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Will the health insurance imbroglio ever get solved?

The situation on the Health Insurance claim payment front has deteriorated significantly over the last few months.

Harsh Roongta

12 Mar 2010

The situation on the Health insurance claim payment front has deteriorated significantly over the last few months. While everybody is aware about the turf war which is going on between IRDA and SEBI over ULIPs, only consumers who have the misfortune to fall sick and get hospitalized are realizing the significant issues with claim settlements on mediclaim plans.

Let me narrate my own personal experience to illustrate the point.

I had the misfortune to slip and fall at home as a result of which I was advised minimally invasive surgery to repair a tear in the shoulder sometime in mid December 2009. I was smug at the fact that I had adequate medical insurance and hence I would at least not have to worry about the hospitalization expenses. My first shock was when the doctor hiked the estimates for the procedure after finding out that I had medical insurance. It was only when I refused to pay anything additional and threatened to shift to another doctor that wiser counsels prevailed and he agreed to abide by the original estimate of around Rs. 2 lakhs. The second shock came when I realized that this very reputable hospital had blacklisted all TPAs/insurance companies and I would have to pay the bill first and seek reimbursement from the insurance company later. On enquiry I learnt this was because of the bad experience that the hospital had with TPAs (as well as Insurance companies) who delayed payment even after providing approval for cashless settlement.

The last shock was reserved for when I put in my claim with the TPA for reimbursement of the expenses that I had incurred. Firstly the TPA allotted by my insurance company had given a 1-800 telephone number, which was never picked up. So for any queries I had to send a messenger over. The people at the TPA were extremely rude to my staff that went personally to their office for enquiries. I was at a wits end as to the status of my claim when I discovered, almost by accident, that the TPA had an online status check facility (this facility is not advertised anywhere in the policy documents). I began checking the status on the website on a constant basis and hence was able to find out, in early Jan 2010, that the TPA had raised several queries including requiring a copy of the FIR filed for the accident (who on earth files a FIR for a slipping incident at home) and a copy of the indoor case papers of the hospital. This query was only updated online and I have yet to receive the actual physical letter containing the query. In any case I got together all the documents and submitted them in mid-January 2010. After that it took them almost 4 weeks (they updated the approval on the site yesterday) to approve my claim after making some nonsensical deductions. To enable you to judge the merit of these deductions here is a sample list of what they have deducted - Rs. 100 for shaving (they have claimed it is for head shaving though no where in the bill is it mentioned as head shaving it was actually chest and shoulder shaving to prepare for the operation) and Rs. 200/- warming blanket used in the operation theatre where the temperature is kept very low thus necessitating the use of this disposable blanket which is filled with warm air to keep the patient warm. I know the amount of deduction is extremely small and hence I do not plan to contest them but the pettiness really rankles. Again true to form I have learnt all this from their online status site. I now anticipate a struggle to get the actual cheque for the approved claim.

So what are my learnings from this episode?

Firstly the health care industry (especially the larger hospitals) is clearly a law unto itself. With a tremendous shortage of quality health care facilities they clearly have no push factors for pricing the services reasonably for their consumers (yes patients are also consumers after all). In fact, but for a few notable exceptions, most of them possibly see an easy money making opportunity when they are treating an insured patient. The absence of competition ensures that patients have a Hobson's choice in terms of medical personnel and hospitals and the ability of even large Insurance companies to lay down some standard payment systems is very poor. The hospitals and doctors of course have their own woes with the health insurance industry. Ambiguous terms attached to cashless pre-approvals mean that the hospital is not sure if the payment will actually come or not. Secondly there are very long delays in payment even after a claim is admitted and approved.

Of course some players in the health insurance industry contribute their own share to the consumer's woe by denying/reducing claims on flimsy grounds, delay in decision making, etc. to make this a very hassle some process for consumers.

The health insurance industry also re-acts by pushing the onus on to the poor patients (sub limits, co-pay requirements, etc) who are the grass that gets trampled upon between this fight between a two elephants (the health care industry and its relatively tinier counterpart - the health Insurance industry).

Given the fact that public spending on health insurance as a percentage of the total healthcare spends in India is one of the lowest in the world, the health insurance industry has a very important role to play in ensuring the availability of quality health care to the population.

It might be interesting to see the history of the stand off between the health care and the health insurance industry. There had been stand off between TPA (Third Party Administrator) and Hospitals, few years ago after which IR DA and others had intervened to set up an arrangement which had been working reasonably well till about 6-9 months ago. This is when the arrangement broke down again, especially where handling is done by TPAs. A large number of very reputed hospitals have refused to entertain cashless approvals by TPAs and now the whole sector is crying out for the urgent intervention of Government authorities.

The lack of standardized charges among the health care sector is the biggest impediment to the spread of health insurance in India. In fact the lack of standardization in so rampant that charges for consumables particularly expensive ones like stents vary from patient to patient. In fact charges may vary considerably for the same procedure in a similar room class depending on whether the patient is insured or not. The question here is why can these charges vary from patient to patient in this manner. The health care sector clearly has a lot to answer, and the Government's recent move to accredit hospitals and to have standardization in some of the charge structure is most welcome and needs to be implemented with full speed.

IRDA also needs to intervene to make sure that similar standardization happens in the health insurance industry to make sure that the newly acquired confidence of the health insurance customer does not dip significantly.

Till both these events happen the consumers have no other choice but to grin and bear it.

I hope Finance Minister comes up with some proposition on this when he gets up to present the budget next Friday. After all health is an important service for the aam aadmi.

Please write to me about your own experiences with Health insurance as well as any counter points to this article.