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 were the two words that described 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 the delisting of hospitals from the PPN 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 large amount of backlash from the all around- Customers, hospitals, media and other insurance experts.

Let’s understand the issue:

There have been various reports about the 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 industry. Without as much as warning, the public health insurers have delisted most of the hospitals from their PPN.

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

Hospitals’ Stand: The corporate hospitals believe that they are been unfairly targeted by the health insurance company, 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 than a 15 bed hospital, cost of healthcare in a large, private hospital is more. 

TPA’s Stand: They have been blamed for everything from inefficiency to making 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. 

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

With Brokers being the neutral as well as a catalyst in the health insurance industry, here is opinion 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 decision, it’s going to 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 that insurer is not refusing. If insurer finds issues with non-core benefits, they have right to tinker with them.

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

On Corporate Hospitals taking advantage of the system: “I think that these corporate hospitals have taken advantage of the system and not 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 amicable manner when the industry bodies will act as mediators. I think IRDA may also step in”.

On Grading of Hospitals: “The grading is 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 secondary care hospital.”

On, the impact of this moves 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 additional burden. It’s discriminatory as it’s meant for Cashless Insurance patient 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 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”.

Hospitals overcharging Patients under Cashless Claims is under the media buzz since a few days.

Here is a quick post which reasons why Hospitals overcharge Cashless Claims:

No Contracted Rates with Hospitals:

TPAs do not have contract binding rates (treatment-wise) with Hospitals in their network. Globally, TPAs contract treatment-wise rates with each Hospital in their network. Treatment wise fixed rates would remove the disparities and anomalies that Hospitals currently enjoy. The core of the issue is TPAs lack negotiation power with Hospitals.

Why do TPAs lack negotiating power?

In India, more than 70% of the total hospital billing is still out-of-pocket and not through Insurance Companies or TPAs. Hospitals are overflowing with patients and therefore don’t depend on TPAs for their revenues. (Imagine a 100 employee TPA bidding to negotiate with a Hinduja, Apollo, Fortis or an Escorts?)

1). Insurance Companies under demands from Large Corporate Customers to list a large hospital, unconditionally pressure, TPAs to include certain hospitals into their network, without rates.

2). Add to this, TPAs are also under pressure to have a large and geographically wide list of close to 3500-4000 hospitals under their network. Due to such a large spread of hospital payments in the network, they cannot guarantee revenue to hospitals, which is the trump card for Health Claims Administrators worldwide.

3). Every division of a Government Insurance Company in a bid to offer the option of a TPA to large customers, use services of 6-8 TPAs. Customers are therefore spread across larger no. of TPAs.

4). Customers (especially Corporate/Group) want to decide their hospital. TPAs currently don’t take the healthcare responsibility of recommending hospitals. Hospitals therefore get 'business' on the decision of the consumer and not the administrator.

Delayed payments to Hospitals:

This is the justification each hospital will give. Insurance Companies (mostly Govt. and some Private) due to their internal deep rooted inefficiencies have been guilty of delaying payments to TPAs. TPAs being small sized companies depend on funding from Insurance companies and therefore in turn delay payments of the Hospitals. Some Hospitals in need of liquid cash, have been known to discount their authorized cashless claims with Banks and Financial Institutions, ofcourse at a cost. Every Hospital would be ready to reduce their costs if they are committed to payments in say, 30 days. 

Recently a new Insurance company has been sucessful in negotiating better rates with Hospitals on the contracted committments to pay on time, with interest penalties.

Lack of Uniform Grading:

There is no regulating apex body or uniform grading of hospitals in India, which makes contracting of rates with Hospitals all the more subjective and unscientific. Rates charges are merely based on location and popularity and not on the quality and consistency of the care and treatment.

Recommended Solution:

Apart from the recent kneejerk delisting/reduction in number of hospitals (to ones which agree to contracted rates), by Insurance companies, here are some solutions our experts recommend. 

1). Health Insurance premiums have grown by 10 times in 5 years. Insurance companies should work towards increasing their negotiating capabilities with Hospitals, by bringing revenue dynamics into picture.  

2). Govt. Insurance Companies should reduce the fragmented way in which it engages TPAs. This will bring more business to lesser no. of TPAs, and hence bring administrative and financial control on claims.

3). Insurance Companies should lobby with the Central Government and Ministy of Health and Welfare to bring in an apex body which enables self regulation and grading of Hospitals and other Healthcare providers.

4). Selection of Hospital Network should be based on quality of Healthcare. Like the "gatekeeper model" in the west, TPAs should be empowered to take responsibility of healthcare beyond negotiation of rates. They should be in a position to recommend the healthcare provider to the customer.  

5). Insurance Companies and TPAs should take into account demography and economics and scientifically fix a schedule of treatment-wise limits for cashless claims, in its policy condition.This way, Insurance Companies or TPAs would pay upto the limit and leave negotiation of the amount charged over the limit to the Customer. 

Do let us know if you have any questions or feedback. Write to Medimanage @ email [at] medimanage [dot] com.

Preamble

Last 3-4 days, we have been seeing a lot of news in various media about cashless network hospital list being brought down to fewer in numbers & this list does not have big hospitals where the treatment cost is high & hence, have a greater need for their presence in list. We fear that these news items have created confusion in our members’ mind & hence, here is small explanatory note from our team.

Genesis of the thought process

Insurance companies have been witnessing inflated, fraudulent & unwarranted hospitalisations claims when the patient had declared that he/she has insurance cover & wishes to go for cashless treatment. Also, an analysis of cashless claims brought out pointer that 80% hospitalisations (by amount) happen in only 25-30% hospitals. The advantages of curtailed list are envisaged as follows:

1). Limited hospital list (around 450 all over India) would offer better administrative control.

2). TPAs can drive more business to small number of hospitals & hence, can demand volume discounts.

3). With better administrative control, all bad claims (fraudulent, inflated & unwarranted) can be reduced to a greater extent.

Methodology adopted

New India Assurance Company (it’s the largest, has major Health Insurance exposure and their current CMD has good rapport with other PSU Insurers’ CMDs) had taken the lead & appointed four of its empanelled TPAs as nodal TPAs (one for each region i.e. East, West, South & North) & asked them to draw a list of around 100-125 hospitals in each region. Only these PPN (Preferred Provider Network) hospitals would qualify for cashless treatment. PPN is a very common concept in west & helps insurer have better control over claims without compromising the quality of care.

 How it impacts you?

1). Currently, this does not impact corporate members as this arrangement is meant for only retail / individual policy holders.

2). However, looking at the success of this arrangement, soon, this may get extended to corporate policy-holders too.  

3). Currently, only New India, Oriental Insurance & United India have agreed for following this network. National Insurance has their own ideas about how to implement this & hence, declined to be part of this network as of now (see news mentioned above).

What are the shortcomings of this system?

1). Cashless treatment becomes very useful when the treatment is costly. With no tertiary care hospitals in major cities being part of this Preferred Provider Network, members would be forced to raise the funds for cost of treatment before the treatment starts.

2). Cashless treatment has been one of the major attractions which has helped increased Mediclaim penetration in Urban & Semi-Urban India. With these kind of restrictions, the new policy sales may suffer an impact which is detrimental to overall claims experience. (New policies sale brings in premium without any claims in its initial years which help insurance companies improve their claims ratio.)

3). There is no proper methodology adopted for selection of these hospitals & many network hospitals are in dark about this change. Without any bench-marking, the quality of care may deteriorate & just for want of cashless, members may have to face inefficient service levels.

What should be done to implement this better manner?

1. 1). A right mix of Tertiary, Secondary & Primary care hospitals should be ensured while finalising the city-wise Preferred Provider Network.
   
   
2. 2). A stringent & transparent criterion should be adopted for selection of hospitals which should broadly look at following features:
   
   a). No. of Beds
   b). Infrastructure & Manpower quality
   c). Certifications & Statutory Compliances like minimum wages, PF etc.
   d). Published rates for various treatment & acceptance of Insurance Tariffs
    
3. 3). A formal Third party annual audit & review methodology should be decided by the insurance company for these PPN hospitals.
4. 4). In case of occurrence of fraudulent practices, the hospital should be banned for a period of three years and even reimbursement at such hospitals should not be allowed.

Summary

Though the initiative taken up by insurers has shaken up the hospital industry & made the consumers anxious, we have reasons to believe that this is a start of much needed changes in the Health Insurance industry. What we expect is well thought-out strategy derived out of data available with the insurers & then an efficient implementation of the same in phased manner to ensure that the consumer is not hassled unnecessarily. 

In case you have any queries, please feel free to connect with me at sudhir [at] medimanage.com

About Medimanage:

Medimanage is India’s first boutique health insurance broker, with an integrated service model which provides Unbiased Health Insurance Advisory, Technology based delivery and Professional Claims Assistance. To know more contact purandar [at] medimanage.com

 

More interesting news just today

Public sector insurers to push for a common claims settling agency (http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Public-sector-insurers-to-push-for-a-common-claims-settling-agency/articleshow/6154912.cms)

•  New Items for reference

Insurance Cos slash list of hospitals in Mumbai for making fraudulent claims(http://timesofindia.indiatimes.com/City/Mumbai/Insurance-cos-slash-list-of-hospitals-in-Mumbai-for-making-fraudulent-claims/articleshow/6145243.cms)

One PSU insurer stays with cashless Mediclaim

(http://timesofindia.indiatimes.com/India/One-PSU-insurer-stays-with-cashless-mediclaim/articleshow/6153259.cms)

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

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

So what caused this move?

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

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

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

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

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

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

Should there be Talks?

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

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

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

Customers- the ultimate losers

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

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

What!? But you’ve heard that health insurance industry was growing like never before, didn’t it just record a growth of 20% in premium collected last year and there was also news of more foreign health insurance companies coming to India… While all you heard is true, it is also true most of health insurance companies which are general insurance companies, in are in fact in losses, the underwriting losses which states the premium collected against claims, for New India Assurance was a whopping 117% this year.  A similar story follows for other health insurance companies too. 

The other side of the story

The reason for the losses is the amount claimed, is higher than the amount of premium collected, in fact, according to health insurance officials, the claims to premium ratio is 180% in group health insurance. Which means that claims are 180 percent of the total premium collected, with such a loss rate, it is surprising to see rosy pictures represented in the newspapers.

The reason why this side of the story wasn’t gaining importance earlier is because most of the general insurance companies make investments that offset some of the underwriting losses but last year’s recession took its toll and the underwriting losses of general insurance industry increased by 37 per cent to Rs 5,326 crore against Rs 3,899 crore in 2007-08.

Heavy Losses

For the Public sector companies (National, United, New India and Oriental), the underwriting costs increased by 28 % and investments fell by 23%. For the private insurers, the losses were a whopping 84% which was offset by a growth of 47% in investments in the year 2008-2009 according to a report in Hindu Business line.

The Reasons behind the losses

Most of the Insurance companies see the group health insurance as the reason behind the losses. They claim that few limits and conditions on group health insurance as well as clauses like coverage of pre-existing diseases have added to the high claims ratio of health insurance policy.

The PSUs assert that large volumes and large share of group health insurance as the reasons for the losses. The other cause which is often stated by health insurance companies is that, TPAs, the representatives of the Insurance companies which are responsible for settling the claim, are not doing a good job managing the costs.

We asked health insurance experts K S Sankar with more than 30 years in Health Insurance industry and Sudhir Sarnobat, founder and director of Medimanage health insurance Broking firm, about their take on this trend. 

Are the Hospitals to blame?

K S Sankar feels “No regulation/standardization of the rates charged by health service providers or hospitals” is to be blamed for the losses.  Another reason he states is that the current system allows hospitalization in any hospital which fulfills a very basic definition of a hospital like having minimum number of beds, basic amenities available.

The solution he thinks by enlisting a restricted number of health service providers to whom the insured population will be given access. He also suggests that there be a reward and deterrent process where in you reward by having less or no co-pay in network hospitals (hospitals in which insurance company have a tie up) and deterrent by not offering  cashless in non network hospitals.

Health insurance companies can better negotiate with these hospitals now that larger volumes will flow in the hospitals. Insurance companies can also review the service of these hospitals to bring in fresh hospitals and delist those who fall short of the standards, he reasons.

Bad Premium Pricing also plays a part!

Sudhir Sarnobat, however disagrees with the statement that hospitals are to be blamed for the losses suffered; he draws parallels with the hospital expenses abroad and in India to compare the premiums.  He says that since the hospitals’ major cost are equipments and consumables and taking the cost of living, the hospital expenses aboard would only be higher marginally however the premium rates in India are very low compared to other nations. He gives the example of US and says “In US, an individual pays around 600-800 US dollars per month for coverage, In India, for a cover of 5 lakh; the annual premium is around USD 500. That is less than 1/10^th whereas the cost of care is not 1/10^th.”

Thus, he thinks that the losses faced by the health insurance companies is not just due to non- standardized rates in the hospitals but also due to wrong premium pricing.

How to control the losses?

K S Sankar feels that if the health insurance companies charge the premiums according to compliance of the insured to remain healthy, (less premium if you are healthy and loading if you are not), they could effectively tackle the situation.  He thinks that health insurance companies can get the inputs through IT driven health insurance broker to drive this reform.

Sudhir feels that the health insurance companies should start by refraining from pricing the current year’s premium based on last year’s claim amount. He says that they should do what any other manufacturing company would do, that is, by looking at the cost of inputs, spending capacity of the market and cost of marketing initiatives. The lack of scientific methods to decide the pricing of the premium is what he claims is the reasons behind the losses.

When would the correction happen?

About when the correction of premium pricing will occur, K S Sankar feels that insurance companies till date have a knee-jerk reaction to new challenges and it requires efforts of outsiders with close association to insurance industry like brokers to drive a change. Sudhir Sarnobat feels that the correction is currently happening in the corporate sector and will come in the retail industry at least 5 years down the line.

We would hope for the industry to start correcting the premium prices because another bad financial year would again throw the insurance companies into losses which in the end would affect the customer!

Reference: http://www.thehindubusinessline.com/2010/01/09/stories/2010010952010600.htm

A staggering 25 Million.

That's the figure quoted by experts, for the number of Indians who will be afflicted by AIDS in the current year. Considering the 2.3 million in the year 2007 it is indeed a sharp rise, which horrifyingly will go on to increase in the near future, given the stigma and shame attached to the disease in India, as well as high medical costs that make treatment a remote possibility for the majority afflicted who cannot afford it!

Considering the role Health Insurance plays in making health care affordable to the general public, AIDS being included in the list of permanent exclusions by Health Insurance Companies makes it rather painful.

The case of AIDS v/s Health Insurance in India  

So why this Exclusion of AIDS from the coverage under health insurance

Delving deeper into the reasons as to why this exclusion of AIDS from the coverage under Health insurance, leads us back to a very old thought process that still exists in India, that of AIDS being contracted only due to illicit sexual relations. Sudhir Sarnobat, Founder of Medimanage Insurance Broking Pvt Ltd. explains the thought process stating that “When AIDS as a disease was first identified, the genesis of the disease was identified as illicit sexual act which in insurance terms comes under the term ‘Moral Hazard’, meaning a disease contracted by virtue of an illicit act by the person himself and hence AIDS became an exclusion”.

However with ongoing research on AIDS still not able to come up with a complete cure, treatment is relegated to simply delaying the inevitable for patients and not a cure, which makes for another strong point in favour of AIDS in the case of AIDS vs Health Insurance in India. However it wouldn’t be fair to blame the Health Insurance Industry for ‘neglecting’ AIDS. According to the insurance policy terms, the main criteria set for a claim to be payable are that 1) there has to be hospitalization and 2) the treatment should be a definitive and curative one and since both of these criteria are not met by any line of treatment for AIDS, it might continue to remain as an exclusion.

What this means for the population suffering from AIDS is an indefinitely ‘long wait’ till cure for AIDS is ultimately found, following which the health insurance industry could probably draft health insurance schemes for the same.

With the constant rise in the number of AIDS cases, why aren’t we seeing an initiative from the Govt. to cover the 2 million + plus population who are living with AIDS

World Bank states that the Indian Government’s spending on AIDS is just 5% of its total $5.4 Billion budget on health care. This will soon start falling short, what with the AIDS cases being alarmingly on the rise in India. A question that is bound to arise in everyone’s mind is ‘Why isn’t the Govt. taking any initiative to come up with an AIDS specific health care scheme for the poor?’

“According to the Indian Government’s data base, over 36 million people do not have access to even primary health care. And given India’s total population of 1.2 Billon, the 2 million odd number of AIDS cases does not even figure in the priority list for the health ministry” states K.S.Sankar, corporate member of Medimanage Health Insurance Pvt. Ltd., throwing ample light on the woes of the Indian governments health care plans.

Plus with perceptions and awareness regarding the need for health Insurance being quite low in India, a fact highlighted by the dismal figure of only 9.8 % of the total population opting to buy health insurance, the idea of an AIDS specific health insurance scheme by the govt. in the near future does not seem quite probable.

Moreover with 42.5% of the 2 million+ AIDS affected population belonging to the BPL category - who simply cannot afford health insurance, it nullifies the effectiveness of the any such health insurance scheme, even if it were to be launched. This one fact alone can do mighty well to explain the government’s reluctance in launching an AIDS specific health Insurance Scheme. 

Is there any hope for the AIDS afflicted?

Is there a consensus with the thought process of getting the IRDA to regulate the list of exclusions, so as to pave a way for AIDS to get covered under health Insurance in India?

The Insurance Regulatory and Development Authority (IRDA) primarily functions as a regulating body for the Health Insurance Industry, wherein technically its job is to protect the policy holders’ interest and issue directives necessary for the same. “There is a faint chance of the social cause behind AIDS propelling the IRDA to issue directives to Insurance companies to devise cover for AIDS. This is not something such as making sure that a minimum percentage of the Insurance company’s premium comes from the rural areas and so on, so as to ensure that the rural population gets the benefit of insurance” states K.S.Sankar, implying that even assuming the IRDA intervenes it wouldn’t by default amount to much of a difference in Health Insurance Industry’s stand towards AIDS.

In the very same vein of thought, Sudhir Sarnobat states that one cannot expect the IRDA, which is primarily formed to look after the insured persons’ interests to add directives that would push for a health insurance cover for AIDS when almost half of the afflicted population is found to be living below the poverty line. “I feel that coming out with a health insurance scheme for AIDS isn’t feasible at this point of time as most of those who are afflicted fall under the BPL and it doesn’t bode well for the health Insurance Industry from the overall premium perspective. Plus given the market’s maturity level in the current scenario, directives issued by the IRDA won’t account to much in regards with insurance coverage for AIDS”

Suggesting a possible alternative route, he adds that “I would rather expect the government to use the tax benefit angle (better tax benefit) for donations to NGOs working in AIDS domain & thus route more funds which would have better utilization”

The Verdict

The verdict in this case is rather grim for those afflicted with AIDS in India.

The moral hazard angle is strong, which makes it almost impossible for AIDS to get a Government backed health insurance scheme at least in the near future, in spite of other reasons for the spread of AIDS being identified.  Plus that a majority of AIDS patients belong to the BPL category also poses huge problems for the health Insurance Industry from the premium affordability perspective to launch an AIDS specific health insurance scheme. 

Somehow one can’t help but think that, what really lies at the base of this whole AIDS vs health insurance saga, is the fact that AIDS goes without a health insurance cover in India more than anything else due to the poor social interpretation of AIDS, along with AIDS being more a problem of the poor! As Sudhir Sarnobat puts it, “I think it’s more to do with the stigma AIDS carries with it that has made it very difficult for India to look at AIDS with changed mindset”. Says it all, we guess!

Health insurance industry as early as 10 years back was in its infancy with only public sector companies who were also life insurance players.  It was after the year 2000 that privately owned general health insurance companies came to India like HDFC, Tata, Max life, Kotak and Birla but it was only in year 2005 with Star health that a dedicated health insurance company came in India. It was followed with Apollo DKV now known as Apollo Munich and now Max Bupa which has launched in March.

There are more coming!

Max Bupa health insurance Company which is launched in March 2010 is a tie-up between Max health care and UK based Bupa. There is news that there will more 3-4 more pure health insurance companies that will come in the next few months. Most of these companies are international insurance

companies with a tie up with a company in India. Among these there is Discovery of South Africa and Cigna and Aetna of United States who are in talks with Religare for a tie-up. Some other international giants have also expressed their interest to form a joint venture with Axis Bank which is India’s third largest money lender.

What’s bringing them here?

K S Sankar of Medimanage Insurance Broking Private Ltd says, “The primary reason is the largeness of the market with low insurance penetration.” What with a middle class of about 300 million people and growing, and only about 10 % of Indian population covered in health insurance that leaves around a potential market of 270 million people. Sudhir Sarnobat, Founder of Medimanage agrees with Sankar and says it is the growing number of people who can afford health insurance which is driving this trend.

Just a look at the numbers tells the whole story, health insurance premiums amounted 66.25 billion rupees in 2009 from 32.09 billion rupees just two years back, it is more than 50% hike in just two years.

K S Sankar also points out that the health infrastructure in India, though unregulated is better than other economies in the world. He also gives other factors that make investing in India a good idea for foreign companies like better regulated insurance environment, lower capital investment requirement, smoother and relatively less corrupt processes with a population that is young hence a good risk and the factor that health insurance in India means only hospitalization costs that drop the overall costs considerably.

Mr. Sarnobat also sees an improvement in the industry that will interest the foreign players, “The premium rates are hardening which can provide a sound profitable business model for health insurance companies in next 3-5 years. These companies can bring in innovation in product structuring which is lacking in India and thus the heightened interest by foreign players.”

What will it mean for us?

Sudhir answers this question in two words, “Innovative products and better service.” K S Sankar feels that since these companies will solely concentrate on the health sector, their in-depth knowledge of health will help us. He says, “Their knowledge will initially make their processes more customer friendly and in the long run, rein in the health service providers from the perspective of cost standardization and right pricing of health services – not by sheer force of volumes but through more scientific benchmarking”.

Mahavir Chopra, founder of online health insurance broking in India, says "Customer will be spoilt for choice. The flip-side is there are chances he will get overwhelmed and confused. Brokers have an opportunity here. Look at a parallel of the now highly competitive cellular mobile service market, its pretty difficult to know which company or plan is good. Even though there is innovation, lack of any IPR on the innovation, results in the new service being copied by other companies in a couple days of the launch. Cellular service is almost a commodity."

Pashupati Davella, Insurance IT entreprenuer says, " Foreign players will bring process innovations so that the client can take treatment wherever he or she is, with minimum hassles. Also, because of greater integration between hospitals and insurers and reduced fraud, the cost of buying Health Insurance products go down and we may get long term care products, lifelong cover and features which are customer friendly like portability."

Currently in India, there is no standardization of health care cost, one procedure may cost Rs. 20,000 in one hospital and may cost over Rs. 50,000 in other. Mr. Sankar hopes that the ‘health only’ insurers will bring to the table independently validated bench marks.

Will they survive?

The scenario though seems to be very bright seeing the growth in premium, the reality is that health insurance is a loss making industry, the claim rate is about 120-150%. The underwriting losses of United India increased from 541 Crore last year to 880 Crore this year, a whopping growth of 63%. The reason why most of health insurance companies are still showing profits is that they have a life insurance subsidiary that is making money or if they have invested in the market.

K S Sankar also believes that it is the non-health insurance activities that will keep them running. He says of the purely health insurance companies in India; Star Health has been successful because it is sponsored by the government in some states. He points out that of Max Bupa, Max is already into Life and Bupa is primarily a service provider for international insurances and this combination again will have synergies to sustain them. “It is not without reasons that they did not rush in (before) but are coming in only now. All these players are using these models for immediate sustenance hoping right pricing of health insurance in India will happen sooner than later.”

Sudhir Sarnobat also feels that things will become better now, he thinks that as the premium rates are hardening, there is possibility of creation of innovative products in retail spectrum which can provide profits. He says “Till last year, the retail Health Insurance portfolio of all insurance companies was profitable hence, this business, if done properly, can provide profits.”

Last words

Having more dedicated health insurance companies in India means more good news than bad news to us- the end users, it means more choice, better service and better products and innovations in the field. “The more the merrier” says the Indian middle class customer, for sure!

First the good news, Indian health care industry in the 1990s grew at a rate of 16% and today is worth more than $ 34 billion. Health insurance industry has registered a 20% growth in health insurance premium in December 2009 and is expected to cross a premium mark of Rs. 9000 crore in FY 2010 making health insurance industry one of the fastest growing industries in India.

Now, a string of bad news, the average health expenditure on a person per year is just $34, only 6% of India’s GDP is spent on health, number of hospitals per 1000 persons is 0.7 while the world average is 3.9, less than 10% of India’s population has health insurance while 80% of health infrastructure is provided by private sector making health care unaffordable to most.

So the current scenario has a growing population, poor State-owned infrastructure, no health insurance coverage for the majority, and due to over dependence on private health care, exorbitant medical expenses. Over and above this, increasing migration of people from rural areas to urban areas along with adoption of sedentary lifestyles, poor dietary choices and stress has led to the spate of lifestyle diseases in India. Today, there are 51 million diabetics in India and the number is set to rise to 73.5 million by 2025. Similarly there are 25 million people with heart disease in India and 15 million die of this disease every year. While the number of cardiac patients is decreasing in the world, 60% of heart patients in the world will be Indians.

The news is indeed grim but the cause of worry is not only the rate of increasing diseases but also the nature of these diseases, diseases like Heart disease, Hypertension and Diabetes are chronic diseases requiring a long term medication course along with the set of complications that they bring requiring expensive treatments. With a large population of Indians - rich and poor - suffering from these diseases, the total healthcare costs will skyrocket. In this scenario, we asked health insurance experts about their thoughts about the future of health insurance industry.

We spoke to K S Sankar, Member of Corporate Relations, Medimanage, with about 30 years of experience in Health insurance industry and Sudhir Sarnobat, co-founder, Medimanage, a ‘health insurance broking firm’ with ‘dedicated India centric health website’ about the future of Health Insurance in India in relation with the increasing lifestyle diseases.

How to cover the masses?

Even with the tremendous growth in the health insurance industry we find in a country of more than one billion people only 9.8% of people have health insurance. This leaves 90 % of the population to either depend on the Government hospitals with subsidized rates or paying on their own the expenses they incur in private health care clinics.  With the public health care system failing, people have no choice but to depend on their own resources to pay for their health care.

Keys- Awareness and Affordability

K S Sankar says that health insurance can reach and cover the masses by being affordable and through awareness creation.  He believes the first goal is taken care of; “The industry has demonstrated capabilities of creating affordable products like Universal Health Insurance, Jan Arogya Bhima, etc. So, making affordable products available is not quite a problem. The problem has been that of creating awareness and reach”.

These health insurance plans do have some very good benefits at a low price. The Jan Arogya Bima Yojana for instance - in a premium starting from just Rs. 70, reimburses expenses upto Rs.5000 in a year towards hospitalization as well as pre and post hospitalization expenses.

The issue, therefore, is more about creating awareness of such policies.

Brokers should market Health Insurance

For the lack of awareness about the health insurance policies Mr. K S Sankar, says the fault lies with outdated model of marketing still used by the insurance companies. The only saving grace he says is “introduction of professional intermediation through insurance broking”. However he adds “even this was kind of forced upon the industry than happening as an internally evolved strategy”. But he laments that, the current breed of brokers, except a few, are more interested in reaching into each other’s market than genuinely trying to create more awareness and create new markets.

Using Technology for Volumes

The job of creating awareness he thinks should be primarily the responsibility of the State and health insurance companies.  The solution to the problem of reach, he feels, is to leave marketing of health insurance to the brokers, where the brokers choose to specialize in health insurance and hone their skills accordingly. And the key he feels is technology, he says “You find cybercafés even in C- towns. Even villagers are on to mobile phones and are used to ‘bill pay’s. There are more mobile phone users in India than health policy holders.” And thus he says, “Technology, at least in its elementary form, has reached out and just riding this reach would itself increase health insurance reach manifold.”

Lifestyle Diseases and How health insurance Companies can cope with them

 The recent health reports say that  India is about to become the diabetes and heart disease capital in the world, it would be important to know how health insurance is adapting to it.

Sudhir feels that Insurance companies have not really looked at the issue, neither as an opportunity nor as a threat. He feels that a system which rewards good management of health and reprimands bad management of health can help because these diseases can be managed by an individual. He suggests, “Insurers should be linking the premium to maintaining the Wellness Score like say, maintaining Sugar Levels under control, providing discounts in premium for better health etc. Insurers could also look at product innovation for specific diseases and thus spread the risk to improve performance.”

Keeping health insurance affordable

It is speculated that with more lifestyle diseases like Diabetes with no cure and many complications, the health insurance companies might just increase the premium or additional loading in the policy, making it unaffordable. K S Sankar disagrees with this approach. He opines, “Insurance is to cover risks, not to simply transfer the risk back to the original risk bearer. Making the risk bearer participate nominally in the claim is fine, but it has to stop there. Otherwise, insurance will become meaningless. So, hopefully there shall not be a late-in-the-day kneejerk reaction from insurance companies to lifestyle diseases in terms of controls, controls and more controls.”

Sudhir on the other hand, feels that as long as there are more people buying health insurance, health insurance will remain affordable. With increasing health costs, he feels there will be more focus on cost efficiency and hence there will be a closer examination of the hospitals by the Insurance Companies and TPAs.

Mr. Sarnobat provides various methods that could help reduce the costs, “Disease Management Protocols, Bulk Purchases of consumables, rationalization of medicine brands and gate-keeper mechanisms for selection of type of Healthcare Provider in line with the ailment profile will help to bring down the prices.” He feels that even if the premium rises, people would prefer to pay it rather than bear the costs, he sums it up by saying, “My take would be that for next 10 years, health Insurance will continue to be affordable as there is huge opportunity to increase penetration and cost inflation is not going to be in line with the same.”

Health insurance and Preventive Care

With lifestyle diseases on the rise and treatments available to cure them becoming more expensive, the only way to tackle this problem is to prevent lifestyle diseases in the first place. With almost all of the health care systems catering to curative methods of treatment, it is to be seen if health insurance companies do something in preventive health care. K S Sankar is of the opinion that there is now a change in perception and it is the private participation in healthcare that has brought the orientation towards pro-active health or preventive health. He feels that the impact of this orientation will take time but will lead the society to healthier living. However he feels that health insurance products are still oriented only towards curative health.

What can be done?

K S Sankar, feels that health insurance companies should build incentives to the section of the population that is health aware and compliant to healthy living processes. The specialized health insurance brokers referred above can greatly help insurers by tracking and reporting such compliance, both as a tool to the insured persons and as data to insurers.  He feels that health insurance companies should have a different pricing with incentive to those who ‘stay healthy’ rather than worry about those, who themselves spare no second thoughts to their health.

The way to do it         

Mr. Sudhir Sarnobat feels that before giving out a policy, the insurance company should determine the healthy living goals to be achieved and give benefits through discounts in premium or bonuses through increase in sum assured once the goals are achieved. This way you incentivize good health and thus reduce the claims in the long run.

Health insurance is sure to be a big industry in some time but it will only truly become a giant, if it looks at the challenge of low penetration, high claims rate, increasing lifestyle diseases and comes up with innovative solutions that make it attractive for the customer at the same time focusing on reducing the losses. The solution that comes across through the discussion is ‘preventive health care’ and if the Government as well as the health insurance industry focus on this part, health and cost of health care will no longer be a cause of worry for the customer or for the Insurance industry!

What is the first thing that the hospital staff asks you as you try to get your close one admitted? Along with the other questions about name, age, symptoms experienced, there is one question that they do not fail to ask, “Do you have health insurance?” The answer to this question has more implications on your final bill than you can imagine. We try to understand what goes behind if the answer to the question is yes!

The Trend:

The scenario today is that health insurance which is meant to relieve the financial burden incurred as a result of hospitalization actually has become a source of malpractice and mismanagement. 

Due to the inefficiency of the Public healthcare system, patients have increasingly started to opt for the private health care institutions their health needs. In the absence of a body controlling their rates, some of the hospitals are found to charge their patients in an ad-hoc manner. There is no rate card that will serve as a bench mark for charging customers. Thus the hospitals have the liberty to charge different rates to different patients gauging their paying power.

Malpractice by Hospitals, Doctors

The gross inefficiency does not end here, some hospitals hike up their fees when it is clear that a patient is covered under health insurance.

Sometimes the doctors hike up their fees as much by 3 times when he is charging an insured patient as the medical charges do not come under the income tax purview.

Sudhir Sarnobat, Co-founder and Director of Medimanage Insurance Broking Ltd gives insights into the way hospitals go about overcharging an insured patient,

No Choice of Room: All hospitals have separate standards for rooms viz of rooms like common, twin-sharing, deluxe and super deluxe. A patient should get to choose his /her room based on their budget and acceptability of comfort required during hospitalization.

Many of the hospitals deny the common and twin sharing class to members who have insurance under the pretext that it’s their policy. Even if the patient is not availing cashless facility, the doctors ask the patients whether they have insurance (and all patients without understanding the implication, nod in affirmative) and then direct them to a room category that is more expensive.

Different rate cards: Some small and medium hospitals maintain different tariffs which are mainly classified in three categories viz. Self-Paying, Insurance (Reimbursement) and Insurance (Cashless). The tariff is lowest for the self-paying patient and is called as base tariff. It’s loaded by 10-15% for Reimbursement Patients and then loaded by another 10-15% for cashless patients.  Some big hospitals do have similar practices but they do it in a subtle manner.

Doctor’s Consultation charges: Small hospitals have visiting surgeons whose fees are mostly never published in standard tariff. Some of these hospitals inflate the doctor’s fees based on the patient’s status i.e. charge higher fees for those patients with health insurance. There are two management modalities followed in India, one is Full Time Consultant model where the doctors who are attached at one hospital cannot work for any other hospital. The doctor’s fees are generally fixed in such models. Second model is visiting consultants who are attached to multiple hospitals and admit their patients based on patient’s capacity to pay. Big hospitals have visiting surgeons who do not have fixed fees and hence doctors themselves decide the fees to charge.

Unnecessary Hospitalization: Some hospitals also push an insured patient for admission in the hospital (as only then insurance pays for treatment) where the same may not be needed. This is another form of exploitation of insured patients.

Unnecessary medical tests: Some hospitals go for excessive investigations when the patient is insured. They also make patient get involved in investigation chasing (due to structure of Human body, some or other parameters are going to be up or down based on various conditions). This is normally acceptable so long there is no major complaint from the patient. But in cases where doctors find insured patient’s parameters little excessive, they ask for further investigation and go for treating these parameters through medications and interventions.

With all the kind of malpractices rampant with the hospital bills, it is the insurance companies who are facing enormous losses due to both high claims ratio and fraudulent claims.

What do the TPAs say?

Third Party Administrators are given the responsibility of accepting the claims and settling the valid ones by the Insurance Companies hence we asked, Mr. Madhavan, COO of Mediassist one of the leading TPAs about this problem. Mr. Madhavan said “there is some discrepancy in the charges between the bill of insured and uninsured but only in some hospitals.  Initially there was a lot of discrepancy in the charges but after the intervention of the TPAs we find that mostly only Tier 2 Hospitals indulge in it than the Tier 1 companies.” He believes that once the industry observed the trend and presented the hospitals with the data about the inconsistency, the hospitals agreed to follow a tariff and TPA with their consolidated data have a control over the costs.

 On where does the discrepancy creep in, Mr. Madhavan believes that it is more in cashless claims where it is a kind of emergency and there is very little time frame in passing the claims, in reimbursement claims the patient pays the bills from his pocket so he negotiates with the hospital and the additional time frame gives a good chance for the TPA to review the case. 

Effect of this trend

Short Term:

This trend of overcharging patients with health insurance coverage will affect the customer both in the long term and short term. In the short term, if he is charged for a disease for example for cataract for about Rs. 50,000 then he is left only with Rs.50, 000 cover if he has taken a 1 lakh cover. Thus an overcharged bill has a negative impact on your cover amount especially if it is a family floater or if the sum assured is less.

Long term:

Sudhir Sarnobat explains the long term effect of extorting money from the insurance cases, he says that the higher cost of treatments of insured patient means that the claims are higher; this he feels will either force the insurance company to limit the benefits or increase the premium. Both of these conditions will affect the penetration or viability of health insurance to people. He says, “The important element of success of insurance is to have the maximum population insured but that gets defeated when insurance becomes unattractive to buy. That further leads to only needy buying the insurance because they only see the benefit in buying costly and restrictive cover, who in turn go for claim which further increases claims.”

What are the TPAs/Insurance companies doing to tackle this problem?

Mr. Madhavan says “We are constantly in talks with the hospitals which are in our network; they share the tariff card with us so we know about their standard charges.” About the Doctor’s consultation fees, he says, “when we make package deals with the hospitals in our network, we not only negotiate the tariff but also fix the rate of consultation charges.”

About the further measures to be taken, he says, “there is lot that can be done to tackle this problem, TPA can convince more hospitals especially the commercial hospitals to give discounts and other measures to reduce the prices.”

On the other hand, Sudhir Sarnobat feels that the problem can be tackled through the education of the insured so that they know what are the limits to the expense for a particular disease for example, if the patient informs the hospitals that the limit on the cataract treatment in his policy is Rs. 20,000, the hospital either has to charge reasonably or the patient shifts to other hospital. The other solution that he provides is that there should be a regulatory board for hospitals like IRDA in insurance that will control the hospitals and bring some transparency in its operations.

With no near end of this problem of overcharging insured patients, the Insurance companies and the TPAs have to do their best to reduce the claims, whatever they do, it is the insured who faces the brunt.

All hail the IRDA for it has come to the rescue of consumers! According to new guidelines issued by the Insurance Regulatory and Development Authority (IRDA) on the 2^nd of April, 2010, it has become mandatory for health insurance companies to now renew health insurance policies irrespective of the payments already made by the health insurance company against the claims.

In lay man’s terms this newly issued guideline will bar health insurance companies from refuting the renewal of a health insurance policy based on repeated claim settlement. This guideline put into action after the modification of three acts: the Insurance Act, 1938; the General Insurance Business (Nationalisation) Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999, will greatly benefit the older population which due to their advanced age requires repeated hospitalization, thereby repeated claim settlement.

Most of the times you forget to renew your policy by a mere 2-3 days, which causes the policy to relapse i.e start anew, wherein it is treated as a new policy and you lose the cover benefits given for the pre-existing diseases; put it simply you lose out on the waiting period already covered for pre-existing diseases and have to do with a new waiting period that is usually 4 years! The new guideline issued by the IRDA has cleared this fallacy up by making it clear that any delay in renewing the policy up to 15 days will have to be excused and the insurance company cannot revoke the benefits given for pre-existing diseases on the basis of non-renewal of the policy up to 15 days.

Moreover the IRDA has made it clear that insurance companies should not force consumers to shift from their current health insurance policy to another, except for when their policy is to be upgraded or discontinued with permission from concerned authorities.

IRDA has also stated that Health insurance companies should provide complete details about the renewal of a policy to the consumer, along with stating in clear terms if there are any changes in the payment of the premium by the consumer; these steps are to ensure that the consumer can make an informed decision whenever he opts to buy or renew his current health insurance policy.   

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