Suresh Nagpal*,a 23-year-old call centre executive based in Delhi,experienced constant pain in the lower abdomen. After waiting for a couple of days,Suresh decided to see his neighbourhood doctor. On examination,it was found that Suresh had a stone in his gall bladder and needed to undergo a few tests. Since he possessed a health insurance policy,Suresh did not think twice and got admitted in a nearby hospital.
At first,Suresh was highly impressed by the alacrity shown by the hospital staff and the quality of service. However,things turned sour soon. The hospital admitted him,conducted tests and recommended an operation. Suresh wasnt quite sure and wanted to seek a second opinion before an operation. Going against the doctors advice,he got himself discharged the same day, yet had to shell out Rs 7,000 for a seven-hour stay.
On consulting another doctor,he found that operation wasnt necessary. His stone was just 2 mm in size and would get dissolved with medication. Our investigation later found that the hospital had been charged with unethical practices in quite a few cases and was blacklisted by a number of insurers.
While the high cost of medical care is increasing the demand for health insurance,a variety of frauds and malpractices mean that the insured are not getting the optimal benefit of this cover.
Four major stakeholders exist in the health insurance space - insurance company,insured,third party administrator (TPA),and hospitals. High medical costs and increasing health awareness have led to the mushrooming of small hospitals and TPAs in every nook and corner of the country. The health industry is today suffering from a nexus between hospitals and TPAs that leads to a high claim ratio on corporate insurance and low on individual insurance,and also higher billing of the insured vis-a-vis those who pay in cash.
Hospitals. While the demand for good medical treatment has increased,the supply of such services hasnt kept pace. The public healthcare sector has lagged behind in terms of its ability to meet the growing demand of a large segment of the population. Private healthcare sector,on the other hand,has grown both in size and scope. But this has led to medical costs shooting through the roof,making it difficult for the common man to avail of good medical treatment.
And adding to their woes is the new breed of neighbourhood hospitals. Nowadays,every district has more than one heart or speciality care hospital. With fancy equipment and five-star services,such hospitals thrive on patients with insurance covers.
These days,anybody with a few lakhs or crore opens a hospital. Such hospitals thrive on people with insurance covers. They buy very expensive equipment and resort to unethical practices like separate tariffs for insured and uninsured patients. They also charge exorbitant amounts from patients through over investigation and fabrication of documents, says a top official at an insurance company. This is not a prerogative of small hospitals alone. Even some of the big hospitals resort to fraudulent practices, he adds.
Third party administrators. TPAs were introduced in 2001 through a notification on TPA-Health Services Regulations by the Insurance Regulatory and Development Authority (IRDA). Their basic role is to function as intermediaries between the insurer and the insured and facilitate the cash-less provision of insurance. Until a year ago,they were paid a fixed percentage of insurance premium as commission (5.6 per cent) for this service. With increasing competition,this percentage now hovers between 2.5 and 7 per cent.
The average premium of health insurance policies in the country is Rs 2,000 to Rs 2,500. According to industry players,on an average a TPA gets 5.5 per cent of this amount (Rs 110-135) to service the policy. Considering the capital-intensive nature of the business which includes running a 24-hour call centre,managing a team of doctors,auditors,and administrators on an average a TPA earns not more than Rs 80 per policy. This is certainly too little for managing a business like this. Therefore,according to sources who spoke off the record,a lot of them pocket a 10 per cent commission from hospitals on the bills of insured patients. Therefore,an incentive for over-billing the patient exists. The result: even if you have a large sum assured,the over-billing ensures that your cover is quickly exhausted,and does not suffice to see you through a serious illness.
Points to remember
Over-billing due to over investigation can also leave you underinsured if there is a need for a second visit during that year. Here is what you can do when faced with such a situation:
Take second opinion,if possible. People who have insurance often tend to think that the hospitalisation is free. They fail to realise that its their own money. Always try and understand the medical treatment. Get a second opinion if possible. This will help you decide whether hospitals are indulging in over investigation, says S Krishnamurthy,chief executive officer,TTK Healthcare Services.
Read the fine print. After you have bought a health insurance policy,do not put the policy document in a file and forget about it. Take some time out to read it carefully. This will spare you from any last minute unpleasant surprises like exclusions,cap on insurance cover for a particular ailment,and details of pre- and post-hospitalisation benefits.
Inform the TPA before admission. It is advisable to inform the TPA before getting admitted into a hospital. Tell your doctors to send cost estimates and details of the ailment to the TPA for prior approval,if possible. This will give the TPA a fair amount of time to evaluate your claim and hence lessen the chance of rejection.
Keep original copies of receipts and bills. In case of reimbursements,always keep the originals with yourself. This will help in hassle-free claim settlement.
The insurance industry in the country is still in a nascent stage. In the meanwhile,insurance companies and the regulator need to take a tough stand to curb malpractices such as over-billing. A few companies have taken steps in this direction. In order to serve their customers better and ensure hassle-free processing of genuine claims,five years ago Bajaj Allianz General Insurance set up an in-house TPA service. Now,DBS Cholamandalam and ICICI Lombard too are setting up their in-house units to settle claims.
Insurance companies can also look at incentivising TPAs so that they do not resort to malpractices and safeguard the interests of the insured. Things have improved from what prevailed a few years ago. Incentivising TPAs can help improve the situation. We also plan to incentivise TPAs with additional commissions soon, says M Ramadoss,chairman and managing director,Oriental Insurance Company. In a similar vein,Krishnamurthy says: There should also be some rationalisation of the cost structure.
Besides,the regulator and insurance companies can look at standardising the claim process so that the insured do not get harassed when they need help most. The regulator can also look at standardising the protocol between hospitals and TPAs to ensure that the billing is genuine.