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An open letter from a Health Insurance Customer

Dear Insurance Company,

Hi, I am your Mediclaim Customer. I am 30 years old, married, have a kid. I own a house in the suburbs of Mumbai and have recently bought a small car. I am well read, and hence fairly aware of basics of financial planning and securing my future. Yes, I believe in Insurance. I bought my first insurance policy (term life) when I was 23 years old. Yes, I know, I am the type of customer, who you vie for – I am the one who appears as “Sec A2” - target customer right at the top of all your sales spreadsheets and presentations. 

I have been your customer since 2007. It started off pretty well. I received fairly good service from your end. But…lately, I have been very uneasy with our relationship. In fact, I think I have lost trust in you. OK. Stop getting surprised; I know you are  part of a group valued in Multi billion dollars ; I know you have presence in 100s of countries worldwide, you surpass all the solvency norms set by the regulator, and yes, your claims settlements are improving . But I have still lost trust in you. Can you help? Please give me your 5 minutes to explain.

Health Insurance Advisor India

4 years back, when I was 26 years old, I decided to buy my own health insurance policy. I had a cover in my dad’s policy, but my calculations showed that I was not covered adequately. I therefore approached a health insurance broker. He did a good job, helping me compare various mediclaim policies available in the market, and took me through how this whole mediclaim thing works. I signed up for the most attractive one (the one which had the best features and the lowest price).  I was proud I had done my homework, just like my dad would.

2 renewals had passed, when I received the 3rd years' Renewal Notice. The renewal notice talked about increase in premium by a shocking 500%, with the reason “adverse claims ratio and Medical Inflation” mentioned on the letter. A premium of Rs. 3000 for 2 Lakhs coverage for a family of 3, has increased to Rs. 13000! OK, I understand Medical  inflation, but I am sure it wouldn’t have been grown more than 50%, then how was the remaining 450% increase in premium to be understood? Did I have a role to play in the adverse claims ratio you faced? Could I have helped avoiding it? At first, I was sure, the premium mentioned was a printing error, but when I realized it was correct, I felt cheated and went berserk. I called the Broker (who himself was shocked, and worried), set up con-calls with the Insurance Company’s representatives, escalated the matter to the regional office, all I received were templated/recorded answers....Phew...I finally gave up.

I refused to renew the policy with this company, and heroicly pledged not to deal with this organization ever. My Broker suggested I port my mediclaim policy to another player. This time, I made sure this player was an ethical, reliable name. I finally zeroed on to a large Insurance company which had an alliance with supposedly “the world’s largest insurance company”. 

I moved on.

Cut to today, I recently received a call from my Broker, the health insurance company had removed the No Claim Bonus of Discount completely from my renewed policy this year, without citing any reasons at all. I got this strange feeling of déjà vu.  Forget prior information, I was expecting some communication from this big brand, but there was none. 

In this world of extreme transparency and hyper competition, I am amazed at this unusual apathy shown by the best of world Health Insurance Companies in India.

When I called the Insurance Company representative, all he said is that Medical Insurance is a “yearly contract”, and terms are subject to change on renewal.  A yearly contract!??!!? Whoa? When this medical policy was sold (twice by different providers) to me, I was explained various clauses in details like 2 years waiting periods, 4 years continuous renewals and the USP – “lifetime guaranteed renewal”. How can a mediclaim which assures lifetime renewal be a yearly contract?? Isn’t this a classic paradox?

OK, I know you are busy….So let me stop complaining, forget the past, and give you one more chance, the last one. Let me plan for my all critical post retirement/old age Healthcare costs. So now I understand the mediclaim policy is a yearly contract. I understand, you are making losses, you are unable to control the claims in Health Insurance and you are “forced” to make these “small” changes in the contract, every year. And yes, I should feel fortunate, that second time on, you atleast did not increase the premium by 500%.

I understand all that, but looking at the rampant changes you have been making in the policy wordings and process, I am really in a fix. I am now not sure what the policy would evolve into when I reach my old age. The way things are moving, the one thing, I am sure of is that the policy would be gravely different from what it is today (I am sure, a money making product for you, by then)

So, How do I predict the policy conditions and plan my post retirement healthcare expenditure?

Till when, and to what extent you would keep changing the terms? How do I assure myself, that the terms would be favorable for someone like me who bought his policy at 26, paid you premium, without claims for 14 years, from someone who is 40 that time and is buying a fresh policy??

Now, I am getting really confused. When you sold the product you encouraged me to buy these, clearly calling them "long term investment", and now, on renewal you are calling it a “yearly contact”.

Would you continue to guarantee lifetime renewals, or would you add restrictions on co-pay, remove no claim bonus, remove all large hospitals from the cashless network or worse, spike the rates by 500% every year, when I am growing older?.

 Now, it's all boiling down to plain trust. How should I trust a selectively transparent, for-profit organization like you? 

Is Mediclaim a policy with long term commitments or is it a yearly contract?

Would love to hear an answer. Can you help?



Your Health Insurance Customer.

Though, the concern being raised is real, please do note that, this is a work of fiction by the writer.  The Insurance companies described in this post, do not add up to targeting any specific company.

Health Insurance Companies India

Worried about health insurance?

“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:

  • Only the Public Sector Health insurance companies have discontinued the Cashless service in the four metro hospitals, you can still avail of cashless service in other cities or in private companies’ policies.
  • Cashless service is available for emergency and accidents cases in all the originally enlisted hospitals
  • Also, you need to check with your TPA to know the details of the cashless availability under your health insurance policy in the hospital you plan treatment in.
  • The Cashless service issue may be sorted out even further in few days.
  • Meanwhile all health insurance companies are accepting reimbursement claims.

You ask: Why all these sudden changes?

Health insurance cover

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.

Health insurance claim

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.

For instance,

-           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.

Health insurance claims denied

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.

Medical exigencies and an empty wallet

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

To read full news, click here

Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

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.

Cashless mediclaim policy Pvt hospitals seek government help

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.

To read full news, click here

Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

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.

10-day time limit for hospital

NEW DELHI: The standoff between insurance companies and private hospitals over cashless treatment continues, defying hopes of millions of Mediclaim policy holders for an early resolution.

The four major public sector health insurance companies, which control 80% of the business, have now set a 10-day deadline for four major chains of hospitals — Apollo, Fortis, Max and Medanta — to come up with their packages for common treatments to avail cashless services.

The tough-talking by PSU insurers — National Insurance Company, New India Assurance, Oriental Insurance and United India Insurance Company — came after month-long negotiations failed to bring these hospitals on board for standardized treatment packages. These hospital chains, along with 100-odd other hospitals in Delhi NCR and a similar number in Mumbai, Bangalore and Chennai, had been taken off the network of hospitals for cashless services on July 1. The withdrawal of cashless service was a delayed action against hospitals that were allegedly overcharging for treatment.

The IRDA chief blasted 5-star hospitals for inflating bills and justifying their costs in the garb of quality service. Harinarayan said if a treatment costs $50,000 in US and the same comes for $5,000 in India, the latter cannot be termed inferior simply by the difference in their costs. His remarks came in response to Shivendra Mohan Singh of Fortis chain who said insurers could not make a common package and club 50 hospitals all providing different quality of services.

To read full news, click here

Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

Though the efforts being made are progressing well, the insurers should apply the rule for all insured members, without discriminating them on basis of Individual or corporate member. The packages & low rates applied for are basically outcome of volume of business given by the insurers to the TPAs. The amount of noise that is made by the hospitals about this decision by the insurers & TPAs confirms that the big hospitals need the insurance business badly & that’s what will bring them to the negotiation table & make them refrain from activities which are unethical.

Insurance companies & TPAs have partly achieved their objective & they should now continue the focus & get the packages at discounted rates approved from the hospitals. However, in long term, they need to restrict the cashless to few hospitals which would result into more volumes at those hospital which can result into reduction into the rates further.

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.

To read full news, click here

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.

Health Insurance Companies to extend cashless facility in emergency and trauma cases

MUMBAI: In a major relief to health insurance policy-holders, public sector insurance companies have announced that cashless treatment will be extended to all hospitals in emergency and trauma cases.

During a healthcare meeting with the Confederation of Indian Industries (CII) in New Delhi on Friday, New India Assurance Company chairman M Ramadoss said a patient who requires emergency and trauma services will be attended to through the cashless scheme in all TPA-empanelled hospitals.

An official from the PSU said that emergency and trauma cases will have to be certified by third party administrators (TPAs) in order to avail of the cashless benefits. There are a total of 24 TPAs which are linked with the Gipsa (General Insurance Public Association), a body comprising the four public sector general insurance companies — New India Assurance Company, National Insurance Company, Oriental Insurance Company and United India Insurance Company. The official said that planned or elective surgeries such as bypass, knee replacement and cataract among others, do not fall under the category of emergency or trauma cases.

To read full news, click here

Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

This is a welcome change & as we had always maintained, a dialogue between insurers & the hospitals only can bring this imbroglio to successful resolution.

As mush the hospitals need the Insurers to maintain their revenues, the insurers need the Tertiary care hospitals to ensure that the high-cost treatments are offered to their customers on cashless basis. The changes in the health insurance market are just beginning & the industry will have lots of up-downs In near future and will continue to remain in news.

Insurers to buy equipment

MUMBAI: After curtailing the list of hospitals eligible for cashless mediclaim, public sector health insurance companies are going further by proposing to order and pay for medicines and medical equipment themselves. They claim the move would help reduce the cost of medication and equipment by at least 20-30% in cashless claims, as hospitals are overcharging for the same.

The PSUs are planning direct tie-ups with suppliers of medical equipment and medicines. Once a hospital determines the equipment and drugs a patient needs, it would inform the insurer, which would order the items directly from the supplier and get them forwarded to the hospital.

An official in the General Insurance Public Sector Association said, "We are planning to work on the inventory management system so that items like implants and drugs can be provided to patients at a reasonable cost."

To read full news, click here

Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

The insurers need to focus on their core competency of “Risk Understanding” & “Risk Underwriting” and should not get involved in service delivery. The insurer, by virtue of being a consolidated buyer, has every right to ask volume discounts for the services that they are purchasing & hence, they should ask for correct prices to be levied by the hospitals for the procedures undertaken.

The insurers should act more like a cost accountant wherein they should demand the detailed break-up of the charges by the hospital for a particular package. They then can identify the market prices of various consumables used during the procedure & identify the discounts possible thru’ volume buying. However, they should refrain from advising what doctors should “use” as that would be trespassing into another specialist’s territory.

Also, the insurers are neither equipped to handle the logistics requirements for these kind of interventions into the healthcare delivery system nor do they have the clinical expertise to make suggestions. These are the reason we think that this suggestion may not go through eventually.  

Purandar Bhavani:

Purandar Bhavani from Medimanage.com

This is a brilliant idea and it stops at that. The problem is who is going to make it work? How is it going to work?

Health care is a business and all most all service providers are there in it for making profits. Should one tell the other how much money to make? Should the insurers be bothered about how much money the hospital is making or their own bottom line? These are issues that can be debated forever.

The problem is most of the focus has been on how the hospitals are “overcharging” than how health insurance becoming unaffordable will impact the common man. Steps have already been taken by insurers by putting caps and co-pays to control claims but if these measures do not work, the premiums will rise and this cycle will continue and we could soon see a US like situation where you may not have food to eat but “pardner you gotta have your health insurance”.

In my view the insurers should not get into controlling healthcare delivery. Their job is to underwrite the risk at a price they deem fit. Having said this if we do not arrest this malicious cycle now there will come a time when the government will have to provide subsidies to consumers to be able to afford insurance.

If there can be low cost airlines and low cost housing cant there be low cost healthcare? It is possible and there are ways to do it.

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.


50 % extra premium to get treatment at high-end hospitals

You might have to shell out 50 per cent extra premium to get treatment at the country’s high-end hospitals.

Following the uproar over withdrawing cashless health insurance claims from high-end hospitals, state-owned non-life insurers are working on a product with differential rating that will bare the expenses of the top hospitals.

The four insurers – New India Assurance, United India Insurance, National India Insurance and Oriental Insurance – are designing a product where a person can pay around 50 per cent higher premium to avail the luxury. The health insurance companies censored cashless facility at these hospitals from July 1 for erratic charges levied by them.

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Experts from Medimanage.com give their opinion:

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

This is improper way to deal with this issue. By creating a product for treatment at these hospitals at 50% extra premium, the insurers are contradicting their earlier stand that the hospitals are overcharging. It looks like the insurers were under-pricing.

Also if the insurers have stopped the cashless by making statements like the hospitals are inflating bills. Is this not a way to legitimise the so called wrong practices of big hospital?

The question remains about the current policy holders. If any member has a complex disease which can be treated at one of these top hospitals only, how can he get the cashless for the same?

Any efficient network of hospitals will need all kinds of hospitals i.e. Primary, Secondary & Tertiary care hospitals. By removing a particular type of hospitals, the insurers are denying the cashless facility to a particular class of patients which is nothing but discrimination.

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