Given the growth Health Insurance has shown, coupled with its potential in the evolving socio-economic environment in India, Mediclaim as it is popularly known in India remains the top story with all forms of the press. News/columns/opinions in the media quote consumer forums, government bodies as well as 'experts talking about the various opportunities, challenges that Health Insurance consumers face in India.

What’s also noticeable is that most of the news or stories have their eyes expectedly trained on Consumer Issues like disputed claims settled at the Consumer Forums or the Ombudsman. In fact, whenever, a customer wins a case, the press and consequently all of us beam with joy, happy to hear that rights of a consumer, someone like us, are protected, and that there is a resolve to the supposedly draconian ways of the Insurance Company. 

Most recently the press driven by opinion from experts and activists has demanded stricter/deeper regulation on better regulation on terms and conditions of Insurance policies and how Health Insurance Companies and TPA manage claims. For instance, take the Times of India (Business) report under the Consumer Watch Section on 19^th February, which talked about Insurance Companies denying the payment of Service Surcharge, Registration Fees charged by the Hospital [which could go to around 10% of the total bill]. Experts in the story recommended regulation of the terms and conditions of the policy as well as inclusion of these charges as a part of the policy.

While the suggestion for better regulation of the terms and conditions of Insurance policies, as a part of constant evolution/change, is welcome, the experts failed to realize that inclusions for any unfathomable charges won’t come for free, and that collectively Insurance premiums pay for the claims.  In short, such unwise inclusions actually end up increasing the premiums, making it more unaffordable, more than anything else.

The Story missed on targeting the real problem. The problem of understanding what these unexplained charges are?

My interactions with Healthcare professionals in Medimanage have shown that there are gross inefficiencies at the administration and costing level in a Hospital, on account of which direct charges that are levied on to the bill such as, room rent, or doctor fees are not scientifically calculated. The Costing department applies an ad hoc [read inflated] direct margin on all costs to arrive at the price to be billed to the customer.

Moreover, you would be surprised to know that most Hospitals do not have a well managed cost management system which calculates indirect overheads like Electricity, Water etc. to each billable service/item in the Hospital. So for e.g. if you manage to ask an accountant of a Hospital how much is his actual margin [gross and net of overheads] when he bills one pair of gloves to a patient, he will never be able to calculate it. This therefore is a weak spot for administration offices in almost every Hospital.

To cover these costs and protect their margins, Hospitals have therefore worked around and started loading additional overall loadings on the overall bill calling them different names like Administration Charges, Registration Charges or Surcharge.

Knowing this you will now realize, that the reason behind Insurance Companies denying payment of such charges is not the validity of the charge or managing claims, but the unscientific and open-ended way of charging this on to the bill.

The most crucial root of the whole problem simply lies in the lack of almost any real regulation on the largest to smallest of hospitals or healthcare providers in India. In fact, after some browsing on the internet and talking to some healthcare experts, I realized there isn’t any regulator or a distinct self regulatory association for Healthcare Provider Industry in India, which defines standardization of billing for a hospital.

Looking at lack of regulation, even the most esteemed hospitals and renowned doctors charge a higher charge and fee, depending on whether you own a Health Insurance or not.

So while the aam consumer is facing deduction in claims and the Insurance Companies continue making major losses, the Hospitals are laughing their way to the bank, with disproportionate and unreasonable charges.

Most would be surprised to know that world-over you pay lower charges in a hospital, if you have Insurance, than when you don’t. This is purely because the Health Insurance Company is able to consolidate business and negotiate better rates for surgeries with a Health Service Provider, than an individual who doesn’t have Insurance.

Remember, since the largest market share of health insurance is still owned by Public Sector Companies, we also end up paying for the losses in some way or the other, through taxes!

What we derive from this particular case is that the solution to this Great Indian Mediclaim Circus lies in giving Hospitals a chance to make a self regulatory body [under guidelines from the government],with a set deadline, and therefore getting the hospitals under phased regulation. If the body fails to shape up the billing practices in the stipulated time, a government formed body be formed to close the matter.

While they are loggerheads in India, The World over Health Insurance has been a partner of the Healthcare providers walking hand in hand, taking the Healthcare Industry to another level.

Missing to hit at the source of the problem, and pushing an already regulated body with huge standardized competition is taking on a bull by its tail.

Let’s catch the problem by its root, rather than killing the gardener.

Views expressed in the article are personal. The organization, does not necessarily agree to them.