Dubai health insurers fret over Dh100 million in unpaid funds

Dubai: Dubai’s medical insurance sector has taken a hit with the back-to-back collapse of two TPAs (third-party administrators), with a combined exposure of more than Dh100 million, multiple sources confirm.

It was earlier this week that the industry became aware of the shuttering of offices of one of these TPAs, and which had been quite an influential player in the local medical insurance claims processing space. “Insurers and healthcare operators have lodged complaints with the authorities, some have already spoken to the lawyers hoping to get what’s owed to them, even partially,” said a top official at a UAE insurer.

“No one had even a 24-hour notice that this could happen.

“This TPA business, to my knowledge, was processing claims of Dh80 million or so – that’s the amount it needs to pay in the market. At this moment, we are awaiting the final word from the authorities on the status of this business.”

If the TPA has indeed gone bust, it would be the second successive one in recent months, and adds further pressure on an already stretched medical-related claims industry. Third-party administrators play a vital role in the processing of claims generated through hospitals and clinics, going over these, and then reclaiming the funds from the concerned medical insurers.

What this means

If the size of the unpaid claims left by the two TPAs are indeed true, it would mean further delays getting funds to hospitals and clinics for treatment provided to patients. And for the medical insurers, it would mean a big hit to their incomes for this year.

The year-to-date has been exceptionally difficult for local healthcare operators on their cashflow side. The focus on curbing the COVID-19 spread meant that patients visiting healthcare facilities dropped drastically from early March onwards. These facilities also saw an erosion in the number of inpatients being treated for non-COVID-19 related medical issues. All elective surgeries were delayed, all of which meant healthcare facilities had to undergo cashflow issues.

All COVID-19 related treatment costs are borne by the government.

Bad habits

Healthcare industry sources claim that some of the cashflow issues TPAs are facing are self-inflicted. “When the basic medical insurance policy in Dubai is already an extremely low Dh550, how can some TPAs afford to drop rates below that,” said Vikas Katoch, Chief Operating Officer at Right Health, which operates a network of clinics in the country.

“But this was exactly what was happening – rates were quoted at below Dh550. Now, in Abu Dhabi, the basic policy is set at Dh1,000, and that gives insurers and insured a lot more flexibility.

“To control risks in healthcare coverage, DHA (Dubai Health Authority) can issue strict guidelines on all basic policies will have to be insured at Dh550.”

Losses can pile up fast

Healthcare and insurance industry sources say that TPAs can get overwhelmed by any sudden spike in claims. Especially those TPAs that had quoted artificially low premiums to win the business.

“At the start of the coverage year, TPAs may not realise the risks they have taken on by under quoting,” said a healthcare operator. “But five months into a policy period, the TPAs will find their cashflow is barely adequate to cover their operations. Then the problems start mounting, and this seems to be what happened to the two TPAs.

“It’s not just the funds that were stuck at these TPAs – a lot of processing of claims were done, and which will need to be duplicated. That means for healthcare operators, funds are likely to get stuck.”

For an industry that already facing a payments delay issue, the latest incidents will only add to the pressure on operations.

The $10 billion UAE healthcare industry is going through an inflection point. Survival is the need of the hour for insurers, TPAs and providers

- Vikas Katoch of Right Health