Times of India
28 July 2011
By, Pradeep Thakur
New Delhi, India

Vishal, a marketing professional, underwent heart bypass surgery last month at a multi-specialty hospital in NCR and was billed Rs 2.60 lakh. When he approached the insurance company for reimbursement, the hospital was made to refund Rs 35,000 while the insurer paid Rs 2.25 lakh, the rate fixed for the procedure.

Until last year, several hospitals had a dual billing structure where patients who were covered under insurance were subject to a higher tariff.

The insurance industry responded to this dual billing by introducing its own rate card and creating a panel of approved hospitals for cashless treatment which it termed as the preferred provider network (PPN). After the big face-off between insurance companies and hospitals last year, patients are beginning to benefit from the standardized cost structure introduced for common medical procedures.

Now increasingly, insured patients do not have to bear any part of the hospitalization cost, unlike in the past. In cases of inflated billing, insurers are getting hospitals to refund the overcharged amount to patients. The other positive fallout is that the claims bill for insurance companies has come down and this, in turn, will reduce the pressure on health insurance rates and keep them in check.

Cashless medicare still low in Mumbai

New Delhi: Public sector insurers, who control up to 60% of the health insurance business, have managed to bring most major hospital chains into the preferred provider network (PPN), where treatment rates are fixed for at least 42 medical procedures. These include open-heart surgery, cataract, knee replacement, gall bladder operation and childbirth.

“A lot of health spending today is being done through health insurance which is a Rs 11,000 crore business. The four public sector companies have joined together which has increased our bargaining power,” said G Srinivasan, chairman, United India Insurance and also head of the General Insurers Public Sector Association. He added that with health accounting for 26% of general insurers’ business, they had done a lot of groundwork in calculating treatment costs and developing standardized rates. Cashless treatment, which had run into problems during last year’s upheaval, is back as well. It is currently being provided in 456 hospitals across Mumbai, Delhi-NCR, Bangalore and Chennai. In Delhi-NCR, where 188 hospitals including all major names except Apollo are on board, cashless transactions now account for almost 80% of all health insurance reimbursements. In Chennai, the figure is 60%, in Bangalore 55% and in Mumbai 20%.

The percentage is low in Mumbai because none of the major tertiary care hospitals with high footfalls of insured patients have agreed to be on PPN, although the city has 114 hospitals providing cashless facility. Starting this month, Kolkata, Ahmedabad, Hyderabad and Chandigarh have been added to the list of cities with cashless facility. In all, 100 hospitals are on PPN in these four cities. Sources in the insurance business said all major hospitals are charging standardized rates for insured patients though the bills vary for patients who do not have mediclaim. The standard rates have not only helped the insured keep costs down by cutting out unnecessary diagnostic tests, but have also slashed the claim ratio-claims reimbursed against premium collected—of insurance companies by up to 30%.

KK Rao, GM of Oriental Insurance Company, said his firm’s claim ratio had come down by 18% to 20% in the past year. “My overall losses have reduced significantly. Last year, the claim ratio was 107%, which has now come down to 91%,” he said. Rao said the yield per capita for insurance companies had also gone up with less underwriting of losses in group insurance policies.

“The industry was losing Rs 100 crore till last year,” says Pawan Bhalla, CEO of Raksha TPA which services health insurance clients. He said that on an average, the claim ratio had come down to 82%, making the health insurance segment a profitable business once again.

In 2010-11, India’s health insurance business was worth Rs 11,000 crore of which the share of PSU insurers was Rs 6,500 crore. The claim ratio had climbed from 116% in 2009 to 120% in 2010 for all public sector insurance companies. For private insurance companies, it went up from 85% to 92% in the same period.

Times View

The fact that the insurance companies have been able to bring hospitals in line through a concerted effort and hence benefited the consumer is good news. It does, however, point to an important gap in our regulatory framework. We have regulators for setting tariffs in the power sector, the telecom sector and the financial services sector. While all of these services are crucial, isn't it strange that the service sector that directly affects the life and wellbeing of people—the healthcare sector—has no regulator. It’s time we had one which would balance the interest of the people and that of the healthcare industry.