Competition Commission okays mega-TPA formation by public sector insurers

The newly-set up Competition Commission of India (CCI) has thrown out an appeal to prevent India’s public-sector insurance companies from forming a single, jointly-owned and powerful TPA or health insurance agency.

The complaint was filed late last year by the Indian Third Party Administrators Association, which represents the interests of independent, and mostly small, third party administrators that function as facilitators of health insurance claims.

The Association claimed that a move by the four Indian insurance companies — National Insurance, New Indian Assurance, Oriental Insurance and United Indian Insurance — would drive them out of the market.

The association pointed out that the four companies account for 60% of India’s total health insurance market and the formation of a joint-venture TPA by the four would result in the entire 60% going into the hands of the new agency.

India has around 28 TPAs at present, such as Raksha, TTK Healthcare Services, Medicare etc..

Customers usually get their insurance done through these TPAs. At the time of making the claim, the customer has to approach the TPA and it is up to the TPA to do the initial processing and screening of the application.

In August last year, the four public sector companies joined together and started work on setting up a jointly-owned TPA, partly with the aim of reducing the large number of claims. The Indian health insurance sector is notorious for being one of the most unprofitable in the World due to the high level of claims.

According to the TPA association, the move would impact both service providers like their own members as well as ordinary customers.

“.. the proposed joint venture would have absolute powers to arbitrarily reject the claims of insured customers because claim reduction is an explicit criterion for the premium sharing between the [insurance companies] and the proposed TPA,” the association told the CCI.

“The existing competitors wouldbe driven out of the 60%-70% market [controlled by the four insurance companies],” it added.

However, the CCI refused to accept the argument that the move will hurt the individual consumer, based on the available evidence. It also pointed out that the Insurance companies are well within their rights to deal with consumers directly, bypassing all TPAs if they choose to do so.

The TPAs were providing a service to the insurance companies which the latter were free to accept or reject. If the latter wanted to do the work by themselves or through an arm, it was upto them.

The CCI refused to accept the association’s claim that the four insurance companies intended to hive off all their work to the proposed company.

“The proposed TPA, when formed, would be just another TPA in the market of TPAs and would have to compete with all the other TPAs for acquiring business. At this stage, there is nothing to indicate that the proposed joint venture TPA would either acquire dominance or abuse it,” the CCI said in its final order.

“.. to anticipate or imagine the emergence of dominance of the proposed joint venture in the TPA business is not envisaged under section 4 of the Act,” it added, dismissing the plea.