Cash Missing In Cashless Insurance

You must no doubt be aware of the recent controversy involving insurance companies and the elite club of hospitals regarding the subject of cashless insurance. Apart from whatever has been reported by the media, there still remain a lot many factors that need to be clarified. This especially concerns those who already have a mediclaim policy and are now unsure of how this issue will affect their interests. As such, we at DSIJ decided to get to the bottom of this matter and provide pointers to our readers to help them understand how they should deal with this new problem.

Locking Horns
The cashless insurance row got kicked off in the month of June when some insurance companies, especially the four public sector general insurance companies, vehemently denied cashless facility to their customers if they availed of medical treatment in five-star, corporate-structured hospitals. This was because the insurance companies felt that these hospitals were overcharging those patients with medical insurance.

There were claims that the amount charged was at times as high as 150 per cent of the premium paid by the customers. It was further alleged that such hospitals usually have two different kinds of rates for their patients depending on whether they are covered by an insurance policy or not. “Certainly it is common knowledge that there are different rates being charged for the patients with and without insurance. This has resulted not only in losses for us but it affects the customer too because he or she may not have enough balance left to take care of any future hospitalisation in the same year,” points out Dr R K Kaul, CMD, Oriental Insurance Company.

To arrive at a solution, the PSU insurance companies requested these elite hospitals, a majority of which exist in NCR, Mumbai, Chennai, and Bangalore, to reduce their rates at least by 20 to 40 per cent. This demand from the insurance companies was immediately rejected by the hospitals on the ground that they give quality service to their patients and that there was no question about any sort of ‘extra’ charges. “The insurance companies have to realise that different hospitals have different levels of infrastructure, expertise, etc. and that the same tariff cannot apply to all. There needs to be a logical gradation and categorisation of hospitals which will allow for the establishment of fair tariffs,” says Ranjana Smetacek, Director (Marketing and Corporate Communication), Fortis Healthcare.[PAGE BREAK]

This stand taken by the hospitals has further annoyed the insurance companies which have otherwise been deliberating for long on how to reduce expenses related to health insurance. When the entire issue snowballed into a stand-off with no party moving ahead to arrive at a resolution, the insurance companies decided to completely do away with cashless insurance for all those customers opting for treatment at any of the 150-odd corporate hospitals. This includes Apollo, Max Hospitals, Fortis, Breach Candy, and Lilavati
However, the cashless facility can be availed of in case of emergency and trauma cases.

The Present Practice
Soon after the suspension of the cashless facility in most of the corporate hospitals, the PSU insurance companies announced their own set of hospitals that had agreed to pre-decided rates of treatment. “The new list of hospitals has come into effect from July 1, 2010. Here the rates of treatment have been agreed upon by both, the insurance companies and the medical institutions in consultation with third party administrators (TPAs). Customers who opt for these hospitals can continue to use their cashless facility,” informs R K Kachroo of Alankit TPA. “In Delhi alone we have 180 hospitals for our customers to choose from and more will be added soon. In cases wherein a customer opts for a hospital not included in the list, he or she can apply for reimbursement after discharge on submitting the necessary bills and documents,” he adds.

Insurance companies are now trying to expand this preferred provider network (PPN) of hospitals and talks are on with medical institutions in all the four metro cities of NCR, Mumbai, Chennai, and Bangalore. Currently there are around 300 hospitals in this list which can be downloaded from any of the PSU insurance companies’ websites. Meanwhile, the dialogue between the insurance companies and the elite hospitals has been kept on to end the deadlock. “There is no question of overcharging in case of the Fortis Group of hospitals. We follow a single tariff list for all our patients. Furthermore, we have already provided our rates for medical treatment in advance to the TPAs and the insurance companies,” Smetacek states. However, such claims are not being easily accepted by the insurance companies. The bone of contention is that while hospitals can charge different rates for their rooms, how is it that the rates vary even for certain basic procedures? “We have noticed in many of the cases that the charges levied by some of these elite hospitals have spiraled 200 to 400 per cent times as compared to the rates charged by the other hospitals. We understand that the accommodation rates of a bed in the general ward or that of a super deluxe room would be different but how can the x-ray cost, for example, be different for patients admitted to the general ward or the super deluxe ward? We just want this discrepancy to be corrected,” Kachroo says.[PAGE BREAK]

Stopping The Bleed
The decision of the insurance companies to suspend the cashless facility hasn’t been an abrupt one but premeditated action brought on by the rising expenditure related to medical treatment. With the public sector insurance companies commanding 60 per cent market share, in the last two years they have shelled out `6,991 crore to settle the claims while the total premium collected during this period has been only `6,734 crore.

It certainly does not make for good business sense. There is another angle to the issue too. “Earlier the cost of health insurance was subsidized by the tariff structure in the motor and fire policy but this cushion doesn’t exist now. Health insurance is one of the largest segments for general insurers today and it will become a profitable proposition only when we have corrections in rates. In the health insurance sector our premium growth has come down from 50 per cent last year to 20 per cent this year,” Kaul informs. Such a dilemma certainly called for special policies with special premiums. “It is true that to cover the losses and grow we have had to come up with policies with revised premiums which should now suit all the parties,” he adds.

That being the reason, the insurance companies are now considering the launch of a premium cashless policy for which a customer will have to dish out an additional charge to be able to avail of the cashless facility at the elite hospitals. In such a case customers will have a wider choice of hospitals. However, the big question is whether such a policy will find favour with customers. The waters need to be tested first.

Need To Innovate
To curtail their costs, insurance companies are now checking out all the available options, one of these being a decision to eliminate TPAs.

Certain insurance companies (Max Bupa, for example) have launched products to enable them to get directly engaged to the elite hospitals and prevent any overcharging. This also helps them to avoid the TPA-related cost since there is no need for any mediator. Hospitals are quite comfortable with such an initiative. “Certainly this move of the insurance companies would be helpful in resolving the controversy as it will help them reduce their expenditure and cut down on the fraudulent claims too,” Smetacek opines. “It is time for the medical and insurance sectors to understand each other. We must arrive at a situation that can be of advantage to all the stakeholders, including the customers,” says Prathap C Reddy, Chairman, Apollo Hospitals Group.