The average claim amount of health insurance policies settled by intermediaries, such as third-party administrators (TPAs), is 5 per cent lower than those settled by in-house claim settlement teams set up by insurers, reveals Insurance Information Bureau data for 2012-13.
For instance, if a health insurance company settles a maternity claim of ₹70,000 through its in-house team, the amount would have been ₹66,500 if settled through a TPA.
Most insurers outsource claims processing to TPAs, who act as intermediaries between hospitals and insurers, to save on administrative and distribution costs. As TPAs get a commission for cutting down claims, they often question the treatment and tests the insured undergo, resulting in a reduction in the claim settlement amount.
However, data from IIB show that the difference in claim settlement amount between in-house teams of insurers and TPAs narrowed significantly in 2012-13 to 5 per cent from 17 per cent in 2011-12.
According to industry experts, while earlier many TPAs settled the claims directly with hospitals, stringent health insurance regulations now require that only the insurance company, and not the TPA, can settle or reject a claim. This has resulted in tighter control over TPAs.
The regulation was issued following a Bombay High Court ruling that required health insurers to pay the claims directly to the consumers.
Gaurang Damani, an activist who fights medical insurance cases in the Bombay High Court, said that as a policyholder’s health insurance contract is with the insurance company, an intermediary, like a TPA, should only be allowed to process the claims.
While most private sector insurers, like ICICI Lombard, Bajaj Allianz, HDFC Ergo and Future Generali settle claims in-house, public sector insurers, who control 60 per cent of the health insurance market at present, settle all their claims through TPAs.
Public sector general insurers are currently in the process of jointly setting up their in-house claim settlement team called the Health Insurance TPA of India which is likely to be operational by April.
A senior official of New India Assurance said that the in-house claims settlement team will help ensure that dispute resolutions are faster and plug leakages in the system. In-house TPA of public sector insurers will gradually take over handling of claims from other TPAs.