not easy for TPAs to make them fall in line and to provide standard costs of treatments and meet expectations of quality healthcare. As suggested by the researcher, TPAs should sell health products too, which is not presently allowed as per regulations.

Anitha (2010): The researcher in her dissertation suggests TPAs should be allowed to change into HMO like in the United States with passage of time.

Duggal (2011): The author of the paper stresses on the need to control both public-run government hospitals and private-run healthcare providers.

Kumar et al. (2011): In this research article, the authors concluded that the TPA model has not been successful in bringing down the claim cost but has helped in providing unbiased services, including cashless benefits.

Aggarwal et al. (2013): The authors in their paper bring out the fact that there is cut-throat competition among various insurers to gain market share with many of them under-pricing their products leading to high loss ratios. The paper lays emphasis on the need to innovate products and improve the delivery mechanism to increase their reach and market share.

Garg (2013): The findings of the study brought out several issues that policyholders faced, like excessive documentation, no knowledge of claim procedures, denial of claims without reasons, deductions in the final payment made to customers without explanation of reasons for the same and delay in settlement of claims. The study suggested policyholders should be given complete knowledge of claim procedures.

Jayaram and Ramakrishnan (2013): The study covers reimbursement models of the United States and UK, and proposes a model for India for critical care services.

Senthil and Ramamoorthy (2013): A study was carried out by authors to analyse the health insurance sector in India on various products being sold to the population, growth trends and future of the market. The authors suggested the need to discipline healthcare providers with standardisation and necessary accreditation.

Burns (2014): In this book, the authors in the chapter on the Indian healthcare industry delve into the past, present and future of healthcare providers. There is an absence of uniformity of accreditation to quality standards with the presence of several accreditation bodies in India; only 137 hospitals were accredited by the National Accreditation Board for Hospitals (NABH).

Chhatwal (2014): The author in his chapter in the book looks at the role of TPAs in the overall healthcare environment. The author looks at TPA as ‘neutral third parties’, whereas insurers are risk underwriters.

Dubey and Benipal (2015): The authors reflect on the fact that there is a lack of information regarding policy terms and conditions among the consumers. The general public is also not aware of the various services provided by TPAs.

Dilawari and Koley (2016): The authors look at the awareness and perception of policyholders towards TPAs. According to the paper, there is a lack of awareness about TPA among policyholders. The authors discovered some people were of the view that TPAs were the same as insurance agents.

Jain et al. (2016): The authors conducted a survey at a 650-bedded hospital in Delhi at TPA desk of the hospital for patients who availed cashless hospitalisation to assess awareness levels and problems faced by them while getting treated by way of insurance. The authors recommended the standardisation of treatment costs across healthcare providers.

Pandit (2016): The paper examines the role of TPAs from various perspectives. The author ends his paper by suggesting the need for appraisal of TPAs on performance parameters based on customer satisfaction and on connecting payment made to them on performance parameters.

Mathur (2016): As per the author, there is a need for uniformity of treatment procedures for the determination of costs accurately so that pricing of health insurance premium can be done.

Samal and Dehury (2016) look at current trends in the TPA industry and their status. The review unravelled a mixed picture; sometimes the TPAs are able to provide the needed services as envisaged by IRDA, and sometimes they fail to do so as per evidence obtained from various studies conducted from time to time.

Shukla and Singh (2018): The study conducted in semi-urban pockets of Delhi showed 73% of the respondents did not have any kind of health coverage. The authors concluded by stressing on the need for making health insurance products by making them more affordable so that they are bought by all sections of society.

Mukhopadhyay (2018): The author observed skewed coverage of health insurance distribution among various states in India. The cost of treatment in private healthcare facilities was four times more in comparison to government-provided healthcare facilities.

Research Methodology

Scope of the Study

The scope of the study was contained to respondents covering two distinct subgroups in the city of Bangalore in India.

Healthcare providers: General hospitals and disease-specific specialised institutions

Policyholders: Both have experienced claim settlement through TPAs and in-house settlement by insurers themselves.

Without a total of 50 healthcare providers and 200 policyholders as respondents, Bangalore has specialised hospitals, general hospitals and population belonging to higher- and lower-income groups relevant for the purpose of the study.

Research Questions

For the purpose of analysis, broadly, the following key questions were framed and discussed.

For policyholders:

What is the satisfaction level of customers with TPA services?

What are the issues faced by them in claim settlement and their interaction with TPAs?

Are TPAs following the laid down TAT while performing their functions?

For healthcare providers:

What are the reasons for choosing a TPA to tie up with a hospital?

Are TPAs following the laid down TAT while performing their functions?

What is the experience of dealing with in-house teams in comparison with external TPAs?

Objectives of the Study

To examine the service levels experienced by consumers of health insurance during claim settlement through TPAs and in-house teams of insurers

To examine the awareness of policyholders of policy terms and coverages

To examine the impact of TPAs on hospital administration and cost

To find out whether TPAs have been effective in standardising costs of treatment

To know the perception of TPAs among policyholders and healthcare providers and assess the advantages and disadvantages of engagement of TPAs and in-house teams by insurers

To find out areas of improvement in the settlement of health claims

Sampling Plan for Data Collection

Data Collection

The study involved empirical research based on a survey of respondents. Primary data collection involved the administration of two questionnaires and structured interviews capturing quantitative as well as qualitative aspects of the study. Two sets of questionnaires were prepared to keep in mind the different types of respondents/individuals in the form of policyholders and organisations in the form of hospitals. The variables to be measured were different for both sets of respondents, so two questionnaires were developed.

Sampling Technique

Random sampling is the sampling method used for the current study. The selection process of the sample was done until the expected size of the sample was attained.

Sample Size

Data from 50 hospitals and 200 policyholders in Bangalore formed the basis of the sample size.

Only allopathic hospitals having more than 10 beds were included in the survey. Ayurveda, dental hospitals and other alternate treatment hospitals were not included in the survey.

As no common accreditation was taken by hospitals in Bangalore, it was difficult to select them on the basis of having accreditation as only 119 hospitals had NABH accreditation in Karnataka.(Chatterjee 2017)

There were 20 government hospitals in Bangalore as per the Government of Karnataka official website. Five government hospitals were chosen from the list of government hospitals. They constituted 10% of the total sample size. Private hospitals have no comprehensive list, they range from one- to two-bedded hospitals, nursing homes and clinics to medium and large hospitals.

Private Hospitals & Nursing Homes Association (PHANA)—Bengaluru had 400 private hospitals as members. Since membership was voluntary, this was not an exhaustive list. In online directories and websites, more than 700 private healthcare providers listed themselves. Random sampling was done taking into account representation from all parts of Bangalore. The study selected 50 hospitals as the final sample size comprising 45 private and five government hospitals.

Administrators manning the insurance helpdesks at hospitals or administration staff coordinating for insurance claims formed the respondents from the selected hospitals. The method of contacting them was face-to-face through administrating the questionnaire by a face-to-face meeting.

200 policyholders were surveyed from Bangalore. To qualify as respondents, they had to be under health insurance coverage from private or public companies and had made a health insurance claim in the past 2 years. While 225 policyholders were initially chosen, there was no response from 25 respondents. Therefore, the study had 200 policyholders as the data collection sample. The method of contacting them was offline and online. Face-to-face interviews and online responses were planned for completion of the task. Online respondents formed only 12% of the total respondents as many respondents did not fill out the online forms. Respondents at hospitals, educational institutions, private companies, government organisations and housing societies were interviewed from various geographies in Bangalore.

Type of Healthcare Provider Surveyed

General hospitals

Specialty hospitals

Government hospitals

College medical centres

The following variables and parameters were considered when developing the questionnaire for hospital administrators:

Standardising the cost of procedures across hospitals

Use of IT systems to streamline processes

Time taken for payment of final bills and settlement

Costs of a hospital in dealing with TPAs

The policyholders’ questionnaire was considered to have the following variables:

Awareness of TPAs

Knowledge of coverage of the policy

Service level exhibited by TPAs on accessibility

Grievance handling mechanism

Time taken for claim settlement and overall experience

Based on the above considerations, two questionnaires were designed.

For healthcare providers, the questionnaire was divided into the following three sections:

Part 1: Demographic details

Part 2: Standardising treatment norms and cost of procedures in hospitals

Part 3: Standardising treatment norms and cost of procedures, time taken to settle claims of providers and impact of TPAs on hospital administration and cost. In this section, Likert scale was used to accurately gauge the responses.

For policyholders, the questionnaire was divided into the following sections:

Part 1: Demographic details

Part 2: Awareness and knowledge of policyholders

Part 3: Service level exhibited by TPA and an overall experience of policyholders

Hypotheses

The following hypotheses were formulated for the research study:

H₁: There is a significant difference in service levels of external TPAs and in-house TPAs as experienced by policyholders as well as hospitals.

H₂: Policyholders are aware of the various services provided by TPAs.

H₃: Engagement of TPAs leads to higher administration and cost.

H₄: TPAs have been able to standardise the cost of treatment procedures across different healthcare providers/institutions.

Statistical analysis was carried out with the help of SPSS version 21.0. The descriptive and inferential statistics were carried out to prove the hypothesis framed here. Important analysis and its findings are described in section ‘Discussion on Findings’.

Testing of Hypothesis 1

There is a significant difference in service levels of external TPAs and in-house TPAs as experienced by policyholders as well as hospitals.

Table 2.

The Relationship between Service Levels Exhibited by External TPA and In-house TPA (Policyholders).

	Opinion Regarding the Service Level Exhibited by External TPA	Opinion Regarding the Service Level Exhibited by In-house TPA
Opinion regarding the service level exhibited by external TPA	1	–0.068
Opinion regarding the service level exhibited by in-house TPA	–0.068	1

Table 3.

Chi-square Test (Policyholder).

	Value	df	Asymptotic Significance (Two-sided)
Pearson chi-square	13.696^a	12	0.321
Likelihood ratio	14.244	12	0.285
Linear-by-linear association	0.928	1	0.335
No. of valid cases	200

Note: 6 cells (30.0%) have an expected count of less than 5. The minimum expected count is 0.15.

Interpretation: Study findings reveal that there is no statistical significance between opinion regarding the service level exhibited by external TPA and opinion regarding the service level exhibited by in-house TPA at –0.68. This presents that there is no significant difference between service levels exhibited by external TPA and in-house TPA in view of policyholders. Thus, the statement given above was rejected.

Interpretation: In terms of healthcare providers, the perspective regarding the service levels by external TPA and in-house TPA was analysed through correlation and chi-square test in Tables 4 and 5. Study findings reveal that there is no statistical significance between opinion regarding the service level exhibited by external TPA and opinion regarding the service level exhibited by in-house TPA at 0.126. This presents that there is no significant difference between service levels exhibited by external TPA and in-house TPA in the experience of a healthcare provider. Thus, the statement given above was rejected. Table 2 and Table 4 show the correlation and Table 3 and Table 5 show the result of chi-square test for Hypothesis 1.

Table 4.

The Relationship between Service Levels Exhibited by External TPA and In-house TPA (Healthcare Provider).

	Opinion Regarding the Service Level Exhibited by External TPA	Opinion Regarding the Service Level Exhibited by In-house TPA
Opinion regarding the service level exhibited by external TPA	1	0.126
Opinion regarding the service level exhibited by in-house TPA	0.126	1

Table 5.

Chi-square Test (Healthcare Provider).

	Value	df	Asymptotic Significance (Two-sided)
Pearson chi-square	16.080^a	9	0.065
Likelihood ratio	20.740	9	0.014
Linear-by-linear association	0.779	1	0.378
No. of valid cases	50

Note: 13 cells (81.3%) have an expected count of less than 5. The minimum expected count is 0.84.

Testing of Hypothesis 2

Interpretation: From Table 6 findings, it is clear that the policyholders are a little bit aware of several health insurance policies (n = 79) and are much aware of the terms and conditions of policies (n = 95), the knowledge about benefits of tax on health insurance policies (n = 77) and awareness of cost of treatment (n = 89).

Table 6.

Policyholders are Aware of the Various Services Provided by TPAs (Frequency Statistics).

	Awareness of Several Health Insurance Policies	Awareness with respect to Terms and Conditions of Policies	Knowledge About the Benefits of Tax on Health Insurance Policies	Awareness of Cost of Treatment
Strongly disagree	27	12	4	11
Disagree	12	19	28	14
Neutral	79	61	72	59
Agree	61	95	77	89
Strongly agree	21	13	19	27
Total	200

Interpretation: Table 7 correlation analysis also pointed out the relation in policyholder’s awareness towards various services provided by TPAs. The study showed the correlation between awareness of several health insurance policies and awareness with respect to terms and conditions of policies (r = 0.664, p < .01); knowledge about benefits of tax on health insurance policies (r = 0.630, p < .01) and awareness of the cost of treatment (r = 0.603, p < .01). Additionally, the correlation was noted between the knowledge about the benefits of tax on health insurance policies and awareness with respect to terms and conditions of policies (r = 0.557, p < .01); awareness of cost of treatment (r = 0.639, p < .01) and further the relation was noted between knowledge about benefits of tax on health insurance policies and awareness with respect to terms and conditions of policies (r = 0.557, p < .01). Overall, the findings depict that policyholders were aware of the various services provided by TPAs. The framed hypothesis statement proved true.

Table 7.

Correlation.

	Awareness of Several Health Insurance Policies	Awareness with respect to Terms and Conditions of Policies	Knowledge About the Benefits of Tax on Health Insurance Policies	Awareness of Cost of Treatment
Awareness of several health insurance policies	1	0.664^**	0.630^**	0.603^**
Awareness with respect to terms and conditions of policies	0.664^**	1	0.557^**	0.573^**
Knowledge about benefits of tax on health insurance policies	0.630^**	0.557^**	1	0.639^**
Awareness of cost of treatment	0.603^**	0.573^**	0.639^**	1

Note: **Correlation is significant at the 0.01 level (two-tailed).

Hypothesis 3

Interpretation: In order to prove the hypothetical statement, correlation and regression analysis were carried out in Tables 8 and 9. Findings show that the impact of TPAs on hospital administration and cost shows a positive correlation in their services (r = .746^**>0.01) and time taken for settlement of claims to providers (r = 0.730^**>0.01). Further findings show a correlation between TPA services and time taken to settle claims of providers (r = 0.821^**>0.01). This highlighted that the engagement of TPA leads to higher administration cost by the companies.

Table 8.

Engagement of TPA Leads to Higher Administration Cost (Correlation Analysis).

	Impact of TPAs on Hospital Administration and Cost	TPA Services	Time Taken to Settle Claims of Providers
Impact of TPAs on hospital administration and cost	1	0.746^**	0.730^**
TPA services	0.746^**	1	0.821^**
Time taken to settle claims of providers	0.730^**	0.821^**	1

Note: **Correlation is significant at the 0.01 level (two-tailed).

Table 9.

Regression.

	Unstandardised Coefficients		R-square	F Value	p Value
	B	Std. Error
(Constant)	1.400	0.285	0.599	35.047	.000^**
TPA services	0.364	0.132
Time taken to settle claims of providers	0.286	0.128

Note: Dependent variable: Impact of TPAs on hospital administration and cost; **significance at p value less than 0.01.

Hypothesis 4

Table 10.

TPAs Have Been Able to Standardise the Cost of Treatment Procedures across Different Healthcare Providers/Institutions (Correlation Analysis).

	Standardising Treatment Norms and Cost of Procedures	TPA Services	Time Taken to Settle Claims of Providers
Standardising treatment norms and cost of procedures	1	–0.780^**	–0.771^**
TPA services	–0.780^**	1	0.821^**
Time taken to settle claims of providers	–0.771^**	0.821^**	1

Note: **Correlation is significant at the 0.01 level (two-tailed).

Table 11.

Regression.

	Unstandardised Coefficients		R-square	F Value	p Value
	B	Std. Error
(Constant)	5.127	0.264	0.661	45.772	0.000^**
TPA services	–0.369	0.122
Time taken to settle claims of providers	–0.321	0.119

Note: Dependent variable: Standardising treatment norms and cost of procedures; **significance at p value less than 0.01.

Interpretation: In order to prove the hypothetical statement, correlation and regression analysis were carried out in Tables 10 and 11. Findings show that there is a significance between standardising treatment norms and cost of procedures and TPA services (r = 0.780^**>0.01); standardising treatment norms and time taken to settle claims of providers (r = 0.771^**>0.01). Time taken to settle claims of providers and TPA services (r = 0.821^**>0.01) also shows a significant result. From this, it is noticed that TPAs have been able to standardise the cost of treatment procedures across different healthcare providers/institutions in terms of services and time taken for claiming settlement. Therefore, the framed hypothesis statement was considered true.

Findings of Hypothesis

From the overall hypothesis statement, the following findings were noticed:

Overall, the findings depict that there is no significant difference in service levels of external TPAs and in-house teams as experienced by policyholders as well as hospitals.

Additionally, the study findings observed that policyholders are aware of the various services provided by TPAs.

TPAs have been able to standardise the cost of treatment procedures across different healthcare providers/institutions in terms of services and time taken for settlement of claims was observed.

Engagement of TPA leads to higher administration cost and includes its services and time taken.

Summary of Findings of Research

Policyholders Responses

Demographic Characteristics of the Respondents

Health insurance was bought majorly by the male population as they were making the financial decisions, and their representation in the employed workforce was more than females.

The majority of buyers of health insurance were in the age group of 20–40 years. Lower premiums of insurance in this age group, growing income, no adverse medical conditions and no medical checkups required were the reasons for policyholders to fall in this group.

The majority of policyholders were graduates. Education had an association with an awareness of health insurance products and the need to protect oneself from medical emergencies was the reason for graduates buying health insurance.

The majority of the respondents with health insurance policies were married. There is a tendency to buy health insurance more after marriage. This is corroborated by independent studies and research done by other agencies.

Health insurance was brought mostly by salaried workers rather than people from other categories.

The income level of respondents had no direct relation with people buying health insurance. People in the higher income brackets did not buy health insurance and people in the middle income group purchased the same. So buying health insurance had more to do with education and awareness than merely high income.

Awareness, Knowledge and Experience of Policyholders

Health insurance was brought majorly from PSU’s insurers, and PSU’s insurers still have a hold on the market. Private sector insurers were in the second place still with 41% share of the market, though private insurers have made inroads into the health insurance market.

The reasons for buying health insurance whether from PSU insurers or private players were a timely response to inquiry and a sense of security. PSU’s insurers gave more security to buyers since they were government-owned. Lesser documentation and processes were also reasons for buying health insurance.

Friends, relatives, and agents were sources of knowledge about TPAs.

The majority of respondents were dissatisfied with service levels of TPA.

Call centre services by TPA were providing unsatisfactory service.

TPAs did not answer customer queries in time.

Claim settlement was delayed for half of the respondents, and the claim process was slow with coordination issues with hospitals and insurers.

TPAs did add value, but services were not up to the mark.

Policyholders were denied cashless facility at times.

There were deductions in final bills and policyholders were not aware of reasons for such deductions.

On comparison of ageing of claims data, that is, settlement time taken from FY 2014–2015 to 2017–2018. There is a clear difference in settlement time between in-house teams and TPAs.

For claims settled in less than one month, in-house teams are performing much better for 4 years consecutively. The difference for the years 2017–2018 for in-house team is 26% higher than external TPA. In all other time period categories, in-house teams were doing a much better job in the processing of claims than external TPAs.

We can conclude that in-house teams have been more efficient in settling the claims in a timely manner in comparison with TPAs on going through the claims data showing the ageing of claims.

In some cases, certain treatments were denied as not included within the terms and conditions of the policy.

Some hospitals asked for a deposit in spite of cashless facility from the policyholders.

The procedures for making a claim were not properly explained to policyholders by the helpdesk.

There were delays in pre-authorisation, but more at the time of discharge from the hospital.

Healthcare Providers Responses

Costs of medical care were increasing year on year and growing medical inflation is a challenge for policymakers.

Hospitals were tying up with multiple TPAs. On an average, one hospital is tied up with 14 TPAs. This was to offer choices to customers who buy insurance from different insurers. Other reasons for tying up with TPAs were time taken to process claims, reputation and increasing network.

74% of hospital administrators were aware of the existence of insurers having in-house claims teams.

The majority of the respondents confirmed that costs of treatment for cashless treatment were higher than for reimbursement claims.

Insured patients wanted to stay in higher-category rooms than uninsured patients.

Time taken to settle claims was a major cause of grievance among policyholders.

Generation of final bills at the time of discharge took a long time, causing customer inconvenience.

A number of hospitals have not embraced IT systems to streamline their processes.

Pre-authorisation approval for TPA was still taking more than one day for 36% of the cases. Though 44% got the approval within 4 hours.

Time taken by TPA on the final discharge of the patient from a hospital or final approval was a cause of concern as only 6% of patients were able to get it within 2 hours. This was also a function of delay in providing the required information to TPA by hospitals.

18% of the respondents felt that in-house teams of insurers were doing a much better job than external TPAs. 60% felt there was no difference between them and external TPA. The service levels also varied from in-house team of one insurer to another.

Most of the respondents at hospitals communicated that hospitals were not interested in extending the cashless facility and were doing it unwillingly due to competitive pressures.

Total non-settlement or partial rejection of final bills of hospitals after the discharge of patients from the hospital who had availed cashless facility was the reason for aversion to the cashless facility by hospitals.

Settlement of hospital bills after deduction of charges, the reasons for which were not explained properly to hospital authorities in case of cashless treatment given by hospitals.

No TAT for settling outstanding dues to hospitals from insurers. Outstanding payments were released after long follow-ups.

Since post-2016, TPA recommends bills to insurers for payment to insurers. Insurers hold settlement and the hospital has to follow up only with TPA (in case of an insurer using external TPA). TPA is unable to provide answers regarding the same.

There were delays in giving final approvals post-discharge of the patient from the hospital resulting in long waiting periods.

TPAs and insurers were tying up without exercising any discretion or tying up without any criteria with hospitals. The focus was only on the increasing number of network provider hospitals aimed at increasing geographic reach for policyholders.

There was no increase in inflow of business to the hospital after being declared a network hospital with cashless facility.

Discussions on Findings

Reduction of TAT at time of pre-authorisation approval: Reducing TAT makes a difference in service levels. Insurers with in-house teams have integrated on a platform in real-time using Cloud-based technology where data entered by the hospital flows to the insurers in real-time, leaving the need to email scanned documents. This has reduced TAT at the first stage of the claim process. TPA should also make use of similar technology to reduce claim settlement time.

Reduction of TAT post discharge from hospital: Service levels are affected post-discharge of patients from the hospital where they have to wait for long periods in hospitals for the final generation of the bill by hospitals. The team of TPA or insurer who gives pre-authorisation at the time of admission in the hospital should be involved in giving final approval at the time of discharge as they are aware of the case already and this will help in reducing TAT.

The insurance helpdesk or TPA desk that coordinates between hospitals and TPAs and insurers needs to have trained workforce. The current situation demands a lot of improvements in the functioning of the same. Training the staff at these helpdesks will help them guide the customer in a better way and improve customer experience. This will help reduce the burden on hospital administration and cost indirectly in the long term.

Treatment costs in India vary from hospital to hospital and across geographical locations. There are intercity and intra-provider variations in treatment costs; this poses a big challenge for insurers and TPAs working for insurers. The insurers and TPAs have tried to make them work on prefixed package rates for cost containment but this included only public sector insurers. The private sector insurers and public sector insurers need to collaborate and work together to have a common network of hospitals with standardised rates for various treatments and surgeries.

There is a need for consensus among all insurers on the need to set upper limits at least for treatment costs. IRDA and General Insurance Council (GIC) can play a role in this. If all insurers in India agree for an upper limit on charges as per treatment done, then the hospitals will have to work at set rates.

As costs of treatment vary between metros and two-tier and three-tier cities. Innovation at the product level is required for city-based pricing for health insurance products. The premium of health insurance products should be priced on the basis of city/state or geographical zone they belong to. Customers should be allowed to get treatment anywhere in India at any hospital so they are not put at inconvenience but in case they move out of the zone for which they paid a lower premium. They have to pay a portion of the total claim amount from their own pocket also known as copayment in insurance. Several insurers like New India, Max Bupa General Insurance, SBI General Insurance and Star Health Insurance already have introduced such products. This will help standardise the cost of treatment across different healthcare providers across India.

A similar effort needs to be made by grading hospitals into different categories with differential pricing of the premium according to the grade of the hospital. This will help in cost containment and eventually standardising costs of procedures in a more rational manner on costs incurred as per location and infrastructure provided by each healthcare provider.

In case of fraud done or abuse by hospitals by inflating the cost of treatment, the only action taken is de-empanelment of a hospital. There is an urgent need to regulate service providers. There should be a medical regulatory authority as a regulator to regulate hospitals. This will help in controlling costs and deter hospitals from engaging in fraudulent activities.

Hospitals, as seen through the study, charge more for cashless treatment compared to people who have no insurance. For reimbursement claims where hospitals get money from policyholders upfront, the amount charged for treatment would be lower compared to cashless treatment provided to the customer. By allowing cashless facility only beyond a limit of the claim amount, insurers’ cost of claims would come down and this will help in lowering loss ratios.

As per the feedback given by hospital administrators while conducting the research, there is a long delay in payment to hospitals by insurers. Large corporate hospitals withstand this but, smaller hospitals are unable to withstand the same due to low working capital. This results in denial of the cashless facility on flimsy grounds or hospitals only agreeing for non-cashless settlements to patients as cashless for policyholders becomes outstanding for a hospital to be collected from the insurer. The solution is to allow restrictive cashless facility. For treatment costs up to a limit, there should be no cashless facility. For example, claim amount less than ₹1 lakh. This will restrict policyholders who misuse the provision of insurance and get admitted for minor ailments and prolong their stay at hospitals and policyholders will try to self-regulate overall costs on admission to hospitals. Hospitals, especially smaller ones, will benefit by way of increased liquidity.

Though policyholders are now more aware of the services of TPAs, they are not aware of the process of claim settlement in detail. TPAs, insurers and the regulator can help increase awareness regarding exclusions of policies and share the details of the claim process. TPAs and insurers are only focusing on pre-authorisation TAT and not post-discharge TAT.

A list of non-admissible items for insurance for which the policyholder has to pay from his own pocket should be shared post-admission to a patient so that the policyholder is aware of the same from the beginning.

As per the findings of healthcare providers, TPAs and insurers were indiscriminately tying up with hospitals and empanelling them as network providers. The patient traffic did not increase after the tie-up flowed to any particular hospital but got divided among a number of hospitals. If few hospitals have a cashless facility, they can offer discounts on treatment costs because of volumes. This will lower claim costs and benefit the insurer in the long run.

Conclusion

External TPAs are looking towards a dismal future with declining health insurance market for PSU insurers. PSU insurers have promoted their own TPA, Health Insurance TPA of India, which has further reduced the available market for external TPAs.

The study shows that TPAs have been able to reduce the cost of claims for the insurers partially and increase the number of network providers or hospitals. There is tremendous scope to improve service level parameters like time taken to settle bills, speedy pre-authorisation approval on the admission of patients and post-discharge approval of bills where the external TPAs have scored very poorly.

Analysis of the ageing of claims data for a 4-year period clearly brought out the fact that in-house teams had a quick TAT in comparison with external TPAs in processing claims.

However, TPA alone has not created customer grievances. Denial by hospitals of a cashless facility to customers and the long waiting period by patients after doctors give discharge orders to patients for the generation of bills by the hospital and delayed approval of same by the insurers is not due to service deficiency of TPAs.

The problem of inflated bills and lack of standardisation of costs of treatment across hospitals is also not due to TPAs. Insurers blame TPAs for high loss ratios but the insurer is the risk underwriter, not the TPA. The hospital has to incur administrative costs in maintaining an insurance helpdesk or TPA desk within the premises of the hospital.

There are no proper selection criteria for enrolment of hospital by TPAs due to which patient traffic is spread among hospitals as the study shows that with low volumes of patients, there is no scope for negotiation on the costs of treatment. The role of TPAs post 2016 IRDA regulations is now to propose a case before an insurer for payment of the claim. The regulatory change has now given a new dimension to the problem in cases of delay in payment by insurers to the policyholders and hospitals with no regulation on insurers for delay.

The findings of the study show awareness about health insurance products among policyholders in terms of knowledge of conditions of health insurance plans, the costs of treatment and tax benefits. This is a welcome change as studies done in the past showed poor awareness levels. The role of TPA in this regard is limited as this responsibility lies primarily with the insurer who is the seller. External TPAs are answerable to IRDA for their actions. In-house claim team (captive TPAs) of insurers are not by IRDA. This leaves less accountability for in-house teams in the long run.

TPAs have no vested interest in rejection or acceptance of claims. Rejection or acceptance of a claim does not affect income earned by them. In-house claims team is part of the insurer, therefore, there is a possibility of bias creeping in while settling claims by in-house teams. Interestingly, none of the Indian non-life insurers, except one player, is making a profit from its operations or underwriting profits. So the insurers till date have not been able to have sound underwriting practices to produce profits, insist on in-sourcing health claim settlements by having an in-house team is putting pressure on scarce capital that can be used for other purposes.

Further, new entrants do not have well-qualified and trained workforce with years of experience and expertise to start with. The decision to dispense with external TPAs needs to be well thought of before journeying out in unseen waters.

The study showed that the advent of in-house claim processing departments has not been able to make much difference in service levels. To the customer, it only matters that service-related issues are handled properly whether through an in-house claim processing unit of an insurer or through an external TPA.

Setting up of an internal claims unit for health claims requires huge initial cost in terms of manpower and IT infrastructure costs. Insurers should take a cue from the cost accounting theory of outsourcing activities which is termed ‘make or buy decision’, which weighs the benefits of producing goods and services internally with that of contracting an outside vendor.

Ensuring customer delight is in the hands of the insurer as external TPA or insurers’ own in-house teams are controlled by the insurer itself. Hiring an external TPA is akin to hiring any vendor and requires vendor management skills. The same rules apply to insurance services and it is up to the insurer to get the best out of an external TPA and ensuring delivery.

External TPA, like any other vendor, can be removed or insurer can tie up with multiple insurers in case of dissatisfaction with one TPA. In case of an in-house team if they develop systemic problems during the implementation of claim processes, the costs of correcting deficiencies would cost far more than de-empanelling an external TPA.

Even though it is very difficult to predict the future course of events, it looks like there will be a period of consolidation and mergers in the TPA industry. Some TPAs will have to shut shop in the future as there is room at the most for 10–15 players in the present scenario. In spite of allowing 100% foreign direct investment (FDI) in TPA business, no interest has been evinced by any investor to invest in existing TPAs or start a new TPA.

There is a trust deficit among the key stakeholders. Insurers do not understand the business of healthcare providers well and the issues faced by them. Hospitals do not have full trust in insurers. There should be a win-win situation for all stakeholders for smooth claim administration. The ultimate judge of the efficiency of in-house teams or external TPAs would be the consumer or policyholder. Insurers’ in-house teams or external TPAs by focusing on the need and satisfaction of the customer, embracing technology and streamlining processes would not only survive but grow and flourish.

Footnotes

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The author received no financial support for the research, authorship and/or publication of this article.

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