Insurance companies will be required to pay health claims directly to consumers, according to a Bombay High Court judgment delivered on a public interest litigation. Earlier, such claims (reimbursements of cashless settlements) were done through intermediaries called third party administrators (TPAs).
Most insurers outsource claims processing to TPAs to save administrative and distribution costs. As TPAs would get a commission for cutting down claims, they often questioned the treatment and tests the insured had to undergo.
With rising consumer complaints against TPAs, activist Gaurang Damani filed a PIL in the Bombay High Court last year, seeking clarity on their role. “There is no tri-partite agreement among the policyholder, the insurer and TPA; while TPAs are only hired to process claims, in practice, they’re often settling claims,” said Damani.
“Often, insurers offer TPAs incentives for rejecting claims. Last month, the High Court observed that this worked against consumer interest,” said Damani. The Insurance Regulatory and Development Authority (IRDA) has informed the court that it would take such insurance companies to task. “TPAs cannot settle claims, only insurers can. There won’t be any incentive given to TPAs,” said M. Ramprasad, Member, Non-Life, IRDA, representing the regulator at the hearing. The insurance regulator has specified the role of the TPAs in the health insurance regulations which will be notified after Parliament approval.
Incidentally, the four state-run public sector general insurers — New India Assurance, Oriental Insurance, United India Insurance and National Insurance — which control 70 per cent of the Rs 13,000-crore health-insurance market, are looking to promote their own TPAs to reduce consumer complaints and disputes. Private companies such as ICICI Lombard, Future Generali and Bajaj Allianz General Insurance have shifted to in-house settlement of claims.
Next, Damani is looking to take up the issue of transparency in the amount an insured can get for specific ailments. “The policyholder will have clarity on which hospitals to go; the hospitals too will know how much they would get,” he added.