Call it corporate muscle power or lure of future business, insurers still bend over backwards to take care of group insurance policies

Most group insurance policies enjoy numerous perks like maternity, post-natal care, pre-existing ailments, dental and ophthalmic care. The icing on the cake is continuous coverage of cashless facility even at high-end hospitals in metro cities. The new concept of cashless facility restricted only at preferred provider network (PPN) hospitals by PSU (public sector undertaking) insurers is only for individual policyholders.

This is unbelievable considering that group insurance losses have been more than individual insurance losses. According to a report by the Comptroller and Auditor General (CAG), between 2006 and 2009 four PSU insurers suffered a loss of Rs417 crore on individual mediclaim policies and Rs622.49 crore on group mediclaim policies.

Segar Sampathkumar, deputy general manager, New India Assurance, said, “In the past, there used to be cross-subsidy given to corporates because of high value business from property insurance. With de-tariffing, the premiums have fallen and hence it is impossible to underwrite group health insurance at low premiums. They are now increasing at 30% to 40% this year. We are adding caps to specific coverage, co-payments and the coverage itself is now shrinking. Corporates are realising the reasoning behind the changes.”

According to industry sources, despite the recent hike in premiums, group insurance polices continue to bleed insurers. It is easier to put loading on group insurance rather than individual policies. If PSU insurers made arbitrary increases to individual premiums, they could afford the cashless facility at high-end hospitals, but it will not solve the source of problem which is inflated charges by some high-end hospitals. “We are trying to correct the system that is in the interest of the policyholder. If there is a high charge from hospitals, it will reduce the sum assured for the policyholder and may not cover another illness in the same year,” Mr Sampathkumar added.

Sudhir Sarnobat, co-founder and director of Medimanage Insurance Brokers, said, “If the claims ratio is adverse, insurers hike group insurance premiums at renewals. However, PSU insurers will offer some discount if the group insurance contract agrees to restrict cashless to hospitals that are part of their PPN. Currently, the insured group has a choice of going either for PPN or other hospitals. The existing group insurance policies are not touched by insurers for restricting cashless at PPN hospitals, probably because it is the corporate sector where the premium can be hiked if the claims ratio is adverse.”
 
“One way to curb the losses for the insurer is to have a ‘Gate-keeping’ model. A policyholder wanting to go to a big hospital without real requirement is a misuse of insurance. The need to go to a big hospital only arises because of ailment that cannot be treated at a smaller hospital. The tendency to go for the best hospital without a real need, just because the insurance company is paying for it, is a misuse of insurance,” he pointed out.

Talking to the media at a CII insurance summit earlier this week, Dr Ravindra K Kaul, chairman and managing director of Oriental Insurance Co Ltd, said that the cashless facility is still allowed by PSU insurers at non-PPN hospitals for emergency and accident cases.

The four PSUs chose to control the losses ahead of other insurance companies; otherwise, the claims trend would put the fate of the entire health insurance industry at peril. PPN network will save at least 20%-25% on their losses, which will help the customers in the long run in terms of premiums not shooting through the roof.

Mr Sarnobat said, “Current churning in the market will make life very difficult in the short term for all the parties involved, but once this phase passes, we are sure that the changes would have a long-term effect and would help the consumer.” He explained that the focused network with negotiated rates would improve the commercial feasibility of insurance and improve the quality and service delivery of hospitals. “Once the losses are tamed, the journey is always upward in value and what is currently happening with the health insurance industry in India marks the beginning of this,” he said.

Another point that needs to be considered is that premiums of most health insurance companies have not risen at the pace of medical inflation. Medical inflation is one of the reasons for creation of the divide between claims and premiums earned, so health insurance essentially remains quite affordable and inexpensive. Thus buying a health insurance policy for yourself and your family even now seems a very good idea. — Raj Pradhan