Higher Premium for Cashless Mediclaim at Large Hospitals - Can it work?

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Pay higher premium, go cashless to big hospitals: insurance plan in the works

To break the stalemate with big corporate hospitals, the four state-owned insurers are planning to introduce a new variant of health cover — the Premium Mediclaim. Subscribers will be charged a premium higher than that of a regular health insurance policy, but will be offered cashless facility at all major hospitals on the insurer’s network.

“Big hospitals have agreed to revise their package rates and share it with us in a few days. We will compare it with a list of ‘reasonable rates’ that we have prepared in consultation with doctors and third party administrators (TPAs). If they are within a reasonable range, it is fine. Else, we may introduce a premium product for customers who insist on getting treated at 5-star hospitals,” an insurance official privy to the negotiations told The Indian Express.

The four general insurers — National Insurance, New India Assurance, United India and Oriental Insurance — had taken about 150 hospitals, including the big ones, off their network list from July 1 following instances of differential treatment and charges for insured patients.

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Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

Underwriting, which is one of the most important part of Insurance, is based on minimising risk & identifying innovative solutions to make the product attractive. The idea being used here lacks both. It’s like if the hospitals are charging “high” let them charge high. If there are buyers who want to buy this, we will have product to match.

Another way to look at it is the “adverse selection” angle of the insurance. Insurers deny risks which are basically skewed and which may bring heavy losses to them without any doubt. The basic premise of this product is that the insurer is ready to pay claims in big hospitals. Then the buys would be those selective members who wish to spend money. The premium being high, the insurer would have tendency to recover & will consume high, not because he needs it but because he has paid higher premium for it. It’s akin to those members in current scenario who buy 5,00,000 cover & then go to big hospital & spend 3.5 lakhs for a simple Hernia or Gall Bladder. These are the tendencies which are bringing losses to insurers (apart from other lack of controls & faulty underwriting) & one more product like this will only further the losses.

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