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CCI to investigate cashless mediclaim issue

The Competition Commission of India (CCI) may take up the cause for consumers who have been hit hard due to the new arrangement entered into by leading insurance companies. In the new arrangement, the insurance companies will stop making direct payments to hospitals on behalf of their policy holders a pre-requisite as per the cashless mediclaim policy they offer.

According to CCI sources, though the commission is yet to take a final call, however, it may soon start a thorough review of the matter to see if there have been any breach of the Competition Act, 2002.

Earlier this month, leading health insurance companies that provide mediclaim policies withdrew the cashless arrangement with all major hospitals, including private hospitals like Fortis, Apollo and Max in Delhi and NCR, thereby forcing the consumers to shell out the entire money on the spot.

Under the Competition Act, CCI is empowered to take up suo moto cases and if enough evidence is found can even order an investigation. MM Sharma, head, competition law practice at Vaish Associates, a corporate law firm, said on two fronts there appears to had been a breach of sections 3 and 4 of the Competition Act.

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Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

This is an interesting example where combined withdrawal of a particular service by state-owned insurers is seen as monopoly mal-practice. However, cashless is an service which is offered as extension of pay-out of claim. The addition & deletion of hospitals is continuous process & if insurers find that some hospitals are indulging into unfair trade practices which are harming their interest, they are free to take action against them. Not paying a claim at such hospital can be breach of policy condition but non-issuance of cashless cannot be termed as same.

Cashles Chaos: Making sense of it all

News Flash:  “The General Insurance Public Sector Association consisting of four major state-run insurance companies - United India, New India, Oriental Insurance and National Insurance have decided to stop cash-less hospitalization in most hospitals”

Shock and outrage are the two words that describe the reaction of most of the customers and media reports on this piece of news.  We demanded to know how insurance companies could take such a decision one fine day, and what would the customer do. 

Before creation of PPN (Preferred Provider Network  by the Public health insurance companies, media and the industry experts were congratulating the sector for the phenomenal growth. It is this decision which has caused a huge backlash from all around- ustomers, hospitals, media and other insurance experts.

Cashless Chaos: The Blame Game

Let’s understand the issue:

There have been various reports about overcharging by the hospitals and the lack of standard pricing. The TPAs as well as the hospitals have been blamed by everyone for being the perpetrators for the huge losses faced by the insurance industry in their health portfolio. And now, without as much as a warning, the public health insurers have delisted most of the hospitals from their existing network of hospitals, creating PPN.

Insurers’ Stand: Insurance industry faces losses amounting to  thousands of crores each year now. Last year the losses further skyrocketed  and for these losses the Insurance industry is blaming the lack of standardized pricing in hospitals along with the trend of hospitals to overcharge the insured patients.  GIPSA has also criticized the TPAs overall efficiency in keeping the claims down.

Hospitals’ Stand: The corporate hospitals believe that they are being unfairly targeted by the health insurance companies., They argue that the price they charge is proportional to the quality of care they provide. Since the kind of care in a 100 bed hospital with latest technology will be different from that in a 15 bed hospital, cost of healthcare in a large, private hospital is more.

TPA’s Stand: TPAs are being blamed of everything from inefficiency to not controlling fraudulent claims. There is immense amount of pressure on TPAs to bring down the claims and there is talk that the PSUs may opt for a single common TPA. Abhitabh Gupta, CEO, Paramount TPA says “ TPAs cannot be blamed for the losses primarily because, most of the PSU Insurance companies had underwritten health insurance at an extremely low cost sometimes even selling Rs. 1 policies, so it is but natural that they would suffer from losses. Further medical inflation has been increasing at a rate of 10-15 % while the premiums are not increasing at the same rate.” He says TPAs weren’t given the rights to meddle with the treatment and unless there is some change in their role, TPAs can’t do much.

Customer’s stand: Customers are caught in the crossfire between Hospitals and Health insurance companies and they feel cheated. Since Cashless facility is now limited to extremely small number of hospitals; customers have to pay the medical bills from their own pockets and then claim reimbursement.

With Brokers being the neutral catalysts in the health insurance domain, we sought theopinion of Sudhir Sarnobat, Founder of Medimanage Insurance Broking Pvt. Ltd on this issue:

Whether Health insurance companies are justified in delisting the hospitals in the middle of the policy:“The policy periods are of one year and at any point you take a decision, itwill be mid-term for some members and hence, we cannot hold insurer responsible for this. People look at benefit of insurance claim and that’s the core product which insurer is not refusing. If insurer finds issues with non-core benefits, they have the right to tinker with them.

Also, Health Insurance in India is currently in nascent stage and hence, the stable decision making would take a little time. One MUST not forget that this portfolio is loss-making and hence, under pressure to reduce losses, insurers are taking some sudden decisions as they are not too worried about consumer reactions”  

Blame game between insurance companies and hospitals

On Corporate Hospitals taking advantage of the system:I think that these corporate hospitals have taken advantage of the system and not offered negotiated rates when insurance is their single largest customer. It’s actually clash of egos and I think after 3-6 months, both Insurers as well as Hospitals will come to sense and will resolve this in an amicable manner when the industry bodies will act as mediators. I think IRDA may also step in”.

 On Grading of Hospitals: “The grading is a very common concept and it will help manage the cost of treatment well and will help in creation of centers of excellence. Why should a person go to Lilavati (Premium hospital in Mumbai) hospital for Hernia just because he has bought 5 Lakh or 10 Lakh cover. It’s a secondary care procedure and hence, should be managed in a  secondary care hospital.”

On the impact of this move on the customer: This (move) may bring the malpractices and over-billing to check. However, I would maintain that you need to have tertiary care hospitals in network as smaller hospitals do not have the facilities, infrastructure and manpower to manage complex procedures. “

On 10.3% of Service tax for Cashless Facility: “That’s not fair as its an additional burden. It’s discriminatory as it’s meant for Cashless Insurance patients only. But as it’s a decision by Union Government, the consumer forums/bodies should take it up with Government.”

On whether this move to curtail hospitals in the Network list will make Health insurance unattractive:
“It’s a need of the hour and once the insurance penetration and clout increases, hospitals will try to be compliant with Insurers’ requirements. This would bring in cost consciousness along with customer focus. The churning what we are seeing now is good for long term sustained development of the industry and hence, one should not look at this as negative or unattractive”


Timeline for Cashless Hospitalization issue:

July 1: GIPSA (General Insurance Public Sector Association) delists most of the Private hospitals in Delhi, Mumbai, Bangalore and Chennai from their PPN (Preferred Provider Network) list. (Of the 800 hospitals in Mumbai only 90 remained)

July 13: Insurance Company leaders and Top Corporate hospitals met to increase the number of hospitals in the list.

  • It was decided that there would different grades of hospitals depending on the quality of health care provided; there would also be a common rate card across the hospitals.
  • It was decided to revive the cashless facility on a case to case basis.

July 15: A Public notice by Public Insurance companies made it clear that Cashless Facility will only be resumed once the hospitals adhered to the conditions of the Insurance companies. 

July 18: There is news that even Private insurance companies are looking at joining the PPN Network.


Insurers may expand the list of hospitals for cashless facility.

NEW DELHI: Locked in a battle with big healthcare firms over censoring cashless health insurance claims, state-run insurers on Thursday asserted that the facility would be extended only to those hospitals that agree to their rates for medical expenses.

"The purpose of working out such package rates and stabilising the hospitalisation costs, will benefit the insured in many ways," the four state-run general insurance companies -- National Insurance Co, New India Assurance Co, Oriental Insurance Co and United India Insurance Co -- said in a joint public notice.

The selected list of hospitals in Delhi and National Capital Region, Mumbai, Chennai and Bangalore, does not include big chains like Fortis and Max Healthcare and was prepared on the basis of those accepting rate packages prepared by the insurance firms for medical procedures and hospitalisation costs.

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Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

This was the resolve & will that was expected from all PSU insurers. Now that all the PSU insurers have come together & demanding the rates negotiations, the cost of treatment for Primary & Secondary treatment would reduce. However, I am not sure about how the Tertiary care is going to be managed without taking in consideration the requirements of top hospitals. They are the only ones which offer the super-speciality treatment for complex medical problems. The hospitals need to look at Cost Plus model where they must find out the cost of procedure & then decide the price. Without having rational thought process of cost & pricing, all debate would be an exercise of demands & rejection of demands.

Mahavir Chopra:

Mahavir Chopra from Medimanage.com

Though, we have always suggested Insurers lobbying against Hospitals for their inconsistent billing menace, this sudden delisting (without any prior meetings, correspondence or warnings to Customers as well as Hospitals) was clearly uncalled for.

Customers are provided the network hospital list at the start of the policy, which they rely on for the entire policy period.Customers have not been prior informed regarding the delisting of hospitals.

Moreover, Government Insurers have not foreseen how this can adversely impact the confidence of future Mediclaim customers. For instance, How would Insurance Companies ensure their future wary customers, that they won’t suddenly delist hospitals again? How do we brokers assure this?

Quality Customers of Health Insurance we have interacted with, do look at the hospital list, to check if it includes hospitals in their locality or the ones they would use in case of an unfortunate need of hospitalization.

I personally feel, Government Insurers should toy with the idea of including the PPN List as a part of the terms and conditions of the policy and promise no ad hoc delisting of hospitals, without prior notice. This will bring in much needed customer confidence.

Recently, we came across news in an online Publication, in.news.yahoo.com

Common TPA to process the health insurance claims

Chennai, July 11 (IANS) The four government-owned non-life insurers -- National Insurance, New India Assurance, Oriental Insurance and United India Insurance-- will soon be taking forward their idea of floating a common third party administrator (TPA) to process the health insurance claims.

'We will be issuing a Request for Proposal (RFP) shortly. Our requirements will be specified in the RFP so that interested parties can submit their proposals,' New India Assurance Chairman and Managing Director M. Ramadoss told IANS over phone from Mumbai.

Consulting firm KPMG had given a report on the feasibility of setting up a common TPA by the four companies a year ago.

The four insurers, which together do around Rs.6,000 crore of health insurance business selling several lakhs of polices, are not happy with the manner in which claims are being processed and settled by the existing  TPAs.

To read full news, click here

Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

Common claims settling agency will be a death knell for the Third Party Administrators which are approved & regulated by Insurance Regulatory & Development Authority.

Already the Private Insurers like ICICI Lombard, Bajaj Allianz, Star Health & Max Bupa have gone for their own TPAs. Hence the business available for 27 independent TPAs would be negligible & that would be the end of TPAs.

As the TPA is an independent agency, the claims settlement happens in impartial manner. However, with an insurer based TPA, we would see rise in mal-practices & consumer rights violation as all disputed case may not be resolved thru’ proper escalation mechanism. The consumers may have to take those cases up in Consumer Court which may not be a path that all aggrieved member would follow for lack of time & will. This may result in dissatisfaction.

It would be interesting to recall that the insurers used to manage the claims themselves till year 2002 (before TPAs stepped in). As the efficiency levels of the PSU insurers are still very low, it would not be wrong to assume that this TPA will work with similar efficiency levels. Also, with multiple TPAs, there is competition & the TPAs are forced to improve their performance (at least at the corporate sector which amounts to 50% premium). This lack of competitive spirit may further decline the service levels of the insurance claims settlement process.  

Purandar Bhavani:

Purandar Bhavani from Medimanage.com

The PSU insurer's concern about spiraling claims is justified but the means adopted does not seem to make complete sense.
Any decision has to take into consideration the following:
1) Continued availability of affordable health insurance.
2) Ensuring convenient utilization.
3) Benchmarking and standardizing healthcare delivery.
4) Providing practical, achievable and common guidelines to TPAs to achieve the outcome desired by the insurers.

5) Ensuring that the TPAs have the desired bandwidth to offer the solutions.
All of the above are interdependent in varying degrees.

For health insurance to continue to be affordable, the insurers have to recognize the fact that unless they is some mechanism for deciding on and standardizing the healthcare delivery costs, the premiums would only continue to rise. The premiums have shot up over 50% in some age bands in the recent correction. For the mechanism to be in place the onus squarely lies on the insurers and the government. There are such structures in place worldwide and it should not be too difficult for us to implement these. Needless to say, such an activity has to involve the healthcare providers and the TPAs.

Once a rationale is decided, it is then the duty of the TPAs to implement the program and manage it efficiently. The TPAs had been instituted, among other things, for the purpose of ensuring convenient utilization of the health insurance. It is erroneous to say that the TPAs are inefficient. One has to remember that they are always in the line of fire and are still manage the show reasonable well. It is because of the TPAs that there is now a semblance of data available which can be the basis of any analysis. Yes, there should be a re-evaluation of the TPAs and those having robust processes and efficient delivery should be shortlisted by the insurers. This will automatically weed out the inefficient ones. TPAs alone are not to be blamed for high loss ratios. The insurers are to share the blame equally. Currently the 7,000 Cr health insurance premium is divided 60:40 in favour of the corporate i.e. the group policies. Almost all of these policies operate more as a finance mechanism than an insurance cover. All covers from Day 1.

True, there could be rouge TPAs, but that is what an evaluation is expected to find out. A common claims settling agency is also not the right approach.

1) It is contrary to the concept of instituting TPAs.
2) We are not functioning in a unitary environment. There has to be competition for progress and growth.
3) There is danger of monopoly.
4) The apparatus could become a monolith, another government.
5) Customer satisfaction will be compromised.
6) Fresh ideas will be hard to come by.

A better approach would be to segregate the business into about 6-8 zones and have 1 TPA for each zone. By this, we can

1) Push TPAs to capitalize on local strengths, create strong processes and improve on efficiencies.
2) Achieve greater customer satisfaction.
3) Create an environment of fair play and competition.
4) Create a strong basis for comparison between TPAs.
5) Have new thoughts and ideas coming to the fore which can be better implemented.
6) Eliminate monopoly.

I am hopeful that saner senses will prevail while deciding on a solution and the competent authorities will place the consumer’s interest above all. The cycle of high hospital bills and therefore high claim ratios, therefore higher premiums and restrictions are only making life for the common man that much more difficult. My father’s premium has gone up by 30%. Delisting hospitals and TPAs seems rather a kneejerk reaction and obviously not the solution for stemming high claims.  

Financial losses by health insruance company

Health insurance companies are trying to salvage the losses which are just increasing each year and here is another of their moves. Public Health insurance Companies (Oriental, New India Assurance, United, National) have announced that they are taking down large number of the hospitals from their list of network hospitals to access Cashless service. From the 800 hospitals which were in the Preferred Provider Network in Mumbai, only 90 remain, all others have been delisted.

Even some of the most reputed hospitals- Breach Candy, Bhatia Hospital, Jupiter, Lilavati and Hinduja have been removed from their lists. There are similar names which have been omitted from other metros like Chennai, Bangalore and Delhi.

So what caused this move?

fradulent claims by health insurance companies

Cashless service is offered by health insurance to the customers to avail hospitalization in select hospitals without paying any fees. The customers show their TPA card, fill a form and the hospital then receive the amount from the TPA, which is an intermediary between Health Insurance Company and the customer. Since the TAT or the Turn Around time, for the entire transaction is just few hours, there is less- than-effective examination of the documents and the some hospitals and some customers manage to file fraudulent claims. Most of the times, hospitals used to inflate their bills and in absence of rate cards could charge different rates for the same treatment.

Since the losses faced by health insurance are now running into hundreds of crores, health insurance companies are tightening the reins around the TPAs and hospitals. After examining the claims they found many Hospitals had filed fake claims and some TPAs were also hands in glove in the exercise. General Insurance Public Sector Association (GIPSA) has come decided to take stringent measures and delist all hospitals which are guilty of these practices as well as have implemented a rate card for treatments across all the hospitals.

This move is surely going to affect the consumers who had many options to choose the hospitals to avail cashless service. Now they will be forced to travel far or go for reimbursement claims. We ask our experts about this move and its impact on the customer.

Sudhir Sarnobat, co-founder of Medimange Health Insurance Broking Ltd, agrees that this move seems to be a knee jerk reaction to the losses faced, he says “Though TPAs have identified some incidences where over charging has happened, one cannot ignore the fact that the Tertiary care treatment facilities are available in these(big) hospitals only.”

He says that the basic essence of Mediclaim is to take cover against large, unforeseen health risks which are being treated at such hospitals. “Raising Rs. 10,000-20,000 is possible but the cashless really becomes useful when the claim amounts are large. Insurance companies are hitting that part and creating major inconvenience (for the customer)” he rues.

As a solution to the problem of overcharging, he suggests that Insurers should have created a list of diseases which can be treated at such hospitals and negotiated rates based on the Sum Insured.

Should there be Talks?

Reports suggest that the hospitals are still not aware of their status in the network hospitals, which suggests that there were no talks between the hospitals and the health insurance companies. So we asked the experts whether there should have been discussions between the parties.

Mr. Sarnobat replied, “As the insurers are essential for health market to grow, so are the healthcare delivery institutions (read Hospitals and Nursing Homes). Currently, the insurers view the hospital with antagonized view which needs to be altered.” He feels that Association of the hospitals should take a pro-active measure and self regulate and engage in a dialogue with the insurers to get a fairer deal.

He thinks it is the individual ego that is stopping the two parties from an honest dialogue and the decisions are based on few incidences more than wide spread activities.

Customers- the ultimate losers

While taking the policies, most customers were told that they had plenty of options to choose their network hospitals from (many boosted as high as 4000 hospitals), suddenly they will find themselves in a soup where either they need to travel far for Cashless or pay from their own pockets through the reimbursement route.

So for now, it’s bad news for the Hospitals and even more so for the Customers!

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