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Investments in Healthcare – Insurance Implications
June 2010
Presented by Simranjit Singh
Director HealthcareHealthcare Practice, APAC
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
2
Healthcare expenditure as % of GDP
4.63.23.8
8.4
4.1
3.7
6.16.6
4.9
8.9
5.7
8.5
0123456789
10
Japan
China
Austra
liaIn
dia
South K
orea
Taiwan
Thaila
nd
Mal
aysi
a
New Z
eala
nd
Singap
ore
Philippin
es
Hong Kong
Healthcare Spending- Macro perspectives
Countries with high investment in healthcare spending: South Korea, Taiwan, Australia, New Zealand & Japan
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
3
Aging and Asia
• Asian countries are just beginning to
experience population aging. As it can
be seen on the graph on the left, the
aging process is occurring much more
quickly in East and South East Asia as
opposed to the West
• By 2025, East Asia will see approx 30%
of their population in the 65 age bracket
and above. Similarly SEA will see about
15% in the same age segment
• One reason that can be attributed to this
speed in aging is the rapid economic
growth that has happened in this
continent over the last 20 to 30 years
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
4
APAC - Growing Older…………………
0 10 20 30 40 50
J apan
Australia
Hong Kong
Taiwan
South Korea
China
Singapore
Thailand
Indonesia
India
Malaysia
Philippines
2010
2003
% of population over 60
More than 25% of the population over 60!
More than 30% of the population over 60!
More than 40% of the population over 60!
‘Greying’ populations go hand-in-hand with increase medical expenditure associated with old age.
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
5
APAC - Growing Wealthier…………………
0
1
2
3
4
5
6
7
8
9
10
Ch
ina
Ind
ia
Ind
on
es
ia
Ma
lay
sia
Ph
illip
ine
s
Th
aila
nd
Vie
tna
m
Sin
ga
po
re
Ho
ng
Ko
ng
So
uth
Ko
rea
Ta
iwa
n
Re
al
GD
P G
row
th (
%)
2005 2006
GDP Growth of Selected APAC Countries
Source: Frost & Sullivan DSD, 2007
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
6
Healthcare Spending- Micro perspectives-1
CountryTotal
Population (Mn)**
Healthcare Expenditure
(bn USD)*
% *of Government Expenditure*
%* of Private Expenditure*
Healthcare Expenditure
as %* of GDP
Japan 127.3 337.2 80 20 8.5
Hong Kong 6.8 29.0 55 45 4.6
Australia 19.9 29.8 70 30 8.9
China 1298.8 29.1 20 80 5.7
India 1065.0 22.4 10 90 4.9
Malaysia 23.5 2.2 70 30 4.1
New Zealand 3.9 3.9 70 30 8.4
Singapore 4.4 2.9 40 60 3.8
Philippines 86.2 2.6 50 50 3.2
*: Frost & Sullivan Estimates from WHO figures for 2002
Countries with high proportion of government expenditureCountries with high proportion of private expenditure
** Latest Population figures as at July 2004-Source: CIA-the World Factbook
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
7
Healthcare Spending- Micro perspectives-2
CountryTotal
Population (Mn)**
%* of Managed
Care Coverage
Population under
managed care
%* Private Managed
Care Insurance Coverage
Population under private
managed care
Japan 127.3 75.0 95.5 65.0 82.7
Hong Kong 6.8
China 1298.8 2.8 36.4 1.0 12.9
Australia 19.9 63.0 12.5 45.0 8.9
India 1065.0 0.2 2.1 0.15 1.6
Malaysia 23.5 2.0 0.5 0.5 0.1
New Zealand 3.9 63.0 2.5 30.0 1.2
Singapore 4.4 90.0 3.9 75.0 3.3
Philippines 86.2 10.0 8.6 2.0 1.7
High proportion of population under managed care High proportion of population under private managed care insurance coverage
** Latest Population figures as at July 2004-Source: CIA-the World Factbook*: Frost & Sullivan Estimates from WHO figures for 2002
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
8
What is fuelling this growth?
The healthcare industry
Ageing population requiring greater medical
attention
Strong economic growth in the region
Development of combination products
Fall in device prices due higher competition
Increase in the healthcare facilities and physician skills
Developments in the interventional
techniquesLifestyle and diet
changes
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
9
What are the challenges ?
The healthcare industry
Low purchasing power of consumers
Undeveloped distribution channels
High cost of devices and procedures
Lack of skilled physicians
Delay in market entry of new products due to regulatory approvals
Low reimbursements and insurance coverage
Shortage of advanced diagnostics and treatment facilities
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
10
Regulatory Environment
CountriesHealthcare Insurance -
Funding
Pharmaceutical Regulation
Medical Devices
RegulationHealthcare IT
Provider Space - Delivery &
Quality
Australia High High High High High
New Zealand High High High High High
Japan High High High Moderate Moderate
Singapore High High High High High
South Korea High Moderate Moderate High Moderate
Hong Kong High Moderate Moderate High High
Taiwan High Moderate High High Moderate
Malaysia Moderate High Moderate High High
Philippines Moderate Moderate Moderate Low Moderate
China Low High Moderate Low Low
Thailand Moderate Moderate Moderate Moderate High
India Low Moderate Moderate Low Low
Degree of Regulatory Progress & Development
Regulatory Parameters
Mature markets of the Region
Emerging Markets of the region
Markets with good potential but lacking adequate payor infrastructure particularly India and China
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
11
Payor Scenario & Opportunities in Healthcare Insurance
95.5
36.4
8.6
82.7
12.9 8.9 1.73.92.50.512.5 2.13.31.20.11.60
20
40
60
80
100
120
Japan
China
Austra
lia
India
South K
orea
Taiwan
Thaila
nd
Mal
aysi
a
New Z
eala
nd
Singap
ore
Philippin
es
Population under Managed Care Coverage
Population under Private Managed Care
Mil
lio
n P
op
ula
tio
n
Countries with a relatively higher population under managed care
Japan: Mature market
Philippines: Emerging market
China: Good potential but lacking payor facilities
Australia: Mature Market
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
12
Healthcare Overviews and Role of TPAs
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
13
Healthcare Drivers
Medical Tourism
Changing Disease Pattern
Extended Health
Insurance Coverage
Better affordability enhances the accessibility of healthcare, thus boosting the demand.
Increased Life Expectancy
Boost demand for nursing care & medical treatment of chronic diseases
Demand on Medical Care
Boost in-patient & out-patient visits in private hospitals
Increase of Chronic Disease Prevalence spurning the demand of Preventive Therapeutic Services
Public Sector Private Sector Overall Healthcare Market
Impact
Assessment of Impact to Healthcare Industry
Malaysia - Impact of Market Dynamics and Trends
14
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Heavy Involvement of MCOs in TPA functions
• Managed care organizations (MCO) have gained momentum since gaining legal legitimacy in 1994, and are currently covering an estimated 1.5 million enrollees, provided through personal or group insurance coverage.
• Over 22 insurers have engaged MCOs to administer their Medical and Health Insurance claims.
• As of 2008, there are 56 MCOs operating in Malaysia. However, only 6 have been registered under the new MOH requirement enforced through the Private Healthcare Facilities and Services Act (1998), Act 586, which is due by March 31 2008.
• Key MCO players in Malaysia include MediExpress, Medilink Global, MHC Asia Group, and IHM Group, which are mainly involved in third party administrative roles, such as claim administration, provider network management, and information and data management.
50
46
62008
1990
Unregistered MCOs Registered MCOs
Issues Ahead
• Despite the proposition of cash-less hospitalization benefits by the TPAs, some of the issues that need to be resolved are:
• Lack of regulatory framework for MCOs’ operations to protect consumers’ interests
• Fee splitting controversy due to discount requests from the MCOs
• Delay in reimbursement payout from MCOs to hospitals or practitioners
• Selective empanelled hospital listing limits the access of policy holders seeking treatments
Source : Medilink-Global UK Limited: Placing & Admission to AIM Report, TheStar, PIKOM, Frost & Sullivan Analysis
Malaysia - Role of Third Party Insurance Administrators
Healthcare Landscape: Presence of MCOs (Malaysia), (1990 & 2008)
15
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Healthcare Drivers
Medical Tourism
Private Health
Insurance
Changing Disease Pattern
Increasing headcounts and capacities of specialty medical centers
Aging Population
Increase demand for Long term and subsidies care facilities
Demand on Medical Care
Attainment of Medical Hub status boosts both the public and private hospital segments
Broadened Insurance Coverage Increases Patients’ Eligibilities to the more costly Private Hospitals
More informed patients has consistently drive medical institutions for higher quality standards
Public Sector Private Sector Overall Healthcare Market
Greater Healthcare Awareness
Impact
Assessment of Impact to Healthcare Industry
Singapore - Impact of Market Dynamics & Trends
16
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Overview of Singapore’s MCO Market• In 1994, Singapore’s National Trades Union Congress (NTUC)
launched a pilot-scale managed care plan, the Managed Healthcare System (MHS), a non-profit organization that serves a social goal of providing quality healthcare at affordable rates to citizen- known widely as NTUC MHS.
• Drug costs are decided by either a fixed drug list or an exclusion list, e.g. vitamins. The prices paid by the MCO for the drugs used depend on the agreement with the healthcare provider. These arrangements vary from pegging it to DIMS pricing, or prices that the providers claim for, or prices that the MCOs dictate.
• There are a few MCOs in Singapore, namely Balestier Medical Group, AIA-HMO Medical Group, Managed Health Care Group (MHC), and the list goes on.
• Major insurers (e.g. QBE, NG Insurance, Aviva, AXA Insurance, Great Eastern and NTUC) contract with HMOs such as MIB (formerly MHC), Healthway and Medinet to provide outpatient service.
% of respondents
Healthcare Landscape: Payment Period After Invoicing (Singapore), 2006
Source : SMA Managed Care Survey 2006; Understanding Managed Care by the Department of COFM, NUS
SG$18
SG$25
SG$35
0
10
20
30
40
Usual C&M When moremedicines are
needed
Chronic conditions
Averag
e F
ee C
ap
s (
SG
$) Healthcare Landscape: Fee Caps System (Singapore), 2007
Singapore - Role of Third Party Insurance Administrators
17
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Issues Ahead
• With the complex schemes, there may be some difficulties with excessive claims for medications that skews the pooled premiums, thus resulting in low consultation rates
• Some patients are dissatisfied with exclusions (non-coverage of certain illnesses) whilst some providers unhappy with patients who visit frequently, or who want additional medications
• MCOs unhappy with some providers on the routine use of more expensive medicines
• Low consultation rates set by managed care players in order to build market share. In the long run, these low rates might lead to under-servicing and a host of other problems
• Scarcity of transparency on how the managed healthcare players conduct their business
• The Singapore Medical Association Private Practice Committee (2003) indicated that physicians were generally unhappy with managed care plans, reasons being late payments, or capitation that may be too low to cover the cost of treating patients with multiple problems
Potential of managed care schemes to be a channel to higher-yield procedures
Potential of managed care schemes to be a channel to higher-yield procedures
The GP (General Practitioner) groups were trying to increase market share and hold on
to big corporate customers
The GP (General Practitioner) groups were trying to increase market share and hold on
to big corporate customers
Apart from highly profitable inpatient schemes, insurance companies want to
provide better service by offering outpatient schemes
Apart from highly profitable inpatient schemes, insurance companies want to
provide better service by offering outpatient schemes
Commercial outfits that were not involved in healthcare came into the picture to try to capitalize on the situation, thinking that
there was money to be made off ownership of patient pools and cash flow
Commercial outfits that were not involved in healthcare came into the picture to try to capitalize on the situation, thinking that
there was money to be made off ownership of patient pools and cash flow
Key Driving Factors on Proliferation of Managed Care Schemes in Singapore
Future Trend
• Managed care and insurance market will grow
• Managed care is currently regulated by Monetary Authority of Singapore (MAS), but Ministry of Health (MOH) may enter the picture
• Life insurance companies have advantage of size and being able to cross-subsidize products
• Doctors will be divided and conquered
Singapore - Role of Third Party Insurance Administrators (Cont. )
18
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Assessment of Impact to Healthcare Industry
Healthcare Drivers
Development of National Health
Policies and Strategies
High Prevalence of Communicable
Diseases
Growing number of
lifestyle-related and chronic
diseases
Healthcare providers shifting their focus towards curative medicine
Increased Life Expectancy
Creates demand for services and infrastructure catered for geriatric care
Demand on Medical Care
Consistent review of the existing healthcare, thus improving the quality of the existing healthcare industry
Urgent need for effective communicable and infectious disease management
Public Sector Private Sector Overall Healthcare Market
Impact
Indonesia - Impact of Market Dynamics and Trends
19
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Industry Outlook
Third Party Administrators (TPAs) and Health Maintenance Organizations (HMOs) in Indonesia are divided into 2; government linked companies managing overall national social health insurance plan for the lower income citizens, and the private entities consisting of independent insurance claim assistance companies, insurance brokerage companies, and to some extent in last 2 years, subsidiaries to several healthcare groups like Siloam Hospitals and Global Doctors.
The latter provides claims management and assistance services to insurance companies, and managing employee benefits and life insurance related services for private companies.
There are currently 24 registered ‘Bapels’ (or commercial HMOs) in Indonesia covering less than 500,000 of the country’s population. Bapels provide comprehensive health benefits through a network of health care providers (government run and private) and to make payment to providers on capitation.
Source : WHO – Searo Social Health Insurance in Indonesia (2008)
TPA / HMO Clients
PT Global Assistance Management Indonesia (TPA)
AIG Life (I)
AIA Life (I)
William Russell (I)
Rama Group Health (I)
Asuransi Syariah Mubarakah (I)
PT International SOS (TPA) AXA Life (I)
PT Askes Komersil (Commercial Askes) (HMO)
PT Gudang Garam (P)
PT Dexa Medica (P)
Universitas Trisakti (P)
PT Asuransi Jiwa Bringin Sejahtera (HMO)
PT HM Sampoerna (P)
Key TPAs, Commercial HMOs and Their Clients
Note: I : insurance company, P : Private company
Indonesia - Role of Third Party Insurance Administrators
20
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Source : World Bank Indonesia Health Expenditure Report (2008)
6.0
8.6
3.5
5.7
8.5
3.9
8.3
5.03.5
15.0
5.43.4
28.5
6.1
4.0
-5.0
5.0
15.0
25.0
35.0
45.0
Per
cen
t (%
)
2003 2004 2005 2006 2007
Year
Bapels and OthersPrivate Life InsuranceCommercial Askes HMONational Health Insurance via Jamsostek HMONational Health Insurance via PT Askes
Indonesia - Role of Third Party Insurance Administrators (Cont. )
Healthcare Landscape: Percentage of Indonesians by Type of
Health Insurance Providers (Indonesia), 2003-2007
TPA and HMO business penetration rate and future outlook
The penetration rate of private health insurance is very low in Indonesia compared to its neighboring countries. It was recorded to be at 3% from 2006 to 4 % in 2007
Taking the number of people insured through the national health insurance program for the poor (28.5%), those who have been insured by their employers into account (8.6%) as well as those who are covered by private healthcare insurances (4%), there is still an opportunity for further penetration to the remaining 58.1% of the population
Third party administrators businesses growth is parallel with the increase in private insurance coverage in the country.
Commercial HMOs and MCOs (managed care organization) which targets corporate entities for the management of employees’ life insurance and other benefits had better luck finding clients
It is reported that 82% of the employers with more than 20 employees in Indonesia today provides various kinds of health benefits, through the engagement of Jamsostek or private HMOs. This present an opportunity for the existing HMOs to reach out for the remaining 18% of the companies
21
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Healthcare Drivers
Health Insurance & Coverage
Aging Population
Varying Disease Pattern
Rising demand for medical treatment of chronic diseases such as Cancer, liver, pancreas, kidney, pneumonia, cerebrovascular, diabetes, hypertensive, blood, eye,
respiratory diseases, & disease of female reproductive organ
Medical Tourism
Rising in-patient & out-patient visits in private hospitals
Demand on Medical Care
“30 Baht” boosts the accessibility of Healthcare Services
Improvement on Healthcare system from the preventive perspective, and enhancement of chronic and nursing care
facilities
Public Sector Private Sector Overall Healthcare Market
Impact
Growing Privatized Healthcare
Private sector – the dominating force in the future hospital service market
Assessment of Impact to Healthcare Industry
Thailand - Impact of Market Dynamics and Trends
22
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Steady rise of Thai TPA market
• Thailand introduced the concept of managed care in 1996, which subsequently opened the gateway for the growth of Managed Care Organizations (MCOs), and Third Party Administrators (TPAs) in the country.
• As of 2008, there are 52 insurance brokerage companies registered under the Thai Insurance Brokers Association, which mostly carry out third party administrative functions for a broad range of insurance products, including, life, general, and health insurance.
• Majority of associated insurance brokers specializes in TPA and insurance consulting functions, such as claim management, benefit management by designing appropriate health plans for the corporate or insurance companies.
• In 2008, a joint venture with Medilink enabled Health Benefits Consultants (HBC) to become the first TPA with electronic eligibility verification healthcard network in Thailand.
Source : Thai Insurance Brokers Association Member Listing, Thai PR.net, TPA Players’ websites, Frost & Sullivan Analysis
Key TPA Players in Thailand
Future Outlook
• The strong growth of medical tourism is likely to boost the TPA industry of Thailand, as foreign patients from US and Europe are more susceptible to TPA form of medical payments.
• The introduction of the E-Healthcard creates the path for more efficient third party administrative activities and offers greater convenience to both the patient and the healthcare providers. Hence, more existing or new TPA market players are likely to follow suit on this service.
Company Country of Origin
Key Expertise
Health Benefits Consultant
ThailandBenefits management, claims
administration, Information & data management
MSI Adjusting (Thailand)
JapanClaim management on policies issued Sri Muang Insurance and Tokio-Marine Group
Independent Consultant (ICC)
ThailandClaim Management, Settlement negotiation with insurers and health service providers
EkawitThailand
Benefit Management, personalized insurance solutions, claim administration
Medilink Thailand
United Kingdom
Medical insurance and claim administration, eligibility verification, Electronic Healthcard
Network Services (EHNS)
Thailand - Role of Third Party Insurance Administrators
23
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Assessment of Impact to Healthcare Industry
Healthcare Drivers
National Health Performance Framework
Growing Popularity of Private Health
Insurance
Chronic Disease Burden
Strong demand persists for chronic disease care facilities and systems
Increased Life Expectancy
Creates demand for services and infrastructure catered for geriatric care; Furbishes new business opportunity for private
player penetration
Demand on Medical Care
Consistent review of the existing healthcare, thus improving the quality of the existing healthcare industry
Greater accessibility and affordability to private healthcare
Public Sector Private Sector Overall Healthcare Market
Impact
Australia - Impact of Market Dynamics and Trends
24
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Outlook of the TPA market in Australia
• The market trend of increased management expenses and the recommendations from the PHIAC (Private Health Insurance Administration Council) will boost the demand for TPA or health insurance BPO service.
• Furthermore, the introduction of the Prudential Act on Outsourcing for the Insurance sector further outlines the regulatory and operational requirements closely monitored under the Australian Prudential Regulation Authority (APRA) to ensure the quality standards of TPAs.
• The Australian banking, financial services, and insurance industry is estimated to US$1.72 billion by 2010.
• Unlike the USA, TPA or insurance process outsourcing still has a relatively low market penetration rate to date, and may result in a two-folded outcome on its future development.
Key Opportunities:
• Profit constraint to Private insurers due to escalating management expenses.
• Consistent development of regulatory framework for insurance BPO.
• Relatively untapped Australian market, especially players specializing in medical insurance.
Key TPA Players in Australia
Company Country of Origin
Key Expertise
EDS Australia
USA
Healthcare payer administrative services – including claim
processing and management, error suspense resolution, and enrollment
membership and billing management, ITO (Information
Technology Outsourcing)
Fujitsu Australia
Japan
Web-based straight through processing (STP) for life insurance market, covering comprehensive
operational process of the life insurers
Health Source Australi
a
Claim Processing, Management Reporting, Front line sales &
services, technological solutions, human resource training
Sai BPO Services India
Claim Processing, administration of policies, new business
administration
Life Administration Services
Australia
New business administration and Policy administration for life insurers
Source : www.frost.com, TPA’s players’ company websites, Frost & Sullivan Analysis
Australia - Role of A Third Party Insurance Administrators
25
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
0
200
400
600
800
1000
2003-04 2004-05 2005-06 2006-07 2007-08
Man
agem
ent E
xpen
ses
(US
$M)
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
Rat
io to
Pre
miu
m R
even
ue
(%)
Management Expenses % to Benefits Paid
Source : Private Health Insurance Administration Council, Australia: Operations of the Private Health Insurers 2008 Annual Report, Frost & Sullivan Analysis
Cost Impact of the Private Health Insurance Regulatory Reform
• Introduction of the Private Health Insurance Act 2007:
• Purpose to enhance the market’s confidence on private health insurance, through more stringent governance of the private insurers’ operations.
• Contains administrative provisions to increase the range of enforcement mechanisms for monitoring purpose.
• Subsequently, the management expenses and ratio to premium revenue of the private health insurers have increased mainly due to the escalated costs of registration and product approval process required by the legislation, leading to thinner margins.
• Employee costs, in particular, forms the largest cost component at 44.6%, followed by information technology & marketing expenses.
• Despite the increase in management expenses, the cost control capabilities of the private health insurers are considered favorable.
• Nonetheless, with the consistent increase in membership volume and the competition to become more cost competitive, the PHIAC has provided several recommendations in 2008 to mitigate the increasing expenses stemmed from the new legislation.
• Key recommendations includes the encouragement on the utilization of HCIT for administrative processing, and outsourcing of member management systems and back office services.
Australia - Role of A Third Party Insurance Administrators (Cont. )
Healthcare Landscape: Australia Private Insurance Management Expenses Trend & Ratio to Premium Revenue
(Australia), 2003-2007
Healthcare Landscape: Breakdown of Management Expenses (Australia), 2007-2008, (in AUD$)
26
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Healthcare Drivers
Medical Tourism
Private Health Insurance
Penetration
Heavy Disease Burden
Increase demand for preventive and curative care, while supported by the development of public health research
Changing Demographic
Profile
Stems demand on primary and geriatric care infrastructure and resources
Demand on Medical Care
Greater affordability and accessibility to quality private healthcare
Enhancement of healthcare facilities & Infrastructure; boost demand in private healthcare
Public Sector Private Sector Overall Healthcare Market
Impact
Privatization of Indian
Healthcare
Enhancement of Infrastructure Capacity and streamlining of Healthcare Delivery Standards
Assessment of Impact to Healthcare Industry
India - Impact of Market Dynamics & Trends
27
© 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the
written approval of Frost & Sullivan.
Overview of India’s TPA Market
• 28 TPAs were registered as of June 2008, up from 23 since its introduction in March 2002 through the IRDA (Third Party Administrators – Health Services) Regulations, 2001.
• A minimum capital requirement of US$ 0.20 million and a capping of 26% foreign equity are mandatory requirements for a TPA as spelt by the IRDA. License is usually granted for a minimum period of three years.
• TPAs function as intermediaries between the insurer and insured and facilitate the cashless service of insurance. TPAs currently charges a fixed 5.6% of the insurance premium to the insurer as a form of commission for the service rendered.
• Key Insurers like Iffco-Tokio Marine General Insurance, ICICI, Lombard General Insurance, Reliance General Insurance and Royal Sundaram General Insurance have already signed up their respective TPAs.
Others14%
TTK13%
Medi Assist9% E Meditek Solutions
8%
Paramount 19%
Family Health Plan22%
Genins6%
Medicare4%
Raksha5%
Family Health PlanParamount TTKMedi AssistE Meditek SolutionsGeninsRakshaMedicareOthers
Source : Insurance Regulatory & Development Authority India Annual Report 2003 - 2007, Frost & Sullivan Analysis
India - Role of Third Party Insurance Administrators
Healthcare Landscape: TPA Player Market Share by No. of Claims (India), (2006-2007)
28
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written approval of Frost & Sullivan.
Rapid Growth Trend
• Since 2003, the TPA market has marked its significance with the rapid growth in terms of patient claims management, posting CAGR of 57.07% between 2003 to 2007.
• Furthermore, key TPA players (such as Family Health Plan, Paramount, TTK, Medi Assist, and E-Meditek Solutions) are consistently expanding their hospital panel list, each holding affiliated hospital networks of between 3,000 to 6,000 in 2007.
• The steady improvement of the settlement duration also marks significant improvement in the TPAs’ operational efficiencies, whereby 76.44% of the claims were settled within 30 days in 2006-07, up from 53.65% in 2003-04.
Issues Ahead
• Despite the proposition of cash-less hospitalization benefits by the TPAs, some of the issues have arise following its operations that needs to be resolved:
• Weak Hospital Networking and poor standardization of billing procedures for hospitals
• Delay in issuing of identity cards to policy holders
• Delay in reimbursement payout from TPA to hospitals
• Low awareness among policyholders about the existence of TPA and empanelled hospitals for cashless hospitalization services
• Selective empanelled hospital listing limits the access of policy holders seeking treatments.
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2003-04 2004-05 2005-06 2006-07N
o. o
f Cla
ims
('000
)40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
80.0
Set
tlem
ent w
ithin
30
day
s (%
)
Claims Settlement within 30 days
CAGR % (2003-2007)
Revenue : 57.07%
Source : Insurance Regulatory & Development Authority India Annual Report 2003 - 2007, Frost & Sullivan Analysis
India - Role of Third Party Insurance Administrators (Cont. )
Healthcare Landscape: TPA Claims and Settlement Trend, (India), 2003-2007
29
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written approval of Frost & Sullivan.
Assessment of Impact to Healthcare Industry
Healthcare Drivers
Expanding Insurance Coverage
Chronic Disease Burden
Rising Middle & Affluent Class
Population
Improvement of healthcare services quality; Boosts demand for private healthcare and
insurance
Aging Population
Boosts demand for geriatric care and specialized healthcare for the rising elderly population
Demand on Medical Care
Increasing access of both private and public healthcare; Reduction of Out-of-pocket payments
Drives market demand for curative and preventive products and services
Public Sector Private Sector Overall Healthcare Market
Impact
China - Impact of Market Dynamics and Trends
30
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written approval of Frost & Sullivan.
Overview of China’s TPA Market
• In China, a number of managed care systems were launched in different parts of the country in the 1980s
• It is estimated that China spent more than US$ 143 billion on healthcare in 2007, 52% of which was directly paid by households. Commercial medical insurance covered less than 6% of these costs, implying a market potential of US$ 67 billion
• The Regulatory environment for the insurance market in China has been somewhat relaxed and there is an increasing demand by the “middle-class” for private healthcare
• The current level of TPA market competition in China is relatively low. Most foreign investors choose to run a TPA company first or buy shares in local businesses to gain presence in the sector
• As a result of relationship with the hospitals, clients receive “cashless service” at the hospitals upon presentation of their health insurance card which is attractive and convenient to the patient
Source : Chinese Health Statistics Summary 2005; Digimedex; Medilink Report; Frost & Sullivan Analysis
Examples of TPAs in China
Examples of Insurers in China
• Prestige Health (Swiss Re)• Digimedex• Sunnylife• CIGNA Corp.• UnitedHealth Group• Aetna Inc.• MediLink (MidLink)• Tiecare and GBG• WellPoint Inc
• Generali China Life Assurance Company
• Ping An Annuity Insurance Company of China Ltd.
• PICC Health Insurance Co Ltd
• Sunshine Insurance Group• Generali China Life
Insurance Co. Ltd.
Examples of Key Players in China’s TPA Market
China - Role of Third Party Insurance Administrators
31
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written approval of Frost & Sullivan.
Source : Chinese Health Statistics Summary 2005; Digimedex; Medilink Report; Asia Times; Frost & Sullivan
Challenges in the Chinese Market
• TPA is in its infancy in China with very few operators currently in existence
• To do business in China, a TPA company must first open a representative office and partner with a Chinese company. Finding the right partner is crucial for success
• There is reluctance among international firms to outsource TPA services to local companies
Opportunities & Future Trend
• The TPA industry in China is still in its infancy, however, it is perceived to have rapid growth in the near future
• China is an attractive market for many international operators due to its membership potential resulting from:
Rapid growth in income levels and purchasing power
Increasing awareness of healthcare benefit schemes
Higher expectation of better healthcare quality
• Key strategies to succeed in China’s TPA market:
Presence of infrastructure, proven technology and track record of operations in other countries
Offers fully automated system
For new entrants- market entry through strategic partnerships
Joint-market with Chinese banks is an important factor in achieving market penetration and growth
• According to the U.S. Department of Commerce, the Chinese government is interested in developing its health care and pension insurance sector in order to sustain announced reforms and provide for the nation's aging population.
• The potential value of China's health insurance premium market could reach more than US$17 billion by 2015, triple what it is today, in part due to the aging of China's population and an expanding economy
• China's health care spending is expected to account for 6% to 7% of its GDP, and this could further grow the market for insurance products
17
5.6
3.2
2015
2008
2004
Healthcare Landscape: Health Insurance Premium Market by Expenditure US$ Bn, (China)
(2004, 2008 & 2015)
China - Role of Third Party Insurance Administrators (Cont. )
32
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written approval of Frost & Sullivan.
Opportunities in APAC
33
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written approval of Frost & Sullivan.
What drives the Asia Pacific Markets?
Countries
Integration of Healthcare Networks, Public and
Private
Changing Demographics-Rapidly Ageing
Population
Medical Tourism
Regulatory developments
in Healthcare IT
Growth of Payor Markets
Australia High Medium Low High Low
New Zealand High Medium Low High Medium
Japan Medium High Low Medium Low
Singapore Medium High High High Low
South Korea Medium Medium Low High Medium
Hong Kong Low High Low High Low
Taiwan Medium Medium Low Medium Medium
Malaysia Medium Medium High High High
Philippines Medium Medium High High High
China Low Low Low High High
Thailand Low Medium High High High
India Low Low High High High
Drivers
Degree of Impact (2004 -2008)
34
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written approval of Frost & Sullivan.
Providers in Asia Pacific: Hospital bed count - A driving factor for investment?
8.5
21.1
2.9
0.8 0.7
16.5
6.2
3.6
02468
1012141618
Hospital beds /1000 people
Dramatic transformationIn bed landscape
35
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written approval of Frost & Sullivan.
The paradigm shift of healthcare from provider to patient centric, centralized to decentralized, have pushed the standards of healthcare in terms of quality and efficiency to a higher level. Hence, value added components, such Health Information Technology, Health BPO (Business Processing Outsourcing) and private health insurance are likely to play significant roles in the transition process.
Key Focused Market Segments & Geographies
High
Market Penetration
Rate
Low
Growth PotentialLow High
HCIT
Australia, China,
Taiwan, India
HCIT
Indonesia
TPA
India, Australia, Malaysia
TPA
Taiwan, Thailand
PHI
Taiwan, Thailand
TPA
Singapore, Indonesia,
China
PHI
Singapore, Malaysia,
India
HCIT
Thailand, Malaysia, Singapore
Least Worthy
Challenging
Competitive
High Priority
PHI
Australia, China
Centralized/Traditional Healthcare Management
Non-applicable to Countries – Traditional Healthcare
management lacks patient care effectiveness, operational
efficiency and market attractiveness
PHI = Private Health Insurance, TPA = Third Party Administration, HCIT = Healthcare Information Technology
Opportunity Assessment on Emerging Market Segments
36
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written approval of Frost & Sullivan.
36
Thank You
Mr Simranjit SinghDirector, Healthcare Asia Pacific
Frost & Sullivan DID: 65-6890 0954
Mobile : 65 91473750Fax: 65-6890 0222
Email: simranjit.s@frost.com
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