Lebanon has long been a regional medical hub. Its doctors are famous beyond its borders and its hospitals sought after. However, in terms of medical insurance, the country is still underdeveloped, both in terms of reach — only 500,000 people are insured, most of them in the greater Beirut area — and of management.
As of 2007, one aspect of the medical sector has seen a kind of shake-up — that of Third Party Administrators (TPA). A TPA is a financial transaction administrator that handles the processing and paperwork for health insurance, acting as intermediary between insurance companies and clients. Its functions often include the management of claims processing, provider networks, and utilization review.
In Lebanon, until last year there was no independent TPA, as the existing ones — like Mednet, Medical Express and Banker Assistance – were owned by insurance companies and thus it was questionable if they would offer equitable treatment to other insurance companies that, essentially, are competitors of the TPAs parent companies. Mednet is owned by AXA and Libano-Suisse, Banker Assistance only works for Banker Assurance and Medical Express is owned by SNA-Allianz. However, many small insurance companies simply do not have the capacity to handle everything by themselves and are dependent on TPAs.
In January 2007 the first non-aligned TPA, Total Care Lebanon (TCL), was formed by a group of investors who wanted to create a TPA that, in the words of its chairman Khalil Sehnaoui, would “serve the insured while preserving the insurance company’s identity. Our own experience showed us that the way it used to be was not working, that there needed to be a change, that there was a need for a truly independent TPA.”
Having acquired two clients with 40,000 insured, TCL officially launched on June 27, 2008. Beirut is its first base of operations but plans are already underfoot to branch out, with Saudi Arabia being next.
This independent TPA is set to stir things up in the Lebanese medical care and insurance sector. As Adel Kharrat, Partner and Managing Director at TCL, pointed out, “We are at arms lengths from all parties involved, insured and insurance,” and Sehnaoui added, “If you go to one of the TPAs to ask for insurance, they will most likely refer you to one of their shareholder insurance companies, which is unfair. What we do is to put the insurance companies’ names upfront and stay in the back. We believe it’s the right way to do business and it’s mutually beneficial.”
As Kharrat further explained, “Our target is to market the insurance company’s name through our excellent services, through the excellence in servicing the insured without putting TCL’s name upfront. Our target clients are not the public but the insurance companies. This is what differentiates us from others.”
In practice, having a TPA gives insurance companies many benefits. As an example, Sehnaoui gave that of TLC’s first client, Cumberland, the 3rd-largest medical insurer in Lebanon, saying, “We had our vision, and our software. The third thing was to either create the network — nurses/hospitals — from scratch or to get it from somewhere. Cumberland had the best track record, but was doing it in-house. We offered to buy the set-up, remodel it so it could fit our vision, and then enter the market as a standalone TPA. But we had to convince them. First of all, big companies can afford in-house management, but smaller ones can’t. But for the big companies it is a fixed cost, regardless of the market fluctuations. They cannot easily adapt to changes. A TPA offers them to turn the medial portfolio management into a variable cost — through outsourcing only paying for services provided.”
The second benefit for an insurer is cost-control. A TPA, representing many clients, can negotiate medical costs – volume rebates, etc. — better than a single company. By pooling clients, a TPA can get better rates.
A third benefit is that, since a TPA has a number of clients which they can pool, it can also provide better statistics. With TLC currently managing 40,000 insured, it is providing its clients with the kind of statistics for medical studies that a small insurance company can never obtain. Also, pooling enables a TPA to achieve a stable average of insured, with the fluctuations being small, and so more easily managed.
In addition, TPAs can hire and fire easier than insurance companies, as there is no image loss involved. If an insurance company lets go of a number of people, its performance is immediately under question, which, as an insurance company lives off its image, can be dangerous. A TPA does not have that image problem.
In terms of staff, TLC is proud to have “the best- trained staff, who are specialized for this work,” according to Kharrat. All are hired locally. The highest demand is for nurses because TLC needs to have nurse delegates present in most hospitals on a full time basis. At any one point the TPA has nurse-delegates in a hospital who assist the insured, who follow up on a daily basis with the client and also control the medical procedures, aiming at cost control and cost containment.
Regarding the latter issue, Sehnaoui highlighted that, “Hospitals and doctors will aim to overcharge, overutilize, prescribe tests that aren’t needed in order to maximize their income. So our responsibility, as a TPA, is to protect the insured from unnecessary tests and procedures and the insurance company from being overcharged”
Kharrat, looking back at a long career in the medical insurance field concurred: “In Lebanon, because there is an oversupply of doctors, there is high number of procedures done that are unnecessary. Nowadays, the trend is that as long as you have a first-class insurance, if you have a tummy ache they’ll take out your appendix. Internationally, it is acceptable to have about 20% of appendix removals if it’s not inflamed. In Lebanon, with some surgeons that number is almost 80%. This is where the role of the TPA comes in. We make sure that there are tests so only necessary procedures are performed.”
Another issue, of course, is that of finances and transparency of financial transactions. In the case of TLC, Kharrat is adamant to highlight the fact that “all financial transactions are transparent, and the ones from medical institutions to the insurance companies are direct, don’t go via us at all. We even offer the option to the insurance companies that their re- insurers can look at all our files and procedures. Now insurance companies even get better deals with re-insurers if they use us as a TPA.”
One of the main approaches of TLC that distinguishes it from its competitors is that from the start it offered clients to pick and choose which aspects of TPA they wanted. Before TLC showed up “the solutions offered were all-or-nothing deals,” said Sehnaoui. “It was like as if you go to a car dealer and he tells you, ‘If you buy the car, you have to take it with all the options included or you can’t have it.’ TCL works on an a la carte approach. The insurer can pick and choose what they want us to do for them, only the services they specifically need.” This approach seems to be working, as other TPAs have now retailored their own offers to allow for pick-and-choose agreements.
But what about the National Social Security Fund (NSSF) in which all Lebanese employees are enrolled? “The NSSF doesn’t work,” said Kharrat. “If you go to a hospital and you’re covered only by the NSSF, you will have to wait, you will put at the end of the list. And you have nobody who will check what the true costs are, so you might get charged for ‘extra procedures’ that are not covered by the NSSF but you, as a patient, will never know if that is correct or not. So even if you are covered under the NSSF you will still need private insurance if you want good medical care.”