Key To Success Of Health Insurance

Due to high-value diagnostics and drugs, the cost of healthcare has gone up drastically, says Dr Biswendhu Bardhan

Health was always a priority in India. In 1978, during Alma Atta Declaration (1978), a programme called ‘Health for All by year 2000’ was chalked out. But when we look back, it is clear that we are far behind the projected scene. Hence, in 2002’s National Health Policy the main objective was to achieve an acceptable standard of good health amongst the general populace of the country.

Though India has experienced a rapid increase of private players in healthcare, facilities at public hospitals are grossly lacking. Public hospitals have failed to provide free and low-cost quality care to people. As a result, there is an increased financial burden (83 per cent of the estimated Rs 1,036 is out-of-pocket expense), which is found to be one of the important reasons of indebtedness in rural areas. Moreover, public health financing is also inadequate in meeting the rising cost of healthcare. This is due to the focus of public finance on disease control rather than on the well-being of the person. At the same time, due to high-value diagnostics and drugs, the cost of healthcare has gone up drastically. So, health insurance in the form of healthcare financing (Mediclaim) was introduced in India in 1986-1987 by four subsidiaries of General Insurance Company (GIC) to support the ailing healthcare industry.

Health insurance works on the basic principle of cross subsidisation between young–old; healthy–sick; and rich–poor. The basic aim was social welfare and provision of good healthcare for individuals and groups. Strength Weakness Opportunity Threat (SWOT) analysis of the insurance shows the following:

Strength: Expected to boost the private sector and increase accessibility to healthcare, which was earlier impossible due to financial barriers.

Weakness: Chances of widening inequity amongst masses and creating a dual system of care.

Opportunity: Source of financing to the starved health sector.

Threat: Can escalate healthcare costs and wreck the system.

Problem Of Staggering Bills

Earlier, medical insurance did not have the facility of cashless service and hence people had to pay hefty hospitals bills and submit the claim for re-imbursement to the insurance company. Though the introduction of Mediclaim had transformed healthcare, patients were grappling with arranging bills at the time of admission and discharge.

So, with consumer interest in mind, the Insurance Regulatory Development Authority (IRDA) licensed third party administrators (TPAs) in 2002. TPAs are supposed to work as mediators who will do all the necessary paper work, while the policyholder simply walks in and out of the designated hospital or nursing home by merely flashing a health insurance card. Though health insurance gave a boost to the ailing health sector, the situation today is very critical, as the claims ratio or the payouts is alarming. Records show that the claims ratio ranges from 100-400 per cent and above. The question is how and why are insurance companies managing the health portfolio? It may be a social commitment or interest of the insurance company towards group insurance policies where they are able to enroll corporate groups with many insurance policies like fire insurance, asset insurance, health insurance etc. Though companies make a loss in health portfolio, it is subsidised with other insurance policies taken by the corporate.

Problems And Challenges

A closer look into the unregulated sector shows there are many factors that cripple the functioning of insurance sector:

Hospital Related

• Overcharging by some health providers from insured persons.
• Differential rates for cash and insurance patients in hospitals.
• In many hospitals, a doctor’s charge is negotiable in higher-class rooms and comprises 70-80 per cent of the total hospital bill.
• Average length of stay (ALOS) is high in nursing home/hospitals where occupancy is low.
• Manipulation of the patient history.
• Patients getting discharged from the ICCU room.
• Some hospitals at present are extracting maximum permissible claim through nexus with client.
• Different tariff rates for similar services in various hospitals.
• Unrelated investigations are on the rise, increasing healthcare cost. Moreover, because of rise of cases in consumer courts, hospitals do not want to take a risk and rely more on several investigation reports.

Insurance Policies Related

Insurance products are not designed properly at many occasions, creating confusion. Here are a few points yet to be taken care of:

• Premium is too low for the sum assured. Average premia is between one-two per cent of the sum assured, as compared to two-three per cent in developed countries.
• Low competition and inadequate range of products.
• There is no ceiling on room categories as per the sum insured, so all patients wish to get admitted in special rooms/suites. Currently, a person with Rs 50,000 sum insured and a member with Rs 7,00,000, both want to get into the deluxe rooms or suites.
• Policy exclusions are not clearly defined. For instance, if a person while taking insurance is suffering from hypertension and hyperlipidemia, it needs to be clear in the policy exclusion that cardiovascular diseases will not be covered; rather than mentioning treatment of hypertension and hyperlipidemia will not be covered.
• Need for a medical check before the commencement of the policy, if feasible.

Policy Holders

• Members converting outpatient procedures as inpatient. Approximately, six-seven per cent of people covered lodge a claim compared to 3.2 per cent of population with inpatient episodes.
• Fraudulent claims are on the rise.
• Younger age groups are not encouraged to buy insurance.
• Persons with high probability to fall sick buy insurance.
• Healthcare spendings of population with insurance is thrice that of the population without insurance.

Insurance Company Related

• Non-life insurers prefer group policies. Individual policyholders are not a priority
• Insurers are reluctant to be in the business. No stand-alone health insurance player in the market, other then Star Health and Allied Services, have entered the sector recently.
• Life players offer critical illness riders.

Government Related

• Absence of institutional frameworks for accrediting, monitoring, regulating and adjudicating.
• No strict laws to regulate provider practices, costs and quality.
• No proper regulatory bodies to monitor compliance to laws. Many nursing homes are operating with registrations from the local bodies.
• Disproportionate public funding – due to impact of political compulsions on allocative issues. For instance, resources given to polio eradication or HIV/AIDS.

TPAs

• Managing cost is the biggest problem as rates are not controlled by TPAs.
• Minimum standard of care is not clearly defined.
• Choosing appropriate service provider is becoming a challenge.
• Claim settlement, especially of mediclaim, takes longer time.
• Small nursing homes and some of the hospitals are being avoided by TPAs to avoid unnecessary documentation.

General Factors

• Poorly-regulated insurance markets, which is threatening the financial system of healthcare.
• Skewed health risks – large pool of the uninsurables.
• Interconnection between poverty, unemployment and ill health.
• Prolonged life spans – increased chronic diseases.
• Increase in risk factors and disease burden.
• Variability in healthcare expenditure – cataract surgery ranges from Rs 5,000 to Rs 75,000.
• Inequitable distribution of healthcare infrastructure.
• No standard treatment protocol.
• Most poor states have no providers to deliver the package of services. Not even pathology labs for basic diagnostics.
• No common terminology for disease and grouping of disease.
• No appropriate data about incidence of disease and to measure level of risk.
• No date for post surgery complication rates.
• No information about hospital infection rates.

Overcoming Challenges

As it is now clear that insurance is the protection for high healthcare cost, it is time for all stakeholders to join hands to overcome the challenges for survival of the industry. Regulations and managed insurance market can also play an important role in moving health financing towards greater equity. Some recommended steps may be as follows:

Hospitals

• Accreditations and standardisation of the tariff as far as possible for similar pattern of healthcare providers.
• Regular orientation to the doctors regarding health insurance.
• Concept of negotiable doctor’s fees should be discouraged as far as possible.

TPAs

• TPAs should increase their network to hospitals in all areas, which will lead to increased competition, and more bargaining power for TPAs.
• TPAs should be directed for faster settlement of claims.
• Selecting some specific hospitals for group insurance policies where the hospitals will be assured of some volume of business and in a position to offer better discounts.
• Indoor case paper and medical history can be made a regular document for the submission of the claim.
• All the problems should be supported by positive investigation report wherever applicable.
• Empanelling hospitals with fixed hospital schedule and not encouraging hospitals with negotiable doctor’s fees.
• Frequent visit to the hospital to meet the patient in the hospital.

Policy Conditions

• Policy exclusion should be very clear.
• Capping in the room category as per the policy coverage with a upper limit is important. For instance, patients get admitted in a Rs 15,000 presidential suite in leading hospitals increase the healthcare expenditure burden on insurance companies.
• Three years’ cataract exclusion with an upper limit as per the sum insured. It has been observed that cataract claims is high in second year of the policy immediately after the first year exclusion. It is recommended that public insurance company should exclude cataract for at least three years.

Insurance Companies

• Creating more awareness regarding health insurance.
• Strong underwriting and claims management.
• Review of mediclaim to cover ‘existing illness’, if possible with a higher premium.
• Introduction of new products for different segments.
• Offer products for specific treatments to profitable segments.
• Remove life/non-life categorisation for writing reimbursement-based health policies.
• Agents and private players should target new markets in rural and semi-urban areas, rather than tapping the same market. This will increase the penetration of health insurance.
• Control costs by managing or controlling hospitals, ie shifting to the concept of Health Management Organisation (HMO).

Government

• Recognising health insurance as a separate line of business.
• Reduce capital requirement for health insurers from Rs 100 crore to Rs 30-50 crore.
• Introduce capital monitoring and product level norms for private health insurance.
• Accreditation and benchmarking of health providers. There should be some quality standards and protocols to follow.
• Invest in training doctors, providers, health economists, cost accountants, epidemiologists, hospital managers, record keepers in computerisation etc.
• Reform public health system by decentralisating autonomy and invest more to ensure standards.
• Government-controlled health trusts can facilitate public–private partnership in a competitive environment.

General Factors

• Encouragement of HMO, PPOs and managed care for sustaining in the business.
• Public education and awareness needs to be increased through media as to use of insurance.
• Social insurance/employer-based insurance for organised sector.

Recent Initiatives By IRDA

• Co-ordination between insurers and TPAs through regular meetings.
• Micro-insurance: Encourage community initiatives in marketing and servicing of health insurance, especially in the rural communities in the form of offering micro-insurance products.
• Health Insurance Working Group (HIWG): Representation from ministries of health, finance, ESI, CGHS, corporate hospitals, insurers, TPAs, actuaries and NGOs.

Terms Of Reference Of HIWG:

• Discussion of issues pertaining to development of health insurance.
• Involvement of stakeholders for strategy development.
• Elaborating a framework for development of private health insurance in India.
• Collaborating on tasks needed to discover and assess the current status of private health insurance and managed care schemes.

Sub Group On Health Insurance Data Terms Of Reference:

• Examining current data availability.
• Standardisation of common data elements for collection of data.
• Identification of standard coding systems.
• Creation of data warehouse and actuarial analysis of data.
• Pricing of new health insurance products.
• Submission of data by insurers/TPAs in approved formats – for previous two financial years.
• Standardisation of data submissions electronically after adopting coding systems and standards.
• Actuarial review of data by insurers to develop and price new products.
• Creation of national health data repository and tariff advisory committee as the custodian.

Conclusion

Health insurance is like the knife. In the surgeon’s hand it can save the patient, while in the hands of the quack, it can kill. Health insurance in India needs to be customised to suit our conditions.

The writer is Senior Networking Officer, Western Region, Family Health Plan Limited.
E-mail: biswendu@gmail.com