“Insurance Cos slash list of hospitals offering cashless services in Mumbai for making fraudulent claims”
“Medical insurers curb cashless facility”
“Mediclaim crisis looms, hospitals seek way out”
“No more cashless mediclaim? Common man suffers”
Reading these headlines in local dailies, you, as a customer, both prospective and existing, must be really worried. After all, you had counted on health insurance to ride through the tough times of cash flow problems in event of hospitalization especially when medical inflation is so high. But all you see are hapless customers being denied first – the cashless claims and then- in some cases, even claims in general. Health insurance companies, you have found out, seem nice when you are buying a policy but when you make claims, they deny claims or double the renewal premium or discontinue the policies on renewal……
Before you think of your health insurance troubles more anxiously, we will try to give you a more balanced perspective about the scenario. All the headlines in dailies are not quite accurate about the situation. After all news is more about the unusual than the usual and media ends up talking about the rarities than the standard cases. As Health insurance experts, we give you our take on the current health insurance scenario.
You ask: Is Cashless Service no longer available? Have all Insurance Companies stopped Cashless facility? What’s the latest update on that front?
Cashless Service was discontinued by the four health insurance PSUs (Oriental, New India, United, National) from 1st of July 2010 from most of the hospitals in their network hospitals in the metros of Delhi, Mumbai, Chennai and Bangalore. The reason cited was - overcharging by most Hospitals and lack of standardized rates. Meanwhile, the PSUs were paying the reimbursement claims as usual. After weeks of hue and cry raised in media and inconvenience to the patients and negotiations, the hospitals and the health insurance PSUs have agreed on standardizing the rates based on the infrastructure available in respective hospitals. The hospitals have thus been divided into three groups based on the facilities.
It is agreed that cashless service will resume in 450 hospitals for 42 medical procedures that covers almost all common ailments from 20 August 2010 and there are talks of adding 350 more hospitals in the list.
The Bottom line:
You ask: Why all these sudden changes?
In the past 5 years, Health Insurance has grown to become the 2nd largest part of the total portfolio of insurance companies in India. Losses in this portfolio that could be ignored earlier have therefore now come significantly into picture.
In 2008-09 itself, Insurance companies paid 20 Lakh Health Insurance Claims worth Rs. 4087 Crore! With overall Claim Ratio being 103%, Health Insurance companies paid more claims than the premium they took from their customers. Other expenses involved in managing the portfolio were adding to these losses. Since Government companies (PSUs) have 80% share of the health insurance market in India, they also bear the largest share of these losses. Also note that these losses are funded by ‘premium payers’ including people like you and me. In a predictable move, the Government companies are now under pressure from the Ministry of Finance to take active steps to get the health insurance business out of losses.
Bottom line: These changes are made now because it is in recent times that health insurance has grown to such large proportions and become what it is, critical to the financial health of general insurance companies
You ask: How can insurance companies discontinue Cashless Facility? Is it legal?
Cashless facility has been incorporated in your health insurance for the convenience of the customers who find it difficult to arrange for large amounts of cash, required for hospitalization, especially in times of emergencies. However it has to be noted that it is an added service and not a core offering of the health insurance companies. The health insurance companies cannot change conditions in the policy without your consent; but they can modify features and benefits not forming part of the policy conditions. Also the PSUs did not discontinue the Cashless service; they only delisted some hospitals from their existing network and created a fresh PPN or Preferred Provider Network list. The list of hospitals does not form a part of your core policy conditions and hence the health insurance companies have arguably not done anything illegal.
Also you can still send your claims for reimbursement after you pay the hospital bills. You are still getting the core benefit of health insurance.
Bottom line: Cashless is not the core product, it is a payment mechanism. You can still avail of reimbursement claims and get your claim settled subject to policy coverage.
You ask: Are Genuine Claims also not paid?
Again this is misinterpretation by most, how can health insurance companies survive if they do not pay genuine claims? Plus, the entire cashless service controversy was a result of the soaring claims ratio (between 115%-130) for health insurance. That means for every 100 rupees you pay as premium, the company ends up with an outgo of 115 rupee. This means that health insurance companies are slipping into losses because they are paying more than they are getting.
And unlike what the news that is circulating would like to tell you, in reality more than 95% of the claims submitted are passed with very small deductions. In order to get your claims settled without any hitch, read your policy document carefully to understand the conditions, keep the documents properly and submit the claim documents on time (for reimbursement claims). If you feel that your claim is being denied without proper reason, you can refer it back to the insurance company, then to insurance ombudsman and finally pursue the matter in consumer court.
Bottom line: If you have a genuine claim, it will be paid!
You ask: Are deductions made in an ad hoc manner?
There are times when you will find that TPAs/health insurance companies will not reimburse you the entire amount in the bill. But there will always be reasons for it- it may be because you have already made one or more claims in a year and the cover amount is spent (for ex. If you have already claimed 50,000 from your 2 lakh cover, you will be left with only 1.5 Lakhs during the remaining period of policy; and if you have a subsequent claim in the same policy year exceeding 1.5 Lakhs, you will naturally be paid only 1.5 Lakhs), there may be sub limits on the specific treatment (for ex: the cost of cataract should not exceed Rs. 25,000), there also may be some expenses that are not covered in your policy for ex. Service charges, admission fees, surcharges levied by the hospitals). In these cases the TPAs/Health insurance companies rightly deduct some amount from the final bill.
However, if you find that the health insurance companies have deducted an amount without valid explanation or reason, you may question them and even pursue the matter further.
Bottom line: TPAs/Companies cannot make deductions in an ad hoc manner as companies are bound by the insurance contract as contained in the policy, and TPAs, representing the Companies, need to process claims as per word and spirit of these contracts. While there are valid reasons for some deductions, you can fight them if you are not satisfied about the validity of any deduction.
You ask: If Insurance Companies can take such ad hoc decisions; they may do the same in the future.
Insurance companies cannot change terms of a contract, without your consent. Only features/benefits which were provided as customer service and don’t form a part of the terms and conditions can be revoked.
- From the informally accepted 30 days, recently many insurance companies reinforced the policy wordings clause of 7 day limit for submitting documents. This was a part of the policy wordings; only now this is being implemented rigorously.
- Hospital list does not form part of the core terms and conditions. Hence change of list of Hospitals is under the power of the Insurance Company.
- Your feeling cheated is because any such change in the process does not get conveyed to you before such change is effected.
Bottom line: In such a scenario, you need an expert in Health Insurance who would be able to inform, answer or provide you alerts on change in the “Value added, out of contract” benefits. And, for that matter, on all matters relating to Health Insurance.
You ask: Don’t the TPAs and Health insurance companies care about the customers?
In the entire cashless facility issue, if there is one party that was at the losing end, it was the customer. For more than a month now, they are forced to arrange for large sums of money to fund their treatments as Cashless was unavailable, some had to travel a great deal to reach the hospitals that remained in the PPN or Preferred Provider Network. It may look like Companies only care about their finances and that is the image that has been portrayed so far.
TPAs’ reputation is also getting a beating since they are primarily responsible for settling the claims. Health insurance companies are blaming the TPAs for being ineffective in curbing the losses and customers are angry that TPAs are being unfair to them. 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 Re. 1 policies, so it is but natural that they would suffer from losses. Further medical costs have been increasing at a rate of 10-15 % while the premiums are not increasing at the same rate.” He says that the TPAs weren’t given the rights to interfere on the line of treatment and unless there is some change in their role with more empowerment in these areas, TPAs can’t do much.
Here is how, this current cashless chaos will benefit you in the long run
The four PSUs chose to control the losses ahead of other insurance companies; otherwise the claims trend would put the fate of the entire health insurance industry at peril. Now that the hospitals have agreed to standardize their rates, the insurance companies will save at least 20-25% on their losses which will help the customers in the long run in terms of premiums not shooting through the roof.
Sudhir Sarnobat, founder of Medimanage Insurance Broking Pvt. Ltd, says, “Current churning in the market will make life very difficult in short term for all the parties involved, but once this phase passes, we are sure that the changes would be of long-term effect and would help the consumer”. He believes that the focused network with negotiated rates would improve the commercial feasibility of insurance and improve the quality and service delivery of hospitals. He says, “Once the losses are tamed, the journey is always upward in value and what is currently happening with the health insurance industry in India marks the beginning of this”.
Also, another point we need to consider is that premiums of health insurance companies have not risen in the ratio of medical inflation which has created the divide between claims and premiums earned, so health insurance essentially remains quite affordable and inexpensive in comparison, even after these changes. Thus buying a health insurance policy for yourself and your family even now seems a very good idea.
Bottom line: Irrespective of the controversies, health insurance policy is a must investment for every family, it is the only savior during difficult times and even now, considering all the recent changes and available options, it remains a safe investment.
Come October 1 and third party administrators (TPA) that service health insurance claims will double the service charges they claim from non-life insurance companies. This may lead to a hike in health insurance premiums if insurers choose to pass it on to consumers. At present, TPA charges 5.25 per cent of the premium paid by policyholders as service fee. This is the amount insurance companies are charged for processing health claims, storage of data, issuing pre-authorization for cashless hospitalisation and checking fraudulent claims. “We will be asking public sector insurers to double service charges from 5 per cent to 10 per cent of the premium, as we will be out of business once public sector non-life insurance companies launch their own TPA. Since we are paid on a quarterly basis, in case the insurers refuse to pay, we will stop servicing new policies from January 1,” said the chief executive officer of a leading TPA who attended the EGM. SK Mahapatra, a spokesperson for the TPA association, confirmed the development. TPAs have also sought a meeting with the Insurance Regulatory and Development Authority (Irda) to present a comprehensive report, containing proof and details of wrong underwriting practices used by the public sector insurers, which are causing them losses in the health business. Similar facts were highlighted in a recent report of the Comptroller Auditor General (CAG) of India as well. “The report will contain names of 200 companies which were charged lower premium on renewals despite bringing huge claims in the previous years. The report will also show employees of insurance companies have been consciously selling health policies to sick people. We will submit this report to the government and the media as well,” said a CEO of a TPA.
To read full news, click here
Experts from Medimanage.com give their opinion:
TPAs are asking for hike in fees because they are expecting a loss in revenue when all four PSU insurers would come out with their own TPA. This cannot be the reason for fee hike. They should justify the value brought in OR should bring forward the components of various costs incurred by them and show the deficit between value/cost versus remuneration received by them. Loss in business or insurer’s faulty underwriting cannot be the basis for hike in fee percentage.
We are surprised to know that TPAs are making these comments & bringing out issues of wrong underwriting prctices only now when their existence is questioned. This shows that despite of being custodian of insurance company’s claims money (which means outflow), they did not share these concerns then & adopted an attitude of appeasement of insurers. TPAs should introspect & check what has brought them to this position. They will find that their own disregard for insurer’s interest & sloppy claims processing are major reasons why they are being blamed for overall mess in health insurance field.
Healthcare providers in Mumbai formed a core committee on Friday to deal with the controversial preferred provider network (PPN) programme unilaterally introduced by public sector general insurance companies under the cashless mediclaim facility.
“The rate for a procedure of cataract is about Rs24,000 under the PPN,” said Dr Sujata Rao, president of the AMC. Thus the maximum reimbursement that a hospital can claim for a cataract procedure would be Rs24,000. “This is not acceptable as only the lens used in the procedure costs that much.”
Because of this discrepancy, 75 of the 120 hospitals withdrew from PPN. “However, the insurance companies are not reporting this,” added Rao. According to Dr Nayan Shah of Paramount Health Services, about 25-30% of a hospital’s occupancy consisted of insurance patients, and hence the insurance companies would soon have to design an array of programmes to address their concerns.
The hospitals have come to defend their rights however; they also need to bring in discipline among their members who exploit the insurance system. Its fact that hospitals have been charging differential tariff & exploiting the facility meant for common good. While fighting for rights, they also need to build a code of conduct & suggest reprimands for incorrect behaviour. Else, it will become a typical trade unionist approach where power of group is used to extract benefits where ultimately the consumers bear the brunt.
Hospitals, proactively, should build & forward the categorisation criterion (they know healthcare the best & can comment on classification themselves) & ask TPAs to follow that. This kind of self-regulation will help the healthcare industry which is currently not regulated by anybody.
The association of third party administrators (TPA) has decided to move the Competition Commission of India (CCI) against the four public sector non-life insurance companies and their association, called General Insurers Public Sector Association of India (Gipsa), for forming a cartel and abusing their dominant market position in planning their own TPA outfit. “The TPA floated by Gipsa companies will result in cartelization, market dominance and monopolisation,” the TPA association alleged in its letter to the insurance regulator. The association said the move would lead to stopping of fresh investments and huge lay-offs by existing TPAs. “The entire business model introduced by the insurance regulator will get destroyed. This is anti-consumer and anti-competition,” Mahapatra said. When contacted, M Ramadoss, chairman and managing director of New India Assurance, said, “Let us first get the notice. We will then decide what we should do? The TPAs have all the right to do approach the CCI.” “The move will result in closure of all existing TPA companies. This will give rise to an arbitrary increase of premium, refusal of policies to the elderly, restrictions on cashless network, favouritism under the guise of preferred network of hospitals and corruption,” the TPAs alleged in their letter to Irda. “How can an organisation owned by the insurers be a TPA to service their clients?” the association asked.
All four Public Sector Insurance companies coming together & deciding for a single TPA could be interpreted as Cartelisation as these four govt. companies are separate legal entities.
However, the TPAs cannot force an insurance company to use their services & insurance companies have been selecting TPAs for their various offices based on capability, fees charged, claims processing quality & technology implementation. Instead of going for an open tender, all four companies can have a tacit understanding among them & select, may be just one TPA, for servicing all their claims. After-all, we have examples of Pvt. Insurers going in for their own TPAs & hence, you cannot stop Insurers from setting up their own TPA.
So it’s not what is being done that is questioned? It’s about who is doing it & the manner in which this is being done that makes it questionable.
NEW DELHI: “More and more hospitals will join the network (Preferred Provider Network) in coming days," said minister of state for finance Namo Narayan Meena while replying to a calling attention on the issue, raised by BJP member S S Ahluwalia, in the Rajya Sabha.
He said public sector insurance companies had to resort to rationalization of rates for cashless facilities as they suffered a loss of Rs 2,000 crore because of overcharging by hospitals in Mumbai, Delhi, Chennai and Bangalore. If the hospitals were allowed to overcharge, it could result in "serious consequences" leading to insolvency of the insurance companies, he added.
Citing an example, he said while the private hospitals were billing Rs 1.35 lakh from an insured for Caesarian operation, the rate was Rs 55,000 for uninsured and the CGHS rate was only Rs 15,000.
Raising the issue, Ahluwalia earlier said there was no standardization of rates. "The government was leaving the people at the mercy of hospitals. Patients should not suffer because of overcharging by hospitals and some cases of manipulation," he said.
Clarifying the issue during his reply, Meena said: "It may be noted that the Standard Health Insurance Policy does not provide for any assurance of cashless facility to the insured. However, in cases where a mention of cashless facility has been made it has been mentioned that the claims in respect of cashless facility will be through the agreed list of Network Hospitals/Nursing Homes/Day Care Centers and is subject to pre-admission authorization".
The minister has raised couple of important points which are at the heart of this issue.
It’s important to note that the cashless is not a service in itself but a way to ensure claim settlement. This is subject to “pre-authorisation” by TPA & hence, should not be taken for granted as right of insured. Also the insurer has right to add/remove hospitals from the network & hence, the network would always be dynamic. However, the insurer have been clearly declaring that they pay 5.5% to TPA for their services & the same is loaded on the basic premium. This has led to interpretation that cashless is right of insured as he/she has paid for that service.
The hon. Minister has brought forward the urgency & important of this issue by communicating about the losses made by insurers under Mediclaim portfolio & if the same are not reined in on time, insurance companies may become insolvent (will not be in position to pay claims for policies sold). This is very important for long term sustainability of insurers & for the larger interests of the policy holders who have paid the premiums for many years without claims & would have claims now. If the insurance company that they have trusted for years can’t pay the claim, they would be left high & dry. This would also be detrimental for policy-holders confidence in a developing insurance market like India where the insurance penetration is high & breach of trust can bring down the sales numbers which are direly needed for better spread of the risk.
On Monday, J Harinarayan, Chairman, IRDA said “The mechanisms are being put in place to improve efficiency in health insurance and administration. Expert committees of industry bodies like CII and FICCI have recommended measures including uniform claim forms, re-authorization. We are also looking into aspects related to billing,” he said. As of July 1 328 hospitals were in the network for cashless facility across four cities namely Mumbai, Delhi, Chennai and Bengaluru. However, they withdrew from the same citing steep charges.
“They (hospitals) have renegotiated rates and as per the last count, over 390 have signed up with the partnership network,” he said.
The initiatives like Uniform Claims Form, Uniform Pre-authorisation form, though look very simple, will add greatly to simplicity of administration.
Apart from the major reforms like cashless hospitalisation, premium rationalisation, the administrative reforms like this would hugely benefit the customers.
Unfortunately, despite the growth and their leading market share, state-owned insurers have not been able to give focused attention to health insurance through the creation of a health insurance division. The grapevine has it that the current imbroglio over cashless is partly because of differences between two senior executives entrusted with health insurance in a leading public sector firm. Instead of arriving at a middle of the road solution, such as asking for co-pay or segmenting their policies, PSU insurers have chosen to renege on their contracts with policyholders and withdraw cashless facilities with most of the tertiary-care hospitals. The result of this decision has been a frenzied round of finger pointing which makes it almost impossible to state the problem. Insurers have alleged that hospitals are padding up their bills for policyholders. This is in sharp contrast to the practice in markets, such as the US, where insurers are able to bargain for better discounts. They have therefore decided to flex their muscles and have stayed away from the negotiating table, despite feelers from hospitals. Third-party administrators (TPAs) have all along been having fights with hospitals over the need for tests and billings. This has resulted in TPAs being blacklisted from time to time. Hospitals, on their part, accuse TPAs of interference in medical decisions, needless harassment caused by their verification processes and delay in receiving reimbursement. “The days of naadi shastra are over. Today, we can decide on treatment only after conducting tests. TPAs cannot apply the wisdom of hindsight and tell us that a particular test was unnecessary,” says a medical director of a leading hospital in South Mumbai, defending the medical practices of using the process of elimination through various tests.
Cashless hospitalisation is not a product in itself but an extended service for a core product of indemnity against hospitalisation expenses. However, this has been an attractive product feature & has helped in popularisation of Mediclaim in Urban India. However, this has been abused by some hospitals most of the time or most of the hospitals some of the times. Though the insurers are trying to bring in underwriting discipline to improve claims performance, they also are trying to make the consumption efficient & hence, this upheaval that we are witnessing in the market.
Though the hospitals (and doctors) may not like interference in their treatment, some amount of questioning & control will happen from the Insurers & TPAs. Doctors, being not habituated to such interference (In India, we treat them like God but abroad, they are always questioned & challenged) they feel threatened but with changing time, need to be open & educative.
Insurance regulator IRDA today said it will follow the Delhi High Courts direction to take steps on resuming cashless facility to policyholders provided by four PSU general insurers.
Now that HC has given direction, we will follow that, IRDA Chairman J. Hari Narayan told reporters on the sidelines of a FICCI event here.
On Tuesday, the Delhi High Court had asked IRDA to make some arrangement to provide cashless facilities to policyholders, amid the suspension of cashless treatment facility at several big hospitals by four public sector general insurers - New India Assurance, United India Insurance, National Insurance and Oriental Insurance.
The Insurance Regulatory and Development Authority (IRDA) should, as a regulator of the insurance industry, intervene and ensure that such changes do not affect existing policyholders ...,? High Court Justice S. Muralidhar had ruled.
With judiciary getting involved in the matter, the consumers would benefit for the short term but the health insurance industry needs long-awaited reforms. If these reforms are not undertaken now, the insurers will simply charge more premium to recover the losses without bringing in the efficiency drives.
With an inefficient system, nobody benefits in long-term & we continue to hold our view that the changes are MUST.
The idea of differentiated products is good but those should be based on sound underwriting principles with innovation in risk management & a higher premium product for big hospital is not what we need now. The thought process for such products emanates from Insurer’s outlook of If-you-want-big-hospital-you-pay-big-money.
When faced with a medical emergency, you pay cash or use your credit card, instead of asking why the hospital is not accepting your cashless medical insurance. This is exactly what harassed consumers found out when health insurance companies recently stopped cashless treatment making customers pay first and then get reimbursed.
Health insurers blamed private hospitals of inflating bills that were paid by the insurance companies. On July 1, four public sector insurers New India Assurance, Oriental Insurance, United India Insurance and National Insurance stopped cashless insurance services in some big hospitals in big cities.
Instead of cashless, these insurers are planning to introduce a new variant - Premium Mediclaim. You will be charged a higher premium than a regular health insurance policy to avail cashless facility at major hospitals.
* Evaluate an additional plan- Can use a combination of plans
* Evaluate switching the plan (not a preferred option)
* Create a corpus for health emergencies- Replenish the corpus with the refund from the insurer
* Credit cards can save in urgent times - Own one card with decent limit
As we have repeated maintained that the differential product with high premium for claiming expenses in big hospitals is akin to legitimizing their higher charges for standard procedures. We will continue to maintain our stand that the efficient network needs to have primary, secondary and tertiary care hospitals in right proportion of strength. Then only, the PPN would be a workable reality. Buying another policy with higher premium would not be a feasible idea in long term. We must look at rationalizing the consumption pattern of healthcare seekers thru health insurance. Creation of personal Health Fund (starting at early age) by investing in mutual funds with tax benefits (lock-in of 3 Years) would be a good intermediate strategy to supplement your existing health insurance till the confusion over health insurance benefits is resolved.
The association of private hospitals have sought state government’s intervention to settle the ongoing dispute with insurance companies over cashless mediclaim policy.
The association, which includes hospitals like Jalok, Breach Candy, Hinduja and Hurkisondas, has said that the demands of uniform rates for medical procedures that had been put forth by insurance firms were not plausible. “Rates differ according to available equipment and location of hospitals. Even within hospitals, rates vary according to the class of service patients opt for,” said CEO of Jaslok Hospital Colonel Manesh Masand. He added that costs also vary for different procedures for the same ailment. “Cancer can be treated by focused MRI and through surgery, at exponentially different costs. The choice of treatment is finally up to the patient,” said Colonel Masand.
“Government intervention is required here. Petrol is being made duty free, whereas hospitals have to pay the highest custom duties for all imported equipment. It is important to understand that our costs are determined by all these factors,” said Breach Candy Hospital CEO Major General Vijay Krishna.
The hospital authorities also rubbished allegations of overcharging. “The billing system in private hospitals is fixed and freely available for all patients to see in advance. Where is the room for exceeding the set charges for particular procedures?” said Pramod Lele, CEO of Hinduja Hospital.
As debated earlier, it’s important to have the tertiary care hospitals in the network too. The ratio should be 10% Tertiary care Hospitals, 30% Secondary care Hospitals & 60% Primary Care hospitals. This would also mirror the percentage of claims for ailments that are similar.
It’s true that the cost of equipment, land & infrastructure are high for big hospitals & the same will reflect in the overall billing pattern of the hospitals. The health insurance companies must make up their mind on what is that they wish to execute as reforms & then only this deadlock can be resolved in amicable manner. Till such time, allegations & counter-allegation would continue.
The entry of state government may not help as government has not been efficient in healthcare delivery before & the issues involved here are beyond the govt. official’s domain expertise.