Health Insurance – Role of TPAs

May 2016

Strictly Private and Confidential 1

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Important Questions

How do you put a giraffe in a refrigerator?

How you put an elephant in a refrigerator?

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Important Questions (Cont…..)

The Lion King is hosting a conference. All of the local animals are in

attendance but one. Who is not present?

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Accident > Case Study

34 year old Indian male found unresponsive in

a US residential swimming pool and could not

be resuscitated

Declared Dead by the reporting doctor after 45

mins of resuscitation

ECG tracing was flat lined

On autopsy, there were findings of: • Pulmonary edema

• Active Lymphatic myocarditis of the cardiac

conduction system

• No evidence of external/internal injuries

He had no past history of any cardiac

problems or any other health issues

He was with his family in the hot tub before he

went into the swimming pool with a lower

temperature

Was it an accidental death?

• History of Medicine

• Stakeholders in Health Insurance

• Role of TPAs & Market Potential

• Health Insurance in India

Contents

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History of Medicine > How did it evolve

Medicine begun about 15000 years back

Was defined as the Science of

Uncertainty & Art of Probability

The 1st Recorded Doctors –

SHAMANS

Knowhow about Health, Life & Death

Causes of Diseases – Evil Spirits, Demons,

Vengeful Gods,

Imbalance in the humors of the body

Treatment Prescribed- Sacrifices

Blood letting

Medication

Primitive man believed that spirits

residing in the head created diseases

Trepanning was done as the first ever

“surgery” …to release the evil spirit

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Medicine > Milestones

Hippocrates, “Father of Medicine” separated

Practice of Medicine from Religion &

Superstition

Developed “Conduct for Doctors”

First Epidemiological thinking

• Patients Symptoms,

• diet & fluid intake

• exercise

• Occupation

• Season of disease

“Hippocratic Oath” taken till date

Any doctor could be bribed into killing a

patient….so the clause ‘ I will do no harm’ was

imbibed

Galen:

• 4 humors in balance:

Blood, Phlegm. Black bile & Yellow bile

• Wrote Medical Books and started teaching

• First anatomist

“OF AIRS, WATERS & PLACES”

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Surgery > Milestones

• Traditionally distinct

from physicians

• Surgery is derived

from Greek words for

work and hand

• Barber Surgeons

• Physicians were more

literate

• Mister/Doctor

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Medicine > Advancements

Emergence of Iconoclasts

Translation of Medical Books

Common Sense

Imagination

Hard work & Dedication

World Wars & Pandemics

Discipline

Engineering

Technology

10

Hospital > Advancements

11

Medicine > Where we are today…..

India > Health Insurance Landscape

12TH FIVE YEAR PLAN (2012-17) GOAL: 7-8% OF GDP

Expenditure on Health: 4.1%

of GDP (2013) - $ 80 Billion

63% Out of pocket expenses

Hospital Industry: $ 46 Billion

25-30% population covered by

Health Insurance for

hospitalization

Another 10% of population

covered by non-insurance

employer funding

WORLD

HEALTH

EXPENDITURE

Average Expenditure on a

Western World view stands at

17- 22% of GDP

USA

75% of total population

covered by Health Insurance

Healthcare: $ 80 Billion INDIA

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India > Health Insurance Landscape

• In “1st Five Year Pan”, Govt of India envisaged Healthcare Delivery & Financing as

primary responsibility of the State

• Healthcare is a concurrent subject i.e. both central & state govt. responsibility

• However the Govt expenditure as % of GDP hasn’t commensurated with the demand by

population apart from the quality of delivery

• Currently, India faces a double burden of diseases: Infectious & Life style related

• Though, the measurable indices (IMR, MMR, Mortality Rate, Morbidity Rates) have shown

improvement, India lags behind with disparity in accessibility of ‘Health to All’

• To keep India’s Healthcare system in pace with its economic growth, would mean an

increase in availability & health equity to each socioeconomic group

• Healthcare Goals can be summarized as: • Improved Health Indices

• Pooled risk sharing, in conjunction with Government programs to avoid financial catastrophe

• Improved Healthcare Provision at all levels of Health…Preventive, Promotive & curative

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India > Healthcare Schema

Public Healthcare

Grant In Aid Providers

Private Providers

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India > Public Health Care Landscape

PUBLIC HEALTH CENTER

COMMUNITY HEALTH CENTER

RURAL HOSPITAL

DISTRICT HOSPITAL

TEACHING HOSPITAL

TERTIARY CARE

HOSPITAL

TREATMENT IS SUBSIDIZED/FREE

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India > Private healthcare Schema

NURSING HOMES, POLYCLINICS, TERTIARY HOSPITALS

DISPENSARY,

PHARMACY

AYUSH/ ALLOPATHY

FAMILY PHYSICIAN

ANM, RMO, “WITCH DOCS”

Utilization is primarily “Private Practitioner” Driven

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India > Healthcare Cost

19%

34%

40%

26%

11%

14%

30%

26%

2015e

2005

Govt Hospitals Top Tier Mid Tier Nursing Home Private

Sector

CAGR -2% 12-14% 5-6% 9-10%

Growth expected in Private Healthcare

Delivery Format – • Primary Healthcare Centres & Family

Practitioners

• Secondary Care Hospitals – Multi Specialty

• Tertiary Care Hospitals – Super Specialty

70%

Out Patient In Patient

80%

The private sector has more than 70% market

share in Out-patient and more that 80% market

share in In-Patient care; however predominantly

in urban areas.

Currently, there are 300+ National wide programs

implemented

Utilization shows a trend of shift from Government

Hospitals to Private Hospitals

Reasons: Under par

Expertise

Infrastructure

Quality of Care: Pre & Post

Hygiene factors

Shift in utilization to the Private Sector, increases the

burden on Cost

Risk sharing through Insurance is the instrument, through

which better utilization of health resources is possible

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Health > The Iron Triangle

Budget

Allocated

for

Health

Patient Access

Insurance: Health& loss of Work

Accessibility to expertise & Infrastructure

Faster Diagnosis

* Lawton Robert Burns

Determining the right thrust and mix among the 3 angles constitutes a balancing act in

resource allocation….the 180* law is sacrosanct

Efficiency/Cost Containment

Risk Pooling/Sharing

Better Primary, Preventive & Promotive Care

Low Priced, High Output Health Products

High Quality Care

Latest Medical Advancements

Stringent Accreditations Levels for

Provider/ Suppliers

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India > Health Insurance

One of the forthcoming vertical under Insurance is “Health”

In spite of constraints in market dynamics, Health Insurance has continued to grow, with a CAGR of

37%

Currently, 25% of population covered, however for Universal Health Coverage, the Health Insurance

by 2020, is predicted to be INR 40,000 Crore

Professionals required to run this industry have increased in the same proportion, for all stakeholders

Increasing trends in Health

Insurance, will necessitate turning

the current “Unregulated” Market

into a “Regulated, Standardized

Market”

This will require expertise with

market knowhow, to create a

streamlined healthcare Delivery &

financing System

Innovation in Product Design,

Sales & Marketing, Provider

Networking, Standardization will

be the “ need of the Hour”

37%

CAGR

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The Healthcare Insurance Market in India

278 370 535 854 1104

1384 1913 2182

2617

3500

4833

6500

8333

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

US

D M

n

Trend in the Health Insurance Premium Forecast

Due to increase in insurance

penetration and density, Health

Insurance Premiums has grown

at a CAGR of 32% between

2005-13 and this growth is

expected to continue at a

consistent pace in the following

years.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Health Insurance Premium Distribution (%)

Public Private Non Life Standalone Health Insurers

Public General Insurance Companies have a market share

of close to 61% of total Health Insurance. New India

Assurance Company Limited, National Insurance Company

Limited, United India Insurance Company Limited, Oriental

Insurance Company Limited are the key players

Private General Insurance - 18 companies including ICICI

Lombard, Bajaj Allianz, Royal Sundaram, Cholamadalam,

HDFC

Insurers dealing with Health have increased from 18 to 26 in the last 10 years

Standalone Health Insurers include players such as Star,

Apollo Munich, Max Bupa, Religare etc..

There are also certain life insurers with health component

such as LIC, Maxlife etc

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India > Health Insurance

Healthcare Insurance products have evolved over time, with a

current wide array of designs. The policies have been designed from

“All Exclusive” to now being “All Inclusive” products including:

• Vanilla Products: Mediclaim

• Senior Citizens Policy

• Products with coverage for Dental, Vision & OP

• Hospital Cash Benefits

• Personal Accident policies

• DRG products

• Specific Ailments (Critical Ailments, DM/HTN cover,

Maternity Cover, AYUSH cover, HIV cover, Congenital Disease

cover)

Health Insurance Products : All Exclusive to All Inclusive Factors Driving Health Insurance

Challenges and Opportunities facing Health Insurance

Market

•Detariffing

• State & Centre

Govt projects

•World bank funding

•Tier 2 & 3 cities

•Reinsurance

• Increase in Proposed

FDI

Opportu

nities

• Indemnity cover

• Underwriting losses

• ↓Penetration

• ↑F&A claims

• No MX advancements

covered

Mar

ket

• GP driven

• Cross practice

• Wellness not

practiced Co

nsu

mer

s

• OP cover

• Specific Ailment

• Vision

• Dental Pro

duct

s • Wellness management

• Risk assessment

• Disease management

• Promotive

• Preventive Hea

lth

In

dic

es

• Risk assessment

• Awareness drives

• Claims management

Sel

f In

sure

d

Co

rpo

rate

s

• Unregulated segment

• Non standardized rates

• Non standard treatments Pro

vid

ers

• Poor access to health

• ↑Disparity for RX

• Poor accreditation stds

• Infectious disease on rise

• Govt. project not viable Go

ver

nan

ce

Customer

• 70% with no Health

Insurance

• ↓Death rate, ↑birth

rate

• Increased awareness

• ↑ Employee benefits

Provider

•Rising cost of

treatment

•Medical

advancements

• Increase in

Corporate hospitals

Challenge

s

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India > Health Insurance Stakeholders

Governmen

t

Employers

Individuals

Philanthropi

c Orgs

Health

Insurers

Managed

Care

Health

Plans for

Masses

Hospitals

OP Care

Physicians

Alternative

Medicine

Nursing

Homes

Pharmacies

Wholesalers

Distributors

Group

Purchasing

Orgs

Pharmaceut

icals/Biolog

ics

Medical

Devices

Surgical

Devices

Medical

Suppliers

PAYERS PROVIDERS PRODUCERS

Providers Distributors Suppliers Insurers Payers

REGULATORS CONSUMERS PUBLIC HEALTH

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India > Role of TPAs

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India > TPA Concept

Concept of the Third Party Administrator commenced in 2001

Basic Goal:

Act as an intermediary between the Insurer & Beneficiary

Facilitate Cashless benefit to the policy holders

Eligibility:

Registered under Companies Act

Only function as a TPA

Paid Up Capital: INR 1 Crore

At least one of the directors of the TPA will be a Doctor with MCI registration

Foreign equity not to exceed 26%

CEO & CAO have to be certified in Insurance (Fellowship or Associateship)

License is granted by IRDA for 3 years

At present, there are 28 licensed TPAs, with 5 major players, controlling about 70%

of the TPA market

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India > Scope pf TPAs

Product Development

Marketing & Sales

Operations Member

Mgt. Provider

Mgt. Care Mgt.

Wellness Mgt.

Financing & Insurance Care Management Care Delivery

• Product

Developme

nt

• Pricing

• Risk

Assessment

• Client Mgt.

• Sales/Chan

nel Mgt.

• Governmen

t Mgt.

• Customer

Mgt.

• Claims

• Customer

Service

• Enrollment

• Billing

• Software

• Telecommu

nication

•Education

&

Awareness

• Appeal/

Grievance

Mgt.

• Member

Services

•Network

Developme

nt

• Provider

Education

• Credentialin

g

• Practice

Mgt.

• Analysis &

Reporting

•Utilization

Mgt.

• Case Mgt.

• Demand

Mgt.

•Disease

Mgt.

• Outcome

Measureme

nt &

Monitoring

• Quality

Mgt.

• Primary

Care

• Specialty

Care

• OP Care

• Pharmacy

• Ancillary

Care

• Long Term

Care

• Rehabilitati

on Care

Case Studies

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TPA Capabilities > Cost Containment > Fraud and Abuse

Databases of Procedures

Databases of Providers

Databases of High End Drugs

Databases of Implants

Definitions of Room Rent Inclusions

Health Index: benchmark Average payout for procedure

In addition to field investigations, abuse has been reduced by use of the following

Incidence Rates per Procedure per district

Utilization per hospital per procedure

Physician Database & Utilization review of each physician

Multiple hospitalizations of same family

Incidence of Emergency hospitalizations

More than 100% occupancy of hospitals

LOS too high/low as per STGs

Exceptions like complications/comorbidities beyond predefined target

High incidence of infectious diseases in non endemic geographies

Abuse Triggers

COLI

Hospital Type

Comorbidity

Complications

Demographics of Patient

Qualifications of Providers

Based on various triggers,

a scoring pattern has been

created.

Each hospitalization is

scored

if found in suspicious

category; full fledged

investigation is to be

conducted

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MDIndia Capabilities > Current Team & Manpower Scalability

Training Team members

with 2 MBBS Trainers

12

Non Medical Staff

2254

Para Medical Staff

8

Allied Medicine Doctors

317

MBBS Doctors

31

MD & Above Doctors

48

Cu

rren

t T

ale

nt

Po

ol

Founded in May 2011, MDIndia NetworX is the sister concern of MDIndia TPA, one of India’s largest IRDA

Licensed Third-party Administrator (TPA), currently servicing more than 80M members in 11 states. We work

with a network of 5000 healthcare providers, 2500 professionals which include more than 400 doctors

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India > Role of TPAs

Earlier Present Future

• Insurance companies covering

hospitalization costs. alone

• Limited penetration of health

insurance policies

• Limited presence of TPAs

• Insurance companies covering

hospitalization costs and also exploring

outpatient cost coverage

• Wider penetration of health insurance

policies – Need for TPA services

• Significant growth in # of TPAs

• Extensive OPD +IPD insurance

cover

• TPAs extending front end

services – Primary care

• Growth in Managed Care

concept

EV

OL

UT

ION

OF

TPA

• Increasing health treatment costs

• ~80% of healthcare expenses in India is borne by the

individual calling for innovation in Insurance segment offerings

• Gatekeeper Model

• Insurance companies' need to

contain costs – Preventive care

LE

AD

ING

FA

CT

OR

S

ENTRY LEVEL

• Operations

• Corporate Servicing

• Client Servicing

• Customer Care

MIDDLE MGT

• Backend Ops

• Transition Team

• Business Excellence

• Wellness Mgt.

• Provider Mgt.

SENIOR MGT

• Regional Heads

• Project Heads

• Process Heads

CORE TEAM

• Pan India Ops Head

• Finance Head

• CMOs

• CEOs

• CAOs

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Questions……..