The Health Insurance TPA of India which is to handle the health claims of India’s public-sector general insurers has secured a licence from Insurance Regulatory and Development Authority (IRDA). Third Party Administrator (TPA) licences are valid for a period of three years at a time.

The general manager of a state-owned general insurer explained that though the Health Insurance TPA of India has been set up exclusively to manage health claims of state-owned general insurers, their entire TPA business will not be transferred to it. External third-party administrators (TPAs) will continue to serve government-owned general insurers and 50-55% of the business would remain with them, reported Business Standard.

An official involved in the process said that Health Insurance TPA of India was granted a licence by IRDA about two months ago and begin operations by April 2015.

This common TPA to process health claims has National Insurance Company, New India Assurance Company, United Insurance Company, Oriental Insurance Company and General Insurance Corporation of India as shareholders. The four insurers have a 23.75% stake each and GIC has 5%.

The common TPA has been formed to avoid large-scale leakages while settling insurance claims in the health segment. The move is expected to reduce costs for the state-owned insurers, which pay a commission to external TPAs to handle health claims.

Meanwhile, the Competition Commission of India (CCI) has ordered an investigation against  the General Insurers’ (Public Sector) Association of India (GIPSA) and public-sector general insurers for alleged anti-competitive practices such as setting up the common TPA. The view is that there will be no competition in the TPA market given the dominance of the state-owned insurers.

The probe represents a U-turn by the CCI which in 2011 said, on a similar issue raised by the Association of Third Party Administrators against the GIPSA, that  there was no prima facie case calling for an investigation and closed the matter.

“In 2011, the public sector insurers have not floated any TPA. But now there is the common TPA and has been licensed by the IRDA ,” Mr K K Srinivasan, a former member of  IRDA, said.

“The government insurers now command around 62-65% of the total health insurance business estimated at around INR180 billion (US$,2.9 billion),” Mr Nayan Shah, managing director of Paramount Health Insurance TPA, told Indo-Asian News Service.

He said that the average service fee for TPAs is around 4% of around INR140 billion of health insurance business serviced by such third parties as many private companies process the claims in-house. Based on these calculations, the overall TPA industry size is around INR5.6 billion of which the share of government companies is around INR4.5 billion. Hence, existing TPAs are concerned and are not reassured by the state-owned insurers saying that at least half of the business would still be channelled to external TPAs.