With the growing role of health insurers and third-party administrators (TPAs) in the region, we look at what is needed for both to maintain a sustainable and symbiotic relationship as the market evolves.
The GCC healthcare market has seen remarkable growth in premiums in recent years, and the trend seems set to continue. A report by Alpen Capital projects the market to grow at an annual rate of 12% to US$69.4 billion by 2018 from about $39.4 billion in 2013. While Saudi Arabia is expected to remain as the largest market in the GCC, Qatar and the UAE are forecast to be the fastest growing markets, Alpen predicted.
Another report by Frost & Sullivan estimates that the GCC’s total healthcare expenditure to triple from $46.1 billion in 2011 to $133.2 billion by 2018.
The push for compulsory health insurance has been instrumental to growth, as an increasing number of GCC governments are shifting the burden of healthcare costs to private sector. Compulsory insurance laws will boost the number of insureds, benefiting companies and service providers involved in the sector. In Dubai, for example, the insured population is expected to reach three million by 2016, from its current level of around one million.
Other factors driving healthcare consumption include changing demographics, the growing prevalence of chronic diseases and rising income levels.
Room for expansion
As the governments try to make their healthcare systems sustainable, this not only opens their markets to private insurers but also sets the stage for the expansion of the TPA business.
The dynamic nature of the regional markets, with high customer expectations and demand for excellence in customer service, in addition to the growth of private health insurance, have had a direct impact on the growth of TPAs, usually seen as more flexible and quicker to react than the traditional insurance business, Mr Christian Gregorowicz, Regional CEO NEXtCARE & CEO MENA – Allianz Global Assistance, said.
Another factor in the growth of the TPA business is “the need to pool health insurance portfolios to ensure economies of scale are generated, and there are financial benefits for the insurance company in terms of both operational and claims costs, which reflect positively on premiums”, he added.
With their experience and expertise in health administration, professional TPAs bring enormous value to an insurance company’s clients’ health service needs, Mr Xavier Arputharaj, Orient Insurance’s Executive Vice President - Life & Medical said. “Some TPAs I know provide a great degree of automation to the insurance companies in the areas of data entry function, pharmacy management system, complain management and resolution. This has led to the growth of the TPA business in the region.”
Cost control
As insurers seek to improve profitability, control costs and enhance efficiency, outsourcing to TPAs can allow them to focus on their core competencies, as TPAs can carry out administration more efficiently.
The high demand placed on operations by compulsory health insurance “might push small establishments to acquire more affinity towards affiliating with TPAs that might appear for them less costly than building internal capacities”, noted AXA Insurance Gulf’s Head of Healthcare Operations, Dr Sherif A Mahmoud.
He added: “The insurance sector is facing a severe shortage of skilled local workforce. This has, in turn, has affected the underwriting and risk-bearing capabilities of companies while increasing their operating overheads. One of the solutions, of course, would be conveying the operational impact to a TPA. You gain flexibility but could lose quality of service and technical expertise.”
Dr Sameer Mankani, Neuron’s Manager - Managed Care & Strategy agreed that increased operating costs have led to insurers outsourcing a larger proportion of their membership to TPAs. “Growing competition combined with the promise of premium regulation to be introduced in 2015 in Dubai has further highlighted the importance of cost containment. The concept of ‘cost containment’ has evolved significantly from the traditional model of provider discounts and claims scrutiny, and now needs to be attacked from all angles in order to achieve the best savings possible without a compromise on service standards.”
Mr Youssef Al Kareh, Executive Vice President of Saudi Arabian Insurance Company (SAICO) and Mr Walid El Hout, General Manager of Cigna SAICO Benefits Services WLL, opined that “insurance companies which still have in-house claims management divisions need to outsource this function to dedicated entities such as TPAs which are much more capable of providing a better cost-effective service and realising economies of scale in claims administration. This will allow insurers to focus on the core underwriting and customer service functions to enhance their profitability and the sustainability of their portfolios”.
However, “TPAs will have to be very transparent with insurance companies and understand that their raison-d’être is to help the insurers achieve the desired cost savings and prevent fraud, both at the insured’s and the provider’s levels. TPAs also have to have clear conflict-of-interest management rules in place; their function is to service and not compete with insurers”, they added.
The role of IT
Dr Mankani said IT has a large role to play in cost containment as companies need to ensure that each department has the necessary tools for optimised operation. He explained: “Claims adjudication is greatly enhanced with the introduction of claims automation, medical edit rules engines, and pharmacy benefit management (PBM). Medical authorisation staff rely on custom screens built within the member handling software to appropriately assess authorisation requests, including benefit calculations and eligibility.
“Clients, members, and providers demand quick, easy, and transparent access to their own information which is provided through their respective portals. All these innovations result in decreased utilisation and decreased operating costs, but at the same time each of these developments carries a price tag that may not be feasible for a payer with a smaller portfolio, hence providing insurers with yet another reason to outsource to a TPA.”
Working together as one
Although the introduction of compulsory health insurance has had a positive impact on revenues, Mr Gregorowicz said that “few insurers and TPAs were not geared to handle larger volumes while maintaining acceptable service levels, which led to many exiting the health insurance market”.
To achieve sustainability, Mr Gregorowicz commented: “This lies mainly in having an open relationship between both companies and closely aligning their respective interests. While technical profitability is a priority for the insurance company, this isn’t always the case for a few TPAs operating in the region going after top line. Insurers and TPAs need to closely work together and have a balanced relationship to build a sustainable model.”
Dr Mahmoud suggested that “there should be some governing framework shaping up the relation between TPA and insurer focussing on defining the shared accountabilities between both parties”. Calling on TPAs to work together with their clients to ensure their profitability and operational excellence, he said: “This will eventually ensure the flow of business continuity in a seamless manner. That can never be achieved if TPAs continue working in extreme isolation from their clients in terms of claims costs, challenges, and inflation impact.”
With the insured public getting more informed and enlightened, Mr Arputharaj said value propositions alone can help the insurers and TPAs in the long term. “Myopic vision will not help and they have to constantly bear in mind the value add they bring to the insuring public.”
Insurers and TPAs are practically seen as one entity by the insured public, he added. “Together, they will have to formulate strategies to reduce over-diagnosis, over-medical intervention and over-treatment on the part of providers and over-utilisation on the part of those who purchase insurance. Together, they will have to work towards the health of the very industry itself. This will eventually lead to increased awareness and enlightened usage of medical facilities by all concerned.”
Summing up, Dr Mankani said: “Any TPA can perform the traditional tasks of processing claims and answering phone calls, but this is no longer enough. Vigorous cost control, combined with increased quality of care, can only be attained by providing additional services such as tighter fraud waste and abuse controls, case management, and managed care offerings including disease management and wellness initiatives.
“Any company that fails to adapt to the evolving market by refusing to offer these services will soon render itself irrelevant.”