Public sector insurance companies have denied some newspaper reports which said that these insurers were planning to deal directly with suppliers of medical equipment and pharma companies. According to the report published today, the move by insurers to deal directly with suppliers of medical equipment and pharma companies was to save 20%-30% of the cost of claims.

 

M Ramadoss, chairman and managing director, New India Assurance Co Ltd told Moneylife, “No. The news is not correct as we don’t have any immediate plans of doing so.”

 

According to the report, with the proposed deal between public sector insurers and medical equipment and pharma companies, patients will gain through lowered costs and premiums. However, hospitals are not happy with the move. The report, quoting the chief executive of Mumbai’s Breach Candy Hospital said that recent developments give an impression that the hospitals are committing fraud.

"Another concern is about who would take blame if medical equipment or a drug is of inferior quality?," the report quoted other Mumbai-based clinic. 

According to insurers, most of the overcharging allegedly happens when drugs or implants are imported.

 

Over the past few weeks, the healthcare industry has been in turmoil after cashless facility was revoked all of a sudden from leading hospitals. Preferred Provider Network (PPN) is a network of providers who agree to negotiated rates on specified procedures. Public sector insurers have restricted cashless facilities to hospitals in the PPN.

 

Public sector insurers are toying with the idea of launching a separate cashless 'Platinum' policy for high-end hospitals in order to retain affluent customers by continuing for them cashless policies at hospitals outside the PPN. However, this plan is fraught with difficulty because the premium is bound to be significantly higher. According to some industry experts, the premium for such a 'Platinum' policy can be as high as 50% over the existing premium.

 

"Lack of quality hospital supply does make it difficult to negotiate with corporate hospitals. They need to give us discounts on volume of business. If we are unable to convince high-end corporate hospitals to join our PPN list, then we (PSU insurers) will be forced to come up with a separate plan for cashless facilities at high-end hospitals. The premium for this 'Platinum' policy will be higher, but we have not finalised it. It is at the drawing board. We have solidarity from private insurers too. They are also suffering due to erratic charges from some hospitals,” said Mr Ramadoss.

 

There are definitely winds of change blowing in the healthcare industry, which is bleeding under losses. New India Assurance itself is running losses of 20% — excluding administrative costs — for health insurance. The losses are over 40% when administrative and other costs are included. The loss scenario is present for the other three public sector insurers too. For the same set of hospitals, private sector insurers have managed to keep their head above the water till now. Private insurers have also become wiser after they failed to rein in losses to the tune of crores of rupees, allegedly due to fraudulent methods adopted by some hospitals and Third Party Administrators (TPAs). It is possible that they too will move to PPN because the underlying causes remain similar for all insurers.