Problems and Prospects of TPAs in the Healthcare Industry

1. Problems and Prospects of TPAs in the Healthcare Industry IIRM National Seminar Mr. Girish Rao 24th January 2012

2. Why were TPAs created? Source: WHO – Health Insurance in India – 2006 The Government’s strategic objective of providing access to a financing mechanism was being fulfilled at a slow pace

3. Why were TPAs created?

4. Why were TPAs created? Source :TTKH TPA

5. Health Insurance - Growth HI Market : Projections are at a long term growth rate of approx 20% Source: IRDA, Company balance sheets, indiastat.com Long term projections@ approx 20%

6. Health Insurance - Growth While the CAGR of premiums collected between 2001 and 2008 has been over 22%, the CAGR of insurance penetration has been only 12% Source: IRDA, Company balance sheets, indiastat.com; WHO Health Statistics

7. Impact of TPAs on HI

8. Impact of TPAs on HI *Source: WHO presentation on the Health Insurance Market – June 2010, Asscocham

9. In sourcing of TPAs Structural shift in the market during 2007-8 when some insurance companies in-sourced administration

10. In sourcing of TPAs Both “INSCO1” and “INSCO2” are large private sector insurers INSCO1 in sourced administration in 2006-7 & INSCO2 had inhouse TPA Source : IRDA In sourcing has not improved cost containment, if any, it has stifled growth

11. In sourcing of TPAs Health Insurance Value Chain Insurer skill base TPA skill base

12. Challenges : Tiny Sector Mindset Entry Barrier Revenue* *Source: IRDA Annual reports for the health insurance premium; TPA mkt size is estimated at 5.5% of health insurance market; No of players is based on press clippings and mentions in the IRDA circulars; Average revenue per player is a mathematical average.

13. Challenges : Evaluation In the Indian market, premiums are structurally under priced

14. Future Focus : Network Management Source: TTK Data. Note: A1 to A4 represent different hospital segments however all of them have the requisite clinical skills to carry out complex procedures.

15. Future Focus : Integrated Partnership Enough evidence to show that TPAs can help change the trend of adverse claims ratios • Large bancassurance portfolio of >100,000 credit card holders • Claims data available from 2003 onwards. • Adverse claims ratio from 2003 to 2005 (>105%) • Analysis of claims patterns and disease profiles showed the need to change product features. • Sub-limits for specific disease and cost elements introduced based on TPA advice. • Claims ratio improved and since then has been profitable.

16. Future Focus : Long term Partnership Social Health Insurance Value Chain Insurer skill base TPA skill base Government

17. Future Focus : Standardisation Need of the hour is to direct capital towards structures which will help with standardization

18. Future Focus : Consolidation Source : IRDA Annual Reports

19. Summary

20. Thank You! Mr. Girish Rao 24th January 2012