Medical insurers have historically relied upon a variety of service companies to provide administrative services in administering health insurance schemes in the UAE and around the region. In line with the growth of compulsory health insurance legislation around the region, the regulation of health insurance service providers is increasing. The UAE Insurance Authority has recently published the Board of Directors Resolution No. 9 of 2011 Concerning Directives for Licensing Third Party Administrators for Health Insurance and Organisation and Supervision of their Operations. The Resolution is effective 31 January 2012 with a 31 January 2013 deadline for compliance. There is a possibility of an extension on application.
The Resolution stipulates that the 'health insurance claim management profession' must be conducted solely by entities registered with the UAE Insurance Authority (the Authority) as "health insurance claims management companies" (TPAs). Applications for authorization must be made to the Authority with the prescribed documentation and fee. Applications will be decided upon by the Director General with licenses being renewed annually. This Resolution represents the first federal regulation of this type of back-office activity in the UAE. At present the only regulatory requirements governing TPAs are the requirements laid down under the Abu Dhabi compulsory health insurance scheme, where all TPAs servicing health insurance that falls within the Abu Dhabi scheme are required to have a physical presence in the Emirate of Abu Dhabi and be registered with the Health Authority Abu Dhabi as a TPA.
The Resolution requires a TPA to be a limited liability company, public joint stock company or private joint stock company, registered in accordance with UAE Company Law, or a branch of a foreign company in practice for at least 2 years. Interestingly, the Resolution does not specify a prohibition for free zone companies establishing branches which are properly licensed in the UAE. However, it appears that TPAs will no longer be able to be set up in a UAE free zone. It also appears that administration work may not be outsourced to a service provider outside the jurisdiction. This is in contrast to regulations recently circulated by the Saudi Arabian regulator, which permits insurers to outsource administration and back-office services to a provider outside the jurisdiction, providing certain safeguards are in place.
A TPA must keep its own accounts separate from accounts of its operations as a TPA. A TPA must have paid up capital of AED5m with a professional indemnity policy of AED3m plus (the deductible should not exceed AED100,000). This capital requirement appears somewhat incongruous considering the administrative function of the TPA. It would appear this is premised on the fact that the TPA and insurer will be 'jointly liable' for obligations under the management contract (which on a plain reading appears to make the TPA co-liable for the insurer's obligation to pay claims).
A TPA may not market or sell health insurance, nor own any part of a healthcare facility or Company, and may not contract with a Company that is not licensed in the UAE. A TPA is permitted to represent multiple insurers but it must maintain separate bank accounts and records for each insurer it represents. The TPA's general manager should possess certain qualifications and at least one physician must be employed.
Certain provisions must be included in any contract between a Company and a TPA under the Resolution including a mandate from the Company to enter into agreements with providers on behalf of the Company, the rights and obligations of the parties, the work mechanism and fees and prices to be approved upon payment of claims. The contract should also include a document from the Company indicating that the TPA has concluded agreements with health service providers on behalf of the Company.
Significantly, the Resolution provides that the TPA and the Company will be jointly liable for fulfilling the obligations of the TPA towards third parties under a health insurance management contract.
The Resolution sets out a code of professional practice which must be adhered to, as well as the procedure to be followed in the event of breach, which may result in suspension and/or cancellation of the TPA's license.
If the Director General acquires information that the TPA has broken the law, submitted inaccurate data, broken terms of an agreement with an insurer, did not renew its license or has stopped operating, the Board of Directors may ask the TPA to remedy the problem, cease entering into contracts for up to 6 months or, the board may cancel the TPA's license. In the latter case, the TPA may not file a new licensing application for 3 years and the TPA must provide the Company with all records for safekeeping.
The Director General will inform the health authorities of all decisions regarding TPA license cancellation and will place notices in two daily newspapers (in Arabic and English) in respect of all decisions to suspend or cancel a TPA license. Following license cancellation, a TPA shall execute remaining liabilities or cede them to another TPA within 3 months of license cancellation (with the Company's approval).
The regulations were published in the UAE Official Gazette No. 526 on 31 July 2011 and provide that they will come into force on 31 January 2012. All existing TPAs have 12 months, until 31 January 2013 to comply with the new regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
