The UAE health insurance market is set to witness the collapse of more third party administrators (TPAs) and the emergence of more meaningful consolidation with the survival of a few stronger players through acquisitions or mergers.
Three TPAs have vanished from the medical protection space leaving hundreds of employees, insurers and providers in the lurch.
It is understood that another prominent TPA is on the verge of closure.
“This is only a beginning. Soon we can see the exit of many TPAs as health insurers are increasingly bypassing them by assuming the policy administration and payment process jobs by themselves to save cost,” said an insurance insider.
Aftab Hasan, secretary general, Insurance Business Group, and chairman, Risk Exchange DIFC, said: “The ban on the capitation scheme is the immediate trigger.
“Insurance companies have been in a bind and when the TPAs ran away, healthcare providers naturally demand payment from the insurers and it is obligatory on their part to pay because the TPAs have already pocketed the premium but vanished without paying.
“It is the job of the TPAs to collect and pay the providers,” Hasan added.
TPAs are engaged in the processing of claims generated through healthcare providers, such as hospitals and clinics, on behalf of the insurance companies.
“The job of the TPAs is to administer policies within the guidelines and terms and conditions of the policies,” he continued.
“Only those TPAs who work by the rule can sustain and remain in the market. Some will vanish or some will merge together.
“At the same time some TPAs are growing also. In a way, such a consolidation is a healthy trend,” Hasan said.
Decapitating stroke
In a report on 16 June 2020 titled “A decapitating stroke for TPAs in the UAE’; International Adviser reported that TPAs in the UAE’s insurance eco system face an uncertain future with the insurance regulator terming capitation schemes related to the health insurance business as unlawful and insurance companies are gradually eliminating the third-party role.
The UAE Insurance Authority had issued a circular making capitation schemes related to the health insurance business unlawful and directed all insurance agents, authorised and licensed entities, such as TPAs, to immediately cease the operation of such schemes.
Capitation is a common form of payment method related to health services, typically paid to medical providers in advance at a pre-determined capped rate for a fixed period based on the enrolled member’s medical needs.
Irrespective of whether that member utilises the benefit of care under a capitation model, payment is made to the medical provider.
So, instead of paying per visit the insurance company would pay a fixed sum for the year for every person enrolled.
Anand Singh, senior associate in the insurance and reinsurance practice at law firm BSA Ahmad Bin Hezeem & Associates, Dubai, explained: “The essence of the new rule is that the insurance company cannot pass on the risk to the TPAs as their role is to manage claims and not to underwrite insurance.
“Some TPAs were using capitation models with local insurance companies, where premiums were paid over to the TPA, who then would negotiate a member rate with the medical provider for the insured group effectively taking on the risk and transferring that risk from the insurer to the TPA.”
How insurers are hit
Dubai’s health insurance segment has been affected by the closure of two TPAs with a combined exposure of more than AED100m ($27.22m, £20.86m, €23.14m).
These TPAs have been processing health insurance claims in the range of AED100m and going bust will leave a big hole in the pockets of related insurers.
But the blame is squarely on the TPAs that have been gambling with numbers.
Against the government-recommended premium of AED500 or more for the basic health package, some TPAs have been underquoting to get business.
“Insurers have already taken a big hit as the TPAs owe a substantial outstanding to insurance companies,” said Nagesh M, an insurance coding expert.
!With the exit of the TPAs, many providers, especially smaller clinics, are in a bind.
“Even when they were present in the market as the intermediary, the TPAs used to withhold payments on the pretext of wrong coding.”
