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Times of India
10 July 2010
Chennai, India

Cases of overbilling and extended hospitalisation of patients is leading to a massive shake–up in the medical insurance sector. A number of hospitals in the city may soon find themselves knocked off the lists of healthcare providers allowed to run a cashless mediclaim scheme while others are likely to face limits on the rates they levy for various tests and procedures.

As a first step, third party administrators (TPAs), who run the back–end for public sector insurance companies have opened negotiations with several hospitals to rework rates for surgical procedures. "From July 1, we have decided to bring about changes on claims made by hospitals for cashless mediclaim," G Srinivasan, CMD, United India Insurance, said.

Essentially, it would mean lowering the compensation that an insurer pays a hospital for treatment provided to holders of mediclaim policies. This would mean negotiating rates lower than the earlier accepted claims. "We found that some hospitals were charging exorbitant rates for procedures. This was making the portfolio for insurers unviable. TPAs of all PSU insurers have started dialogue with hospitals for fresh rates. Since the process has started only few days ago, it will take time to cover all hospitals," Srinivasan said.

‘40–50% of hospitals may be knocked off cashless treatment list’
Chennai: Third party administrators (TPAs), who run the back–end for public sector insurance companies have opened negotiations with several hospitals in Chennai to rework rates for various surgical procedures. "From July 1, all of us have decided to bring about changes on claims made by hospitals for cashless mediclaim," G Srinivasan, CMD of United India Insurance, said. "We found that some hospitals were charging exorbitant rates for medical procedures. As much as 40 to 50% of the hospitals which were offering cashless claims may cease to do so after the revamp," he said.

Nearly 60% of United India’s settlement of medical bills is through the cashless format. Public sector insurance companies have a stranglehold in the health insurance space with a 80% market share.

Another PSU insurance major, New India Assurance, said it was also reworking its health insurance portfolio. "We are facing a runaway situation as far as health claims are concerned. The need of the hour is to focus more on claims management," said M Ramadoss, chairman and managing director, New India Assurance.

Insurers contend that frauds are commonplace in the cashless settlement system in which hospitals bill directly to insurance firms, thanks to premiums paid by policyholders. "Sometimes, the patient is discharged earlier but the hospital adds one more day in the bill. In other instances, the patient may undergo numerous tests or an expensive procedure that is not warranted at all," said an insurance official.

While premium collections from health insurance policies are around Rs 8,000 crore (all India), the loss to PSU insurance companies is currently pegged around Rs 3,000 crore.

"There is a clear direction from the Government of India now that insurance companies can no longer afford to run as charitable institutions," says Rahul Aggarwal, chief executive officer of broking firm, Optima Insurance Brokers. The government’s contention is that the benefits of such health insurance schemes are enjoyed by the rich who in any case can afford to pay premiums.

Many insurance majors, both private and public, are partially or fully exiting the group health insurance space as it’s not profitable anymore.

But with hospitals and insurance firms battling it out, it’s clearly the patient who is bearing the brunt.

Clampdown
Back and forth: Those patients covered under the cashless schemes would now have to pay out of their pocket if the hospital is out of the insurer’s list. After payment, get geared for some chase for getting the reimbursement from the insurance company.

Group health under scrutiny: With many insurance companies either partially or fully exiting the group insurance space, the new model emerging would that be of co–payment where the employee will have to bear some portion of the medical expense


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