Economic Times
09 August 2010
By Dheeraj Tiwari
New Delhi, India

Insurance companies have taken their fight against hospitals for overcharging patients covered by health insurance to the finance ministry, seeking support for their plan to take hospitals off the preferred list if they do not reduce drastically the costs of standard procedures. The insurers have presented a detailed report to the finance ministry, naming the big hospitals and the amount they charge to the health insurance holders for some of the standard procedures, which is often double of what it costs a patient who pays out of his own pocket.

"This (overcharging) has serious consequences for the stability and solvency of the insurance companies," said a senior finance ministry official, adding that the ministry would take a view soon as the near Rs 2,000–crore losses of health insurance portfolio is unsustainable. Hospitals under the preferred network provide cashless hospitalisation services to policyholders.

Withdrawing the tag would affect both hospitals and patients. These hospitals will lose business to ones still on the preferred network, creating pressure on a lesser number of hospitals. Alternatively, patients will have to settle the bill themselves and claim a refund later from insurance company, which can be a very tedious process with risk of the claim being rejected.

Shankar Nath, CEO, Policy Tiger, an online insurance comparison portal, feels creating a stake for policyholders through a co–pay system will bring more pressure on hospitals to keep the cost of treatment low. "If a system can be set up, wherein 80% of the cost is borne by the insurer and the rest 20% by the person insured himself, he will question the hospital about inflated charges," he said.

The insurance regulator, Insurance Regulatory and Development Authority (IRDA), has already written to the health ministry requesting it to prescribe standard operating procedures for hospitals to bring uniformity in pricing. "Apart from surgery cost, other components such as consultancy charges, investigation charges and other expenses are also disproportionate, which needs to be looked into," the official said.

The move comes after the leading insurance companies, including the four state–owned ones, had withdrawn the cashless facility for 150 private hospitals of the National Capital Region from July, 1 in protest against highly inflated cost of treatment. The cashless facility for emergency, ICU, cardiac care and trauma cases was restored after the industry body CII managed to get all stakeholders – hospitals, insurance companies and third party administrators – together but the dispute continues.

According to chairman of a state–run general insurance firm, the insurers have told the finance ministry that if the hospitals don't bring down the rates, they'll have no option but to increase the premium charges. "Only 5% of the total population has access to insurance–funded health care, increasing the premium charges can drive away potential beneficiaries," he said. As of now health insurance is a loss making business for insurers with gross claim ratio is as high as 105%, which means that for a premium of Rs 100 collected, the claim received by insurance firm is Rs 105.

Public Sector insurers currently hold 59% share in the health insurance segment, which has a total premium of Rs 8,305 crore.