TPAs aren’t the right Ayushman Bharat solution PDF Print E-mail
Wednesday, 15 August 2018 04:44
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Since TPAs have no skin in the game, unlike insurance firms, they are unlikely to do a good job of fraud mitigation


In an ideal situation, given how much skin in the game insurance companies have, both the Central and state governments should be using them to run their ambitious health insurance schemes for 10 crore families under the Ayushman Bharat scheme—with a family cover of Rs 5 lakh per annum—to be launched later today by the prime minister. Instead, most state governments plan to use either a “trust” or a “hybrid” model. In the “trust” model, all payments to hospitals will be made out of a government-run trust while, in the “hybrid” model, payments till Rs 50,000 per annum will be made via insurance companies, and higher ones up to Rs 5 lakh will be administered by the trust—if costs of treatment rise above the premium received, in the “trust” model, the losses will be borne by the government trust.

The governments’ reluctance to work with insurance companies stems from the sharp rise in premium levels. In Rajasthan’s Bhamashah scheme, they rose from Rs 370 per household in 2015-17—claim ratios in 2015-16 were 90% and rose to 176% in 2016-17—to `1,263 right now; despite the sharp jump in premium, claims ratio in July were as high as 114%. Thanks to this, the PSU insurer is at loggerheads with the government—at one point, within hours of the insurance firm de-empanelling hospitals for fraud, the state government overruled it. In Chhattisgarh, where a Rs 50,000 claim is offered against a premium of Rs 816, the claims ratio was around 136% in May 2018.


But, rather than shooting the messenger, governments must realise that high premiums are the result of the high levels of fraud right now and the insurance companies’ view that the government has not put in enough checks in Ayushman to stop this—checks can, for instance, include online verification of biometrics as well as the capture of live pictures at the time of admission/discharge. In Chhattisgarh’s “hybrid” model, the bid for the `50,000 insurance cover has just been won by Religare Health, which bid `1,100 per family; since Rajashtan’s Bhamashah offers a `5 lakh cover for a premium of `1,263, this means the Chhattisgarh premium is much higher in real terms. In the case of Gujarat, the `50,000 “hybrid” cover has been won by Oriental Insurance at `361 per family. The wide variations in the quotes notwithstanding—New India bid `3,750 in Chhattisgarh versus Religare’s `1,100 and Oriental Insurance bid `361 in Gujarat versus Iffco Tokio’s `2,712—they suggest Ayushman Bharat could end up being a lot more expensive than the `1,000 or so per family that the Central government had assumed as its share of the costs.

How much the costs can be brought down will depend upon how strong the fraud mitigation is and whether this will be better than what insurance companies are doing at present. While centralised health records under the proposed Health Stack is a good idea, since all data will be captured/processed at the level of the patient, this will take several years to build. Meanwhile, the plan to use third-party administrators (TPAs) as part of the trust model needs to be thought through. TPAs perform a useful function in administering claims, but they cannot possibly substitute the insurance company or the government/trust when it comes to fraud control. Since all fraud takes place with the connivance of, or due to the incompetence of the TPA—as all claims are first cleared by them—asking a TPA to do fraud-control is a conflict of interest; yet, that is what is being contemplated. TPAs have no skin in the game unlike insurance companies or reinsurers, so if the governments don’t plan to use insurance companies, they have to develop this expertise themselves.


Last Updated ( Wednesday, 15 August 2018 04:48 )

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