Column

The media has been full of stories on how the four public sector general insurance companies have withdrawn cashless reimbursement facilities from top hospitals in Mumbai, Delhi and some other cities.

This decision, though brewing for the last 12-18 months (Ref: my article in DNA on February 20, 2010), was implemented by the PSU companies suddenly from July 1, 2010, without any notice to policyholders, leading to very justifiable howls of protests from the affected policyholders.

As of now, the private sector companies have not taken action on withdrawal of cashless reimbursement facility, but it is possible that we will see similar action emanating from some of them as well, as the underlying causes remain similar for all insurance companies.

So who is to blame for things coming to such a pass?
I suspect not a single of the stakeholders involved i.e. the hospitals, insurance companies, the policyholders, the insurance regulator or the government can escape the blame.

Let’s look at the role of the hospitals first. The complete lack of transparency in their charge structures is the basic issue behind the whole imbroglio. Forget insurance companies, a patient who has no insurance also is not provided details of what a particular procedure or a consumable, implement or diagnostic test will cost. We have trawled the websites of all leading hospitals in India and not a single one of them has a detailed charge structure on its website. Some of them had packages for certain procedures but even those packages had lots of extras to be charged “on actuals” basis and, of course true to form, there were no details on how much these “actuals” would be. (We are open to being corrected on this and request readers to let us know of any hospital that transparently displays its charge structures for all patients).

Clearly, the hospitals gain from this lack of transparency by charging on a “maximum traffic can bear” principle. I have personally witnessed how a well-known cardiac physician in one of Mumbai’s most reputed hospitals started quizzing my cousin, who had gone to consult him for a possible angioplasty, about what he does and whether he has a stake in the company that he works for, etc. None of these questions had any medical relevance — the physician was trying to establish how much my cousin earned. He might as well have asked for his income-tax returns.

The top hospitals complain the charge structures that insurers are trying to impose on them are very low and do not take into account the quality of healthcare facilities and medical personnel.

There is a grain of truth in this, but they would have had some public support if they were transparent about their charge structure with all the patients — whether insured or not.

Unfortunately, there is no regulator for the hospital sector to enforce transparency and anyway, the shortage of quality medical facilities means that the hospitals operate in a sellers market and have little or no incentive to be consumer-friendly.

Let’s look at the role of the PSU insurers. They are said to be incurring losses on mediclaim policies because claims are far higher than the premiums collected. For the same set of hospitals, the private sector insurance companies have managed to keep their head above the water. Obviously, something is wrong in the manner in which the PSU insurers are issuing fresh policies and their claim procedures. For years they have tried to staunch losses on these policies by trying to deny or reduce claims on flimsy grounds, thus loosing customer support. In fact, the recent imposition of service tax on cashless reimbursement, which has no impact on their cash flows or tax liability, has been used to reduce losses on this portfolio by debiting it to the claim amount (most private companies we spoke to said they do not debit the customer in any way for the service tax charged by hospitals on cashless reimbursements).

Clearly, as far as charge structures with hospitals go, they are not wrong in demanding a transparent structure. What is wrong is the ham-handed way in which the cashless facility was removed one fine day without bringing the facts out in public first and giving notice and providing detailed statistics behind their claims that hospital overcharge patients with cashless facilities.

Next comes the role of the consumer. Somehow, consumers don’t feel the pain when the bill is paid directly by the insurance company to the hospital. They know (or would know, if they exercised reasonable care) that the hospital is overcharging them and yet go ahead and blindly sign the bill as long as it is below the insurance limit. What they don’t realise is that a higher claim could not only mean higher premiums next year, it also leaves them exposed if that illness recurs or another illness is contracted the same year. Also, ultimately it is their premium money that has gone in the payment of the bill and eventually, all policyholders of that company will suffer when payouts increase disproportionately.

Also, what has perhaps been missing is the lack of an industry-wide consumer education programme, which will ensure that consumers are educated about the benefits of being transparent with their insurance companies when they first buy the policy and the pitfalls if they choose to hide their existing diseases while buying insurance.

The regulator has rightly refused to intervene in what is a private matter between the hospitals and the public sector insurance companies.

But concerns remain on enforcement of regulations and grievance handling. Some insurance companies officially flout regulations such as all health policies being required to be available till the age of 65 years at least. The other issue of course is about grievance redressal, which hopefully will be addressed more suitably once the centralised grievance handling system and the call centre goes live in the next few months.

The government (whether state or Centre) can help by having a regulator for the healthcare sector that would enforce some rules in what is currently a Wild Wild West.

All in all, this imbroglio would have served a very useful purpose if it ends in bringing in transparency in the hospital and the health insurance sector.

The writer is CEO, Apna Paisa, a search comparison engine for loans, insurance and investments. He can be reached at hrdna@apnapaisa.com