Irdai asks TPAs to keep out of settling claims, soliciting biz

Officials in the sector said several TPA services were terminated by companies after discovering fraudulent practices

Third party administrators (TPAs) in health insurance will have to keep out of deciding on claims or soliciting business, according to draft guidelines of Insurance Regulatory and Development Authority of India (Irdai).

In the draft guidelines, the regulator has clarified: "Health services by TPA" means services rendered to an insurer under an agreement, in either pre-authorisation of cashless treatment or settlement of other claims. Neither the rejection of claims nor procurement of insurance business, directly or indirectly, is part of TPA services.

Officials in the insurance sector said several TPA services were terminated by companies after discovering fraudulent practices. The head of claims of a private general insurer, who did not want to be named, said some TPAs tried to mislead customers by rejecting their policy claims. Such decisions are not within their jurisdiction and they have been removed.

Some un-licensed organisations have also been trying to dupe policy holders by telling them that they can settle claims in exchange of cash.

Irdai said a TPA cannot service personal accident claims. If any claim is rejected, Irdai has asked the TPA to provide exact policy clause, condition number or numbers based on which the said claim is denied.

TPAs assist insurers in settling health insurance claims. The public sector general insurers have their in-house TPA (common for all four state-owned non-life insurers) that will begin operations soon apart from external TPAs. Private sector insurers on the other hand either have individual in-house TPAs or rely completely on external TPAs for claims handling.

"There have been several complaints from customers about how some TPAs have been rejecting claims in an unauthorised manner. The regulator is also cracking down on these firms," said a senior official from the Insurance Ombudsmen office.

Irdai has said that during the course of the settlement of claims under health insurance policies, either the insurers or the TPAs may be obtaining discounts from various network providers or also from other hospitals outside the network. It added that they should ensure that the discounts obtained from the hospitals, if any, are passed-on to the policyholders or the claimants of the concerned health insurance policy.

The insurers and TPAs have been asked to mandate the hospitals to reflect such agreed discounts in the final hospitalisation bill of each claim, by which the policyholder or the claimant can also be aware of the actual bill raised by the hospital.

Where the admissible claim amount is more than the sum insured, the agreed discount will have to be effected on the gross amount raised in the bill, before letting the policyholder or the claimant bear the costs over and above the eligible claim amounts.

In cases of some health insurance policies where there is co-payment or the deductible conditions, the insurer or TPAs has to ensure that the said co-payment or deductible is effected only after netting of the discounts offered by the hospital.

The regulator has said TPAs can service foreign travel policies and health policies issued by Indian insurers permitting treatment outside India.

Further, they can also offer health services to the foreign travel policies issued by foreign insurers for the policy holders who are travelling to India. Such services would be restricted to the health services required to be attended during the course of the visit or the stay of the policyholders in India.

To deal with malpractices, TPAs will also be required to have systems in place to identify, monitor, control and deal with fraud including hospital abuse, by various agencies including healthcare providers.

Concerned stakeholders have been asked to give in their views on the regulations by July 1, post which this would become mandatory rules for TPAs.