“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.
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".
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Experts from Medimanage.com give their opinion:
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.
To break the stalemate with big corporate hospitals, the four state-owned insurers are planning to introduce a new variant of health cover — the Premium Mediclaim. Subscribers will be charged a premium higher than that of a regular health insurance policy, but will be offered cashless facility at all major hospitals on the insurer’s network.
“Big hospitals have agreed to revise their package rates and share it with us in a few days. We will compare it with a list of ‘reasonable rates’ that we have prepared in consultation with doctors and third party administrators (TPAs). If they are within a reasonable range, it is fine. Else, we may introduce a premium product for customers who insist on getting treated at 5-star hospitals,” an insurance official privy to the negotiations told The Indian Express.
The four general insurers — National Insurance, New India Assurance, United India and Oriental Insurance — had taken about 150 hospitals, including the big ones, off their network list from July 1 following instances of differential treatment and charges for insured patients.
Underwriting, which is one of the most important part of Insurance, is based on minimising risk & identifying innovative solutions to make the product attractive. The idea being used here lacks both. It’s like if the hospitals are charging “high” let them charge high. If there are buyers who want to buy this, we will have product to match.
Another way to look at it is the “adverse selection” angle of the insurance. Insurers deny risks which are basically skewed and which may bring heavy losses to them without any doubt. The basic premise of this product is that the insurer is ready to pay claims in big hospitals. Then the buys would be those selective members who wish to spend money. The premium being high, the insurer would have tendency to recover & will consume high, not because he needs it but because he has paid higher premium for it. It’s akin to those members in current scenario who buy 5,00,000 cover & then go to big hospital & spend 3.5 lakhs for a simple Hernia or Gall Bladder. These are the tendencies which are bringing losses to insurers (apart from other lack of controls & faulty underwriting) & one more product like this will only further the losses.
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.
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.
If you had been considering the premium amount on health insurance policies to be too stiff, this will come as good news to you. Especially, at a time when most of the general insurance companies have raised their health insurance premiums by 20-30 per cent, the news of a public sector general insurance company, looking at launching one of the cheapest health insurance policies - with the premium being less than Rs.1000 for a yearly Rs 1 lakh sum assured – may come as a relief!
New India has always been one of the general insurance companies with a flair for innovation. Their differential pricing for health insurance between Metros and non-Metros is an example. And now, by looking towards launching one of the cheapest health insurance policies, they are on their innovation mode again.
But, while, the initiative comes with the prime motive of expanding the reach of their health insurance umbrella, the picture may not be as rosy for the prospective customer as it appears to be. Though the news seems profitable from the view of a customer, the reduction in the premium rates comes with a corresponding reduction in some of the related benefits that are otherwise, normally available under other health insurance policies.
An in-depth analysis of the initiative will enable you, as a customer, to understand the specifics behind the product (cheapest health insurance policy) and will also help you in making an informed decision.
First, Limited choice of hospitals:
The reduction in the price of the policy is accompanied by a corresponding limit in the choice of hospitals.
New India has identified a panel of hospitals with whom it has probably negotiated discounted rates for different procedures of treatment for its policy holders. For you, as a customer, this means that in order to avail of the claims benefit, you would have to get treatment done from the hospitals that have been identified by New India. This limits your choice of hospital from where to get treatment and if you do choose a hospital not identified by New India, then the entire reimbursement benefit will not be given to you, thereby making a dent in your pocket.
Second, Coverage of major illnesses only:
The low price policy comes with the condition that only major illnesses will be covered.
Through its ‘Cheapest policy’ initiative, New India plans to provide coverage only for certain major illnesses as the incidence of claims towards these illnesses is much lower than overall incidence of claims in the Health portfolio. For you, as a customer, this means that you can claim reimbursement for expenses accrued only in case those expenses cater to a major illness that you have suffered from, else, no other expense gets reimbursed.
So, what is in it for you?
Mr. K.S. Sankar, from Medimanage.com, an expert in health Insurance for almost 30 years, puts it lucidly:
“This product of New India is not, repeat not, a substitute for your standard health insurance. As stated, this product covers only specified illnesses while the standard product covers all hospitalizations following any illness (both of course subject to the standard exclusions). Therefore, if you were to substitute your existing health insurance with this product, you would be left to fend for yourself for hospitalizations following illnesses other than those covered under this product”.
Does it mean you cannot take advantage of New India’s cheapest policy?
Indeed you can; all you need to do is to transfer the top layer of your existing insurance to this product.
Mr. K.S. Sankar explains, very vividly, how you can have the cake and eat it too...
“Whatever is the Sum Insured under your current health insurance policy, at the time of its renewal, ascertain the renewal premium for the same sum insured as well as for a sum insured that is less by Rs. 1 Lakh. If the differential is more than the price you would pay for this New India product for a Rs. 1 Lac Sum Insured, renew your existing policy for a Sum Insured that is less by Rs. 1 Lac in comparison to the current Sum Insured. In parallel, you get yourself this policy of New India for Rs. 1 Lac. This way, you pay less for both the polices together than you would if you renew your existing policy as it is. You use the New India Policy for any hospitalization following illnesses covered by the New India policy. You use your existing policy for all other illnesses.”
The amount of Rs.1 Lac mentioned above as Sum Insured under New India policy is only suggestive. You need to determine how much you will knock off from your existing policy Sum Insured and transfer to this New India policy. We would be happy to provide comparative arithmetic for you if you could approach us a month prior to renewal of your existing policy.
If your current health insurance is only for Rs.1 Lac:
“If so, independent of this new product, it is time you ought to be looking at increasing your Sum Insured. May be this product could be the trigger. You could take this in addition to your existing policy and if you do not already have a health insurance policy, we suggest you buy a standard policy in addition to you New India’s cheapest policy.
Yes, while doing the price comparison, you need to consider the fact that the New India policy will pay for Hospitalizations only in the hospitals listed in the policy, and then decide whether the differential in price is worth the while for you.”
It is a good thing innovations are happening in the insurance market place. Like in any other market place, not all new products will make sense to every customer. Same holds good with this product also. With professional guidance you need to decide how best you could get the advantage of any innovation, including this one.