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Cashless Medical Insurance: Q&A

The Insurance Regulatory and Development Authority of India (IRDA) may not be keen to be involved in this matter, as the issue is between the Insurance Companies and the Hospitals.

The public sector insurance companies in India had withdrawn the facility from July 1, 2010. Over 150 hospitals on their network were taken off the list. 

The insurance companies, which decided to scrap the cashless treatment facility are New India Assurance, United India Insurance, National Insurance and Oriental Insurance.

The tussle between public insurance companies and corporate hospitals in the city is turning out to be a nightmare for medical insurance holders entitled to cashless treatment. Big private hospitals in the city are receiving as many as 10 denials per day from public insurance companies for pre-sanctioning of cashless treatment facility. All are for 
individual, not corporate claims.

"On July 1, we received the first cancellation for a cancer patient. Since then, we have been getting as many as 10 denials per day," said Sanjay Rai, director, marketing and customer management, Max Healthcare.

Insurance companies said they were forced to withdraw the cashless facility because many private hospitals overcharge patients with insurance.

"Expecting private hospitals to provide treatment at CGHS rates is irrational," said Dr Sanjeev Bagai, chief executive officer, Batra Hospital.

"What's the point of paying premiums for a cashless policy if we have to pay during an emergency? " said Vikas Pawar, a software engineer, whose father's knee replacement surgery had to be postponed.

In an effort to end the impasse, the Confederation of Indian Industry (CII) organised a meeting between corporate hospitals, such as Apollo and Max, and four public sector undertaking insurance companies ó New India Assurance, Oriental Insurance, United India Insurance and National Insurance Company, and General Insurance Public Sector Association  in Mumbai on Tuesday. 

"In next one week, the Third Party Administrators will individually meet big healthcare providers in the country to discuss the finer financial details for restoration of the cashless treatment facility," said A. Vaidheesh, chairperson, CII sub-committee on accessibility, health insurance and the medical industry.

The CEOs and heads of about 15 private Delhi hospitals will meet on Wednesday to look for a temporary solution. Till the time cashless treatment facility is restored, people will be reimbursed their medical expenses.

State-owned insurance companies plan to put a check on hospitals by asking them to standardise charges on treatments. Some hospitals are inflating claims and overcharging insurers, G Srinivasan, chairman and managing director, United India Insurance Company, tells Shilpy Sinha. As against Rs 8,000 crore earned from health insurance policies, the 22-odd insurers settled claims worth Rs 11,000 crore in the year to March 2010. Edited excerpts:

Have public sector general insurers stopped cashless mediclaim in certain hospitals? 
Hospitals have been charging rates that are far in excess than what is justified. Our third-party administrators (TPAs) have been talking to hospitals for a long time to rationalise the charges. It results in customers exhausting their policy limits early. Subsequently, the premium also goes up.

We are in the process of talking to other hospitals to bring them under our network. We have only classified hospitals. We donít want erratic charges to continue. TPAs are not able to negotiate well with hospitals. So, we took this step in the interest of our health portfolio.

We have created a new list and not added some hospitals so far. As and when the rates materialise, we will add them.

Is health cover getting costlier?
There has been a big jump in health insurance premium. We load the premium with the increasing claim experience and also take health inflation into account.

There have been a lot of complaints from senior citizens about unavailability of health cover. What is your comment?
There is a problem in writing health insurance for senior citizens. The claim ratio in this segment for companies is 200 per cent. Companies are very selective while writing health covers. But, the Insurance Regulatory and Development Authority (Irda) has been pro-active in saying that you should treat them fairly and even if you conduct medical tests, you should bear a part of the fees. They cannot deny covers and can load premium to a certain extent. There are a lot of restrictions, which are strictly followed by us. If there is any aberration, it can be brought to our notice.

Insurers are still offering huge discounts. Where will the prices stabilise?
You can divide the entire portfolio into mega policies, mid-cap policies and smaller policies.

Large policies were detariffed 10 years back. In mid-cap policies, there was certainly a substantial drop in rates but now there is a tendency for rates to go up, especially depending on the claim experience.

If you take our company, the fire loss ratio was around 49 per cent and the engineering loss ratio was 15 per cent. People said the rates would stabilise in two years. It may take up to three to four years. But ultimately, each risk will get a price. There are some risks like hydro-electric and group mediclaim, which no one wants to write. Rates have gone up on a client to client basis.

Is it viable to continue the third party motor pool or you want it to be scrapped?
The remedy is to charge the right price. The price was so far borne completely by public sector companies. But if prices are not enough, the solution is to either charge actuarially determined prices, which can be governed by the regulator, or open up so that companies know what to do. The industry has proposed to Irda to prescribe obligations on this, so you can always cherry-pick or pay penalty and not write it. That may not be the complete solution. So, we would like the pool to continue as long as pricing is adequate.

How do you look at State Bank of India Generalís entry into the market? Is it going to lead to a rate war?
The market is big. Penetration seems to remain at a low level because we are growing at the same pace as the economy. We are adding new customers and the business size is increasing. So, new players are welcome. A few companies may lose their bancassurance partner. A new player is aggressive in pricing as it has to build a critical mass.

What kind of growth are you expecting this year?
Last year, we reached Rs 5,200 crore and this year we will reach Rs 6,000 crore. It will be 15 per cent growth. We are not going to run after growth. Our retail business is around 70 per cent while the rest is corporate. We are leaders in social and rural sectors, which contributes 15 per cent of the total premium. We are looking at increasing our share in this segment.


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