Insurance
Mediclaim packaged rates for 42 ailments will marginalise TPAs' powers

A High Court directive puts additional responsibility on IRDA to issue guidelines for insurance companies to come up with package rates for 42 ailments based on policyholder’s sum insured and type of hospital. It will ensure that TPA’s role in recommending claim payment is marginalised 

The Bombay High Court has directed Insurance Regulatory and Development Authority (IRDA) to issue guidelines for insurance companies to come up with package rates for 42 standard ailments in the policy document. The package rates can be based on policyholder’s sum insured and type of hospital combination. It is no surprise that insurance regulator did not want to get involved in this task-IRDA’s advocate argued that this was not within its realm. Bombay HC Chief Justice Mohit Shah said, “You have the power. You don't exercise it.” He gave the example of former election commissioner TN Seshan reforming the election system despite limitations.
 

A division bench of Chief Justice Shah and Justice MS Sanklecha heard a public interest litigation (PIL) by activist Gaurang Damani on issues facing mediclaim policyholders. According to Mr Damani, “The good old cashless mediclaim days are no longer available with government insurers, who realised it was more expensive than reimbursement claims. There is no financial incentive to restart cashless facility. Information on package rates for 42 standard procedures will help policyholders know what they are entitled to. Today, there is lack of transparency and third party administrators (TPAs) have huge discretionary powers. Bills for same procedure undergone in the same hospital are settled with different amounts.”
 

Recently, Moneylife had written about a policyholder from United India Insurance, who was handed over a bill of Rs65,368 by Chennai-based New Hope Indian Speciality hospital, for appendicitis surgery done at the insurance company’s preferred provider network (PPN). The TPA, Vipul MedCorp approved only Rs25,000 for the surgery. The TPA and hospital agreement for package rates seems to be a farce. Had the policyholder known that the policy would only pay Rs25,000 for the surgery, she could have looked for another hospital instead of having to foot the difference in the hospital bill.

United India Insurance makes a mockery of PPN package rates
 

Packaged rate for standard procedures specified in the policy will force the insurance companies and TPAs to become more transparent about what they are willing to pay, avoiding nasty surprises for the policyholder later. Today, going to PPN does not ensure complete coverage for hospital bill, even if there is no sub-limit for the said procedure and even when the policyholder has availed room facility within its room-rent limit.
 

Moneylife had written about health insurance guidelines issued by IRDA that initially barred TPAs from claim settlement and were later revised to allowing the TPAs to recommend a claim amount. Please read Do IRDA health insurance guidelines really disallow claims settlement by TPAs?
 

During the High Court hearing last Friday, Mr Damani pointed this loophole-it gives enough discretionary power to the TPA, to the extent of recommending zero claim payment. Will this mean the claim is rejected? In 2011-12 , about 6 lakh claims out of 37 lakh worth Rs1,200 crore were pending. TPAs are known for keeping float; delaying the payment to policyholder even after getting it from the insurance company. The judges, in their order, also directed that insurers will frame guidelines for TPAs to recommend the claim amount.
 

According to Mr Damani, “The TPAs will not be able to settle claims. The insurance company and not the TPAs will have to give reasons for claims rejection or partial payment. Moreover, if 42 procedures have packaged rates mentioned in the policy, the TPAs cannot execute an arbitrary settlement amount. The packaged rates will be transparent and policyholder will be aware of what cost will he receive. Competition will take care of market forces to offer appropriate package rates for the 42 procedures in the mediclaim policy.”

 

Read - Insurer and not TPA to settle health insurance claims

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COMMENTS

nagesh kini

4 years ago

One shouldn't forget that the PSUs have been in the health cover sector much longer and have better expertise than the present lot of private players who are still groping their way through by coming out initially with rock bottom premia, great settlements that took them in the red forcing one to hike the rate by as much as 500%. Yes is is indeed a choice between the devil and deep sea!

nagesh kini

4 years ago

One shouldn't forget that the PSUs have been in the health cover sector much longer and have better expertise than the present lot of private players who are still groping their way through by coming out initially with rock bottom premia, great settlements that took them in the red forcing one to hike the rate by as much as 500%. Yes is is indeed a choice between the devil and deep sea!

R Venkiteswaran

4 years ago

I agree with your sentiments Mr.Gaurang that "Instead of shunning PSU Insurance Companies, we must try to make them more accountable to their customers." But when the PSU companies continue with their defiant attitude treating their customers as idiots and cheats, they deserve to be taught a lesson. That is what I meant.

CHANDU CHARTIST

4 years ago

ACCORDING ROOM RENT LIMIT ALL PSU INSURANCE COMPANY CUT ALL MEDICAL EXPANCE IF ANY ONE TREATED HIGHER RENT ROOM, IN SUCH CASE INSURANCE CO HAVE TO CUT ONLY ROOM RENT ACCORDING POLICY AMOUNT NOT ALL TRETMENT AMOUNT

LALIT SHAH

CHANDU CHARTIST

4 years ago

ACCORDING ROOM RENT LIMIT ALL PSU INSURANCE COMPANY CUT ALL MEDICAL EXPANCE IF ANY ONE TREATED HIGHER RENT ROOM, IN SUCH CASE INSURANCE CO HAVE TO CUT ONLY ROOM RENT ACCORDING POLICY AMOUNT NOT ALL TRETMENT AMOUNT

LALIT SHAH

CHANDU CHARTIST

4 years ago

ACCORDING ROOM RENT LIMIT ALL PSU INSURANCE COMPANY CUT ALL MEDICAL EXPANCE IF ANY ONE TREATED HIGHER RENT ROOM, IN SUCH CASE INSURANCE CO HAVE TO CUT ONLY ROOM RENT ACCORDING POLICY AMOUNT NOT ALL TRETMENT AMOUNT

LALIT SHAH

Ramesh Kalhan

4 years ago

I am right now suffering dealing with UII as they hv kept my case hanging in air for more than four months now.

Ramesh Kalhan

4 years ago

Thanks for bringing it to our notice. Thanks.

Gaurang Damani

4 years ago

Raj, Thanks for the article.

Thanks a lot, Nagesh ji, Vivek ji, Deepak ji and Venkiteswaran ji, for the encouraging words.

Instead of shunning PSU Insurance Companies, we must try to make them more accountable to their customers.

R Venkiteswaran

4 years ago

Further to my post today let me add one more thing. The same case which United India offered to settle at 15000/- was settled by another private insurer to the full extent of Rs 32000/- within 14 days. This clearly shows that govt. insurers are out to cheat and fleece the public.I request all my brothers to shun the govt. sponsored insurance companies so that they close their doors on the mediclaim business. My hearty congratulations to Mr. Gourang Damani.

vivek shah

4 years ago

Gaurang Damani the great crusader !!!!!
Great work

R Venkiteswaran

4 years ago

I had a very bad experience with United India insurance. They offered to settle only 15000/- against a bill for 32000/- on the pretext that the rent of the room i occupied was beyond the limit under the policy. If room rent is beyond the limit they can very well limit it to eligibility. But they say that if you stay in a room twice your eligibility, even cost of paracetamol will be settled only at 50%.Mediclaim is nothing but daylight burglary.
Venkiteswaran, Cochin

nagesh kini

4 years ago

Thank God for the unstinted dedicated efforts of the one-man army of Gaurang Damani that the mess of the obnoxious TPA menace that has been the bane of Mediclaim has at last been curbed considerably and ultimately may have to be terminated lock, stock and barrel.
May Gaurang's tribe increase. God Bless Gaurang!

DEEPAK KHEMANI

4 years ago

Finally some good news for Mediclaim Policy holders who were at the whims and fancies of the TPA despite having paid 6% extra for the TPA services a fact that many are not aware of.

Does SEBI deserve to be the strongest regulator in the world?

Under the new ordinance, SEBI becomes an absolute power in ‘settling’ defaults and is not accountable to any authority. Do these powers have legal sanctity?

Market regulator Securities and Exchange Board of India (SEBI) was conferred unchallengeable powers through an ordinance on 18 July 2013, which can waive any penalties or actions for defaults by anyone, and arrive at a ‘settlement’, under the Securities Contracts (Regulation) Act and Depositories Act, regardless of the gravity of offence. These powers are unbridled, absolute, without any checks and balances, and, without any accountability to investors or other stakeholders in the securities market.

 

This makes SEBI the most powerful securities regulator in a democratic world.

 

The ‘settlement’ amendment has retrospective effect from 20 April 2007. On this date, SEBI had issued Guidelines, through a circular, for Consent Orders and for considering requests for composition of offences.

 

Is giving such absolute powers to a market regulator legal? Activists filed a public interest litigation (PIL) against these guidelines in Delhi High Court. As a result, an ordinance was passed on 18 July 2013. The Court has fixed its next hearing for 23 August 2013.

 

Consent guidelines replaced with ‘settlement’ in the ordinance promulgated on 18th July, reportedly meant to tackle the menace of raising of money by fraudulent companies and collective investment schemes (CIS) in an unauthorised manner is bound to raise eyebrows. 

 

An analysis of important issues raised in the PIL, SEBI’s reply, Midas Touch Investor Association’s arguments and amendments through Ordinance follows:

 

In the circular dated 20 April 2007, SEBI justified its powers to frame consent guidelines. It said, “The Parliament of India has recognised the powers of SEBI to pass consent orders under the SEBI Act and the Depositories Act. This will of the Parliament is apparent from Section 15T of the SEBI Act 1992 and section 23 A of the Depositories Act.” Section 15T says ‘No appeal shall lie if the order by SEBI, and Adjudicating Officer is made with the consent of parties.’

 

In its written argument, Midas Touch stated that the meaning and definition of words ‘consent’ and ‘settlement’ are different and they are not inter-changeable. According to the Oxford dictionary, while ‘consent’ means ‘give permission, agree; voluntary agreement; permission; compliance’, ‘Settlement’ means ‘the act or an instance of settling; the process of being settled; an arrangement ending a dispute’.

 

Thus, according to Midas Touch, SEBI’s premise for framing the guidelines in its circular dated April 20th, 2007 is inherently flawed, without any basis and untenable.

 

In the ordinance passed recently, ‘settlement’ is being promoted, and more importantly, the term ‘consent’ has been completely wiped out.

 

SEBI also stated, “US Securities and Exchange Commission settles over 90% administrative/civil cases by consent orders.”

 

Midas Touch argued that the statement was factually incorrect. No provision of ‘Consent Orders’ exists in the US securities laws. In fact, in the US, ‘settlement’ is done either by the Securities and Exchange Commission (SEC), which is termed as ‘settlement order’ or by the courts upon filing of the settlement, termed as “consent judgement”. “A settlement generally refers to an agreement between parties outside of court proceedings.  The rules for settlement are set out in Rule 240 of the SEC Rules of Practice.” Neither the phrase “consent order” nor the word “consent” is used in Rule 240, which governs “settlement” in US SEC.

 

On the other hand, a consent judgment is just like a settlement.  However, the agreement is presented to the court, which then issues the consent judgment, giving it the force of law.  Rule 68 of the Federal Rules of Civil Procedure sets out the general rules for consent judgments.”

 

Midas Touch further questioned whether section 15T (2) confers any additional powers to SEBI. It states, “Section 15T (2) of SEBI Act, enables Adjudication officer (AO) and SEBI, to make an order with the consent of the parties.” This cannot be construed as SEBI and AO being vested with any discretionary or unfettered powers to issue order with the consent of the parties.

 

SEBI justified its stand on consent mechanism by drawing strength from section 11(1), which states, “Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.”

 

SEBI contended that the word ‘measures’ in section 11(1) and the Preamble are wide enough to include any kind of legislative or administrative instrument.

  

Midas Touch rebutted this and said “The argument is ludicrous as it includes any kind of legislative instrument. The said circular has completely ignored interests of investor and SEBI’s interpretation of ‘measures’ under section 11(1) is without any basis and erroneous. The ordinance has not used or resorted to these sections, and, in fact deleted section 15T (2) in the SEBI Act which was the bedrock on the guidelines.”

 

SEBI submitted that Section 15-I deals with the appointment of Adjudicating Officer (AO) and his powers. However, this provision does not preclude the AO’s powers, ancillary to the main function of adjudication. Passing of consent orders is one of measures of concluding adjudication proceedings, recognized by section 15T (2) of the Act.

 

Midas Touch contested SEBI’s arguments and submitted that the adjudicating officer is to be appointed ‘for holding an inquiry in the prescribed manner’, prescribed by rules made under this Act.

 

The power to make rules have been vested with the Central Government under section 29 of SEBI Act, which has made rules for inquiry under sub-section (1) of section 15-I titled as “SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995”. SEBI has suppressed the fact of existence of these rules, which have a crucial and decisive role in deciding the main issue in the writ petition under consideration. These rules have not been referred to in the writ petition.

 

Penalties under Section 15 were substantially raised through an amendment in SEBI Act in 2002. In its written statement, Midas Touch has submitted that: “Prior to amendment in 2002, the amount of penalty to be imposed, under any of sub-section of 15A to 15H, was solely at the discretion of the AO since the amounts in the acts contained the words ‘not exceeding’. Post amendment in 2002, the discretionary power of AO in deciding penalty has been restricted to sub-sections 15F for ‘default in issuing contract notes’ and sub-section 15HB, where the AO can impose penalty as per his discretion, but has to compute it in accordance with the principles and methodology laid down in section 15-J.

 

The Ordinance has specially included section 15-I of SEBI Act and section 23-I of SCRA in the amendments. These amendments were not required if SEBI or the AO already had discretionary powers regarding the amount or quantum of penalty to be levied.

 

Midas Touch also submitted detailed facts on two matters solved under consent orders- Reliance Anil Dhirubhai Ambani Group (ADAG) and Himachal Futuristic Communications Ltd (HFCL).

 

Considering the enormity of the amount and sweep of offences committed by ADAG Reliance companies and prima facie found so by SEBI after its investigations, settlement of Rs50 crore and certain other sanctions contained in the consent order are peanuts when viewed with implications of such grave offences in its entirety, Midas Touch said.

 

In HFCL matter, Midas Touch submitted, “The SEBI order completely ignored even consideration of loss suffered by investors, its amount and protection of their interests. It was undeniable and accepted that shares prices of HFCL had been manipulated under the relevant period and investors had suffered huge losses. It was the statutory duty of SEBI to find out the errant entities, which it failed to do. On top of everything, the settlement done through consent order was in complete defiance of the will of the Parliament.”

 

“In view of the facts stated above, the resort to plea of SEBI for expeditious settlement of disputes is contrary to facts and raises doubts.”

 

The ordinance is silent about 1,200 consent and compounding orders issued by SEBI through its guidelines.

 

In conclusion, the hearing fixed for 23 August 2013, should be done considering both micro and macro effect of the judgement.

 

At a macro level, the absence of oversight of regulators by the Parliament is a serious issue. Members of Parliament (MPs) ought to raise tough questions regarding desirability and background of issuing consent guidelines through a circular. The problem underscores the dysfunctional nature of Parliament crying for reforms.

 

At a micro level, one may wonder whether ‘settlement’ as enacted, would improve investor protection or will degenerate into amnesty to white-collar crimes. Suppose police authorities are given the powers for ‘settlement’ and they announce an ‘indicative minimum settlement rate’ for various offences like pick-pocketing, theft, dacoity, rape and murder would the Aam Aadmi feel safe in such a situation?

 

(Virendra Jain is president of Midas Touch Investors Association, which is a party in on-going PIL in the Delhi High Court regarding consent guidelines.)

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COMMENTS

nagesh kini

4 years ago

The unlimited powers granted to SEBI more particularly on the so called ''consent' and 'settlement' making it the king of all it surveys is setting an extremely wrong precedent for regulatory functions of all kinds making it the prosecutor, judge and jury. It will not do!

sathyacumaran

4 years ago

sathya cumaran
sebi as mentioned is the only organisation in india to control the stock exchanges in india but as an investor and international media personality we say that this organisation lacks courage and accountability and motivation and integrity because these institution is puppet in the hands big stock brokers mainly because the employees of sebi and stock exchanges of india once the retire on attaining superannuation these employees are abosrbed in big stock broking firms with fat salary apart from their pension and so inorder to satisfy them right from the service they act as puppets and they never implement any rules are act and as such indian capital market is an in phetatic condition that is reason its not grown and it will not grow is our surmise

srinivasan

4 years ago

why retrospectively?which were the pending matters when the 2007 circular was issued so that the beneficiaries can be identified? can the validity of present ordinance be challenged in a court? would the parliamentarians show any interest or would they be busy with the 2014 elections?
it would be interesting to know the answers!

Justice Grinds Slowly

Those of us who watched with fascination how Subrata Roy seemed to get away with full-page advertisements and interviews attacking the capital market regulator are relieved that the word ‘contempt’ is even being discussed in the apex court.

It is said, “the wheels of justice grind slowly, but they grind exceedingly fine.” This is especially true in India and a change in judges or forum can make all the difference. Those of us who watched with fascination how Subrata Roy seemed to get away with full-page advertisements and interviews attacking the capital market regulator are relieved that the word ‘contempt’ is even being discussed in the apex court. A day before the July-end hearings, Sahara again publicly attacked SEBI and the SEBI chairman, accusing them of trying to ‘destroy Sahara’ with patently false claims and being ‘singled out for punishment’.
Such public attacks prior to court hearings were unheard of in India.

Sahara dared to publish its version of events leading up to the court battle, even though there is a path-breaking and extremely detailed Supreme Court judgement (31 August 2012) ordering it to refund over Rs24,000 crore raised through Sahara India Real Estate Corporation Ltd and Sahara Housing Investment Corporation Ltd. A quick reading of Sahara’s release only reveals how many senior bureaucrats, officers of the court and those in regulatory positions were willing to blindly endorse Sahara’s stand that it could raise thousands of crores of rupees, without scrutiny. It claimed to have received favourable legal opinions from “five legal luminaries, including two former Chief Justices of India and one ex-Chairman of Securities Appellate Tribunal (SAT)”;  in addition to the law ministry “with the signature of the Minister Veerappa Moily”. The company deliberately obfuscates the fact that the issue is not about whether money is raised from an unlisted entity, but the quantum and number of people from whom it is raised that puts it in the domain of the capital market regulator.



Such is Sahara’s influence over the Indian judicial system that, on 18th July, the two-judge bench of the Supreme court declared: "No court or tribunal will interfere with our August 31, 2012, order. We are annoyed by the SAT order. What business does SAT have to interfere with the Supreme Court judgement.” In another signal of displeasure, it also transferred Sahara cases pending before the Allahabad High Court to itself. The contempt issue itself has been adjourned for another hearing.

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