IRDA moves to protect individuals from being fleeced by hospitals

Insurance regulator plans to assign unique grades to hospitals accross the country based on their cost of services and treatment.

Published: December 2, 2013 5:21:42 am

For those who have paid through their nose for medical treatments,for those who are unnerved by the arbitrary cost of healthcare,and for those who are baffled by more-business-less-service approach of hospitals,the insurance regulator seems to have a remedy.

Recently,the Insurance Regulatory and Development Authority (IRDA) announced that it will map hospitals across the country by providing them with unique identity numbers and collect information on the cost they charge for different treatments. The move,which is still at an initial phase,may ultimately lead towards drawing down rules and framework for hospitals,thereby making the cost of medical treatment transparent and consumer friendly.

“We are working with national accreditation agencies to uniquely identify hospitals,which will involve giving them identity numbers that will be integrated with the pin code of the area and the name of hospitals,” said TS Vijayan,in Mumbai last week.

“The next step will be to see what these hospitals charge patients for various treatments.”

The insurance regulator informed that it has already started work on the same and is collecting transactional data for health insurers to know the charges by various hospitals for a particular disease. Even the Insurance Information Bureau is compiling data to provide unique identity numbers to hospitals.

Insurers see this as the beginning of a big change in the way healthcare and health insurance industry could operate in the future. There is no database on hospitals as of now.

“It is a very positive step to have all hospitals numbered. It is the first step towards creating a database with a unique identity number,” said Kaushal K Mishra,chief executive officer,Tata AIG General Insurance adding that the whole process may take some time.

The bureau has already collected data from around 30,000 hospitals which would help streamline prices apart from curbing fraudulent billing.

What will be the model?

While the plan is still at the drawing board,insurers and Third Party Administrators (TPAs) clearly feel that it is one thing that is critically needed in the country.

Industry experts say that the first thing required to be done is to categorise hospitals and grade them according to treatments and services they offer. Once the grading process is completed,hospitals should be made to agree on a standard charge within their grade for a particular treatment.

“This in itself will be a big revolution as today the hospitals charge arbitrarily and there is no regulation on what they can charge a customer for a particular treatment,” said the CEO of a leading Third Party Administrator who did not wish to be identified.

He further added that for a test like MRI and CT Scan if you visit private hospitals in Delhi or Mumbai,the charges will vary from anywhere from Rs 5,000 to Rs 10,000,though the actual cost of that is only about Rs 1,000. “These things need to be standardised,” he added.

What IRDA plans may not be easy to implement as sources say that there are lot of hurdles in the way and the government will have to intervene if hospitals have to be categorised and graded and the charges within a particular grade have to be standardised.

“It is a complex task as all hospitals that may fall in a grade will have to agree on the standardised charge for a particular treatment and that can only happen with the government’s intervention,” said an industry insider who did not wish to be named.

“If things are standardised,the healthcare cost may not vary significantly from one hospital to the other within a category and therefore there will be more certainty both for the customer and the insurance company,” said Rakesh Jain,CEO,Reliance General Insurance that has partnership with over 4,200 hospitals across the country.

Why is it critical?

Quality healthcare service is a major concern for any individual and if that is a growing concern,the exponential rise in the healthcare expense has made it even more challenging for individuals. Interestingly,that is also leading to a rise in the demand for health insurance products which now accounts for almost 25 per cent of the total general insurance business.

The head of a TPA alleged that overcharging is a general practice across large number of hospitals.

“Healthcare has become more of a business and hospitals are doing pure business without being concerned about the services they offer. They charge excessively and with greater penetration of medical insurance the charges are only going up as the hospitals feel that they will get that money from the insurance cover that the individual has,” said the CEO of a TPA.

So,as the penetration of health insurance grows it is important to have the desired checks and balances in place in the healthcare industry so that such practices can be curbed and this is where IRDA’s beginning may prove to be a critical initiative.

How IRDA’s move benefits you?

Insurance experts say that everyone in the chain — the consumer,insurer and the TPA will benefit if IRDA can finish this task it has taken on hand. Every year,the charges for various tests and treatments are going up and it varies significantly even within one type of hospital. If charges are standardised then there will be more certainty on the charges for a particular treatment and thereby insurance cover and premium.

“IRDA’s step is the first step but in the long run it will be help the consumers as they would know the charges for a treatment at a hospital,” said Mishra.

“The standardisation within the healthcare industry will lead to an organised approach and will make individuals more comfortable when they approach a hospital for treatment. While the intent of the regulator to make it transparent is credible a lot will depend on how this is implemented at the ground level,” said Jain.

However,once the grading is done and charges are standardised then insurance companies will have more certainty on even pricing their health insurance products.

“The premiums may actually come down for health products if such a process is brought in place,” said a source.

Expert speak

If things are standardised,the healthcare cost may not vary significantly from one hospital to the other within a category and therefore there will be more certainty both for the customer and the insurance company.

Rakesh Jain

Reliance General Insurance,CEO

It is a very positive step to have all hospitals numbered. It is the first step towards creating a database with a unique identity number. IRDA’s step is the first step but in the long run it will help the consumers as they would know the charges for a treatment at a hospital.

Kaushal K Mishra

Tata AIG General Insurance,CEO

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