Times of India
10 July 2010
Mumbai, India

It has been 10 days since public sector insurance companies stopped offering cashless facility to patients across the country, bringing insurance activity to a virtual standstill. As TOI highlighted in its Friday edition, PSU companies have withdrawn the cashless facility because the "inflated claims" put forth by various healthcare providers were bleeding them financially. As against premiums worth Rs 900 crore in the Mumbai sector alone, the PSUs were shelling out Rs 1,200 crore in annual claims.

In fact, since July 1, many patients who are not part of corporate group insurance schemes have been asked to settle payments directly with hospitals and claim reimbursements later instead of using the cashless facility.

However, hectic efforts are on to dissolve this gridlock. On Friday, the Confederation of the Indian Industry (CII) committee on health, comprising senior doctors and hospital administrators, met in Delhi to discuss the problem.

Vishal Bali, CEO of the Fortis group of hospitals who was part of the CII discussion in Delhi, told TOI that there has to be a dialogue between the various stakeholders to solve the impasse. "One cannot unilaterally take a decision to stop the cashless scheme to patients. Each has an issue here:insurance providers feel they are making losses, while healthcare providers feel the products are not framed properly. TPAs don’t pay healthcare providers for months on end," said Bali.

Incidentally, it emerges that various hospital chains across the country have approached the Insurance Regulatory and Development Authority (IRDA) for a quick solution.

When India opened up the insurance sector almost a decade back, it was expected to spur a growth in the healthcare sector. On paper,the plan seemed perfect with all the stakeholders talking about bringing on big–time reforms such as accreditation of hospitals and standardisation of payments across the country. Unfortunately, little of these reforms have taken place. Instead, chaos reigned – lack of transperancy became the norm.Overinflated bills followed.

According to Pawan Bhalla, the CEO of Raksha TPA, PSU firms are making an estimated loss of Rs 1,500 crore annually on a yearly premium collection of Rs 6,000 crore on mediclaim policies across the country. These 18 insurance companies had so far been providing cashless services at over 3,000 hospitals pan–India.

A recent study carried out by the TPAs found that only 350 of them, or roughly 11%, were consuming more than 80% of the total claims. It was also found that customers were overcharged for each hospitalisation, irrespective of the treatment, and were left with very little funds for their next treatment.

Although the problem has been simmering for years, hectic efforts weer being made in the last six months to arrive at a solution. PSU companies had asked their TPAs in the four zones to pan out to various hospitals with a new rate chart – something the healthcare providers found impratical. "For one, all operation costs were slashed by more than 20% of the usual rates.

For another, we were told that all patients would be given the same sum irrespective of the class of room they were admitted to," said Dr Ajay Thaker, CEO of Jupiter Hospital in Thane. In other words, whether a patient was in a twin–sharing or suite, he would get the same reimbursement from the insurance companies.

As most hospital chains seemed cold to the new rate charts – "they were too discounted," said the CEO of a national chain of hospitals – the PSUs decided to go ahead with their Plan B: stop extending cashless facility."So far, however, none of them has responded positively, forcing the insurers to take this drastic step," said Bhalla, adding that "this is intended to discipline the hospitals who are overcharging a customer".

According to the TPA survey,it was also found that customers were overcharged for each hospitalization, irrespective of the treatment, and were left with very little funds for their next treatment. Segar Sampath of New India Assurance Co Ltd said,"TPAs have been asked to convey the fresh list of hospitals to individual policyholders as also the new packages available."

These insurers have worked out treatment packages and depending on the hospital’s infrastructure, the lower or higher rate will be applicable.

For instance,hospitals that are part of the big chains charged Rs 58,000 on average for a gall bladder operation. Now, according to the new package deal, a hospital would be offered anywhere between Rs 30,000 and Rs 48,000 for the same. Similarly, for a cataract operation, the average payout was Rs 35,000. The new deal provides for a maximum of Rs 24,000, while it would be Rs 14,000 if the surgery is done at a smaller However, Bali sees a quick solution. "Everyone wants the insurance sector to succeed in the country. For better accessibility to healthcare, wider insurance cover is a must. We cannot postpone seeking a solution for too long."

At A Glance

• ‘Inflated claims’ by various healthcare providers bleeding PSU companies
• PSUs shelling out Rs 1,200 crore in annual claims
• Hospital chains approach IRDA for a quick solution
• According to the TPA survey, it was also found that customers were overcharged for each hospitalization