Health Insurance Claims Settlement to be more Transparent

Of late, increasing dependence of insurance companies on third party administrators (TPAs) has been reportedly causing quite a few glitches in cases of claims settlement. While some instances have been genuine, according to sources, there have been insurers who have made TPAs operate on a more business-like front. Thus, TPAs, whose sole function is to validate claims and get the final decision-making done by the insurer, have ended up having targets based on reducing hospital bills.

Getting admitted into and treated in a hospital that’s not included in the Preferred Provider Network (PPN) list of the insurer could seriously cost you a lot of time and money after the treatment is done. The hassle faced by many policyholders in such a situation is the near relentless follow-up with the TPAs and often, request for an extra payment in order to settle the claim completely. TPAs have either rejected claims outright owing to missing documents or some other discrepancy. A more common scenario is where they provide a list of deductions to bring down the claim amount.

As per activist Gaurang Damani, health insurers are as much to blame as the TPAs themselves. Producing documents that corroborated the fact that TPAs hand out targets based on lowest claim amount per day, he advocated that such targets are a result of the insurers offering incentives on lower claim settlement. With differing amounts sanctioned for the same illness at the same hospital, glaring instances of malpractice are quite evident. The Insurance Regulatory and Development Authority of India (IRDAI) has been quick to act on this. IRDAI has clearly mentioned in its draft health insurance regulations that TPAs cannot act on behalf of the insurer to reject any claim and that they can only administer cashless claims. It is hoped that wrongful decisions pertaining to rejection of claims will be reduced, now that the insuring agency will have to take official responsibility of its actions.

TPAs and health insurance companies generally have negotiations with hospitals to avail discounts for releasing the payment. This fact remains hidden to the policyholders and thus, the benefits of a possibly lower bill are completely lost to them. As per the new regulations by the IRDAI, such discounts will now be mandatorily reflected in the bills provided by the hospitals. A pivotal step as this will allow the policyholder to save on his insured sum and claim future settlements. In case of an entire insurance amount being claimed, the final payout would be lesser.

Adding on to the aforementioned grotesque state of affairs, many do not maintain proper records pertaining to either the TPAs they dealt with or the amount or number or claims the TPAs helped settle. TPAs have also been reported to ask for commissions from hospitals on every claim filed, in order for the latter to be enrolled in a Preferred Provider Network (PPN) list. Since insurers rely primarily on the PPN list to allow successful cashless settlements, often many hospitals fall for this lure. Bajaj Allianz General Insurance and many other private insurers have set up their own claims settlement departments just to get rid of this scenario.

Insurance providers are essentially the ones who should be in charge of deciding whether or not a claim should be accepted. But quite a few instances have proven that many TPAs were accepting and rejecting claims on their own. A secondary level of settlement also comes into play wherein TPAs negotiate with the hospitals and get to keep the reduction amount in the claim for themselves. Ethically, they are not supposed to solicit any business. Such kind of practices eventually lead the healthcare providers to amp up the fees of the services provided by them. Health insurance providers have also been reported to offer bonuses and rate TPAs according to the reduction that they made possible in the claim amount. Yet again, the policyholder gets to face a larger hole in his pocket due to these reasons. The recent regulations will help cut down on such malpractices and offer a breather to the policyholder.

As for the solution to the removal of some hospitals from the insurers’ PPN list, the ones that faced an issue of monetary reimbursement, which was sorted out rather quickly. But as for standardisation of rates for different medical procedures, all the partners involved in this reform are working together to find an entity that’s expert and credible enough to look into the issue.

It’s important to note that most private insurers now have in-house claims management and that the TPA market is majorly dependent on the public insurers in the market. With a change in the market share for public and private insurers, it can be expected that claims settlement by the insuring agencies themselves will be the trend that will gain the upper hand.

To wrap it all up, one should keep in mind that -

  1. Claim rejection and acceptance are now solely dependent on medical grounds
  2. Only the insuring agency has the authority to accept or reject a claim
  3. Insurance agencies or affiliated TPAs can request documentation only once
  4. All the information pertaining to the entitlement of the policyholder will be in a one-page document
  5. If the claim settlement moves beyond 30 days, the insurer is liable to pay interest on the amount to the policyholder
  6. TPAs can only recommend options for settling a claim
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