Who will iron out the chinks in the insurance business?  

July 21, 2010

There is a need for checks and balances on every stakeholder in the insurance business: Hospitals, policyholders, pharmacists, TPAs and insurers

According to M Ramadoss, chairman and managing director of The New India Assurance Co Ltd, “Insurance companies have been witnessing inflated, fraudulent, and unwarranted hospitalisation claims when the patient had declared that he/she has insurance cover and wishes to go for cashless treatment.”

There is a complete lack of transparency in hospital charge structure irrespective of whether the patient has insurance or not. This is a big impediment for patients. Some of them have packages for certain procedures but even those packages have lots of extras to be charged “on actual” basis. There are no details on how much these “actual” extras would be. Many hospitals charge at a higher rate based on the quality of the room. Why would procedure cost or anaesthesia cost increase for patients in a better quality of room? It is obviously because “quality of room” signifies willingness of the patient to pay more money for medical expenses. In an attempt to standardise hospital rates, public sector insurers are moving towards a Preferred Provider Network (PPN). For more, see: (http://www.moneylife.in/article/8/7387.html).

Another problem faced by patients is getting billing details at the time of discharge. According to Mr Ramadoss, “The patient is in a hurry to go home. If the patient asks for details, he is told it may take four hours. The patient is certainly discouraged to wait and at times made to sign on blank papers. We would like patients to assist us by bargaining to get a better value proposition from the provider and report any aberration to us for corrective action. It will certainly help if patients are alert in checking hospital bills.” Patients care less if the bill amount is lesser than the insurance limit. What they don’t realise is that higher claims will mean higher premium next year and lesser coverage for any medical need later in the same year.

There are rising cases of fraud in the system. Mr Ramadoss told Moneylife, “We have ongoing work to check and audit the system. At one time we did a three-month investigation in different cities. We found cases of bogus nursing homes, bogus bills from hospitals and pharmacists as well as fraudulent claims by policyholders.  We had to file police cases. We have to keep a check if the patient admitted in a hospital is the same as the one who is the policyholder, verify pre-existing conditions and ensure the treatment given is in line of medical need. This does add to investigation cost.”

For a long time, hospitals and doctors have argued that when it comes to payment of the cost incurred on medical procedures, insurance companies don’t pay hospitals on time. Delayed payments have been a major issue with hospitals, who have been complaining that they have been getting their dues after nearly six to eight months. Hospitals have been blaming Third Party Administrators (TPAs) for these delays, saying that the intermediaries keep the float given by insurers and delay payments. Even insurers have complained that TPAs are not using these funds to settle patients’ claims.

Mr Ramadoss says, “There have been some regional offices that were delinquent which resulted in slackness in payments, while some TPAs have been indifferent when it comes to paying doctors on time. We are moving towards a centralised payment system that will streamline the process. We have an external agency to audit TPAs. All their files are under scrutiny. We would be starting our own TPA entity in a year’s time. All the four PSU insurers are together. We have not finalised an outside partner. It may be in-house, but a separate company. It will help to have better control over claims.”

Over the past few weeks, the healthcare industry has been in turmoil after cashless facility was revoked all of a sudden from leading hospitals. It was done by insurers one fine day without bringing the facts out in public first and giving notice and providing detailed statistics behind their claims that hospitals overcharge patients with cashless facilities. According to Mr Ramadoss, “We are technically and legally not violating (the) agreement with policyholders because we specify in the policy that hospitals have to agree to our terms. I don’t see any harm to our reputation. On the contrary, I have received congratulatory emails for (our) PPN initiative.”

The changes in cashless facility by public sector insurers have certainly made policyholders anxious. It is also a fact that grievances for healthcare insurance are rising and is now more than grievances for motor insurance. There have been numerous complaints to the healthcare industry ombudsman.

Leakages are present at different places in the system. All we need to do is fix it quickly as it will only get worse if we are unable to keep it in check. — Raj Pradhan