Third party administrators have moved the Competition Commission to block public sector insurers from floating their own TPA entity. Will the private TPAs’ move hold water?
Third party administrators (TPAs), intermediaries who handle insurance claims, have moved the Competition Commission of India (CCI) and the Insurance Regulatory and Development Authority of India (IRDA) to block a move by state-owned non-life insurers to float a captive company to manage claims.
However, the TPAs' case could considerably weaken given the plans of government-controlled insurance companies. Speaking with the media at a press conference of LICHFL Financial Services Ltd and United India Insurance, G Srinivasan, CMD, United India Insurance said, "We will not get rid of TPAs, only give partial business to a new common TPA entity." This stance taken by PSU insurers will surely weaken the TPAs' case.
Mr Srinivasan declined to give specifics on proportion of business distribution between common TPAs and existing TPAs. According to sources, "It is expected that 50%-75% of the health insurance premium of four PSU insurers would be transferred to the new (TPA) entity by its third year of operation and 75%-100% of their health insurance premium would be transferred to it by the fifth year. But all this is subject to its performance, especially in terms of reduction in claims."
The CCI has set Wednesday (13rd October) as the date for the hearing of the petition submitted by TPAs.
Last week Mr Ramadoss, CMD, New India Assurance, told the media at a seminar that they have received 24 bidders to partner in their TPA venture. He added that GIPSA has not yet received any notice from CCI.
Meanwhile, IRDA is understood to have refused to entertain the complaints of the TPA Association, association sources said.
According to Sunil Sarnobat, co-founder and director of Medimanage insurance brokers, "All four public sector insurance companies coming together and deciding on a single TPA could be interpreted as cartelisation as these four government companies are separate legal entities. However, the TPAs cannot force an insurance company to use their services and insurance companies have been selecting TPAs for their various offices based on capability, fees charged, claims processing quality & technology implementation. We have examples of private insurers going in for in-house claims processing and hence you cannot stop insurers from setting up their own TPA. So it's not what is being done that is questioned. It's about who is doing it and the manner in which this is being done that makes it questionable."
Most of the TPAs are not eligible to bid because of the criteria that require the bidder or their parent to have a net worth of Rs250 crore.
TPAs fear that the captive company will put them out of business which will result in cartelisation, market dominance and monopolisation by state-owned companies who account for over 80% of the TPA business. The association has alleged that through the new TPA company, insurance companies would try to become a third party which would defeat the very purpose of consumer protection and neutrality which a third party has. Existing TPAs would have to stop their investments in business and IT and lay off the 10,000 people they have employed.
TPAs allege that if they shut shop, no insurer will be able to give policyholders a choice of TPAs as required by IRDA. Moreover, no new health company can come up as there wouldn't be any independent TPA to provide it with infrastructure support. The regulator has so far not permitted private insurers to take a stake in the TPA business. Given this stance, TPAs say the regulator cannot grant permission to public sector companies.
"The move will result in closure of all existing TPA companies. This will give rise to an arbitrary increase of premium, refusal of policies to the elderly, restrictions on cashless network, favouritism under the guise of preferred network of hospitals and corruption," TPAs have alleged in their letter to IRDA.
So who will blink first - the TPAs or the public sector insurers?
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
Simply running down private TPA , in favour of a new JV by PSU insurers is missing the tree for the woods.
The TPAs on the contrary indulging in cartelization. They were said to organise media campaign in July,August,Sept. 2010 maligning the hospitals with planted reports.
There is an urgent need for a pro bono intervention in the Competition Commission that the TPA application deserved to be thrown out as they have come with tainted hands and they lack transparency. Their intentions are patently mala fide. They deserve no sympathy. I don't know why New India paid them a whopping Rs.68 cr. in 2009-10 as per their RTI response to me.