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Health insurance guidelines: No incentive for TPAs to reduce claims ratio

At a high court hearing of a public interest litigation filed by Gaurang Damani, IRDA’s legal representative stated that health insurance draft guidelines clearly specify that the TPA should get no incentive to reduce the claims ratio

At the Bombay High Court hearing, the Insurance Regulatory and Development Authority’s (IRDA) legal representative stated that the health insurance draft regulations have been approved by its board and it is now pending approval of Parliament. He added, “The final guidelines clearly spells that the TPA’s (third party administrator) role will be confined to only claims processing and not settling; they will have no incentive to reduce the claims ratio.”
 

According to Gaurang Damani, a social activist, who filed the public interest litigation (PIL), “TPAs are supposed to process claims, instead they’re settling claims. There are no standard guidelines to settle claims and it is left to the whims and fancies of the TPAs who are in fact not entitled to settle claims but are found to be doing so in several cases.”
 

The insurance company will make direct payments to the hospital and policyholder (not through the TPA). Cheques will have to be written by the insurance company and sent to the hospital (for cashless) and to the policyholder (for reimbursement). It means that cheques cannot be held by TPAs as a float. Mr Damani raised the point about a clause in the guidelines specifying that the TPA needs to send bank reconciliation data to insurance company, which was contradictory as insurer will be issuing the cheques. The IRDA legal representative confirmed that the clause has been omitted.  
 

According to Mr Damani, “If mediclaim policies indicated the amount an insured was eligible for specific ailments, it will ensure that they have a clarity on which hospitals to go; the hospitals too would know how much they would get.” At the last hearing, the advocate for Association of Medical Consultants (AMC) agreed to indicate the amounts for 42 standard ailments. HC had directed the petitioner to send a notice to Association of Hospitals (AOH) and Bombay Nursing Homes Association to get the range of package rates for the 42 standard ailments.
 

The AMC was able to come up with indicative rates for 42 standard ailments with disclaimers about the rates excluding professional fees and surgeon fees which may vary. AOH and Bombay Nursing Homes Association have indicated that they will not be able to do so. AOH in its response states, “As the location, facilities and skill-sets vary in different hospitals, it is not feasible to fix rates for surgeries/procedures/illnesses. Hence, according to us there is no question of fixing the rates for the above.”
 

AOH offers possible solution to the dilemma. According to AOH, “We feel that if it is mentioned in the insurance policies the amount which the insured is eligible to receive towards, not only the hospital charges, but also towards the medicine charges for a particular ailment, it would be easier for the insured to decide which hospital he could afford for the treatment and in that event the hospitals could also know how much amount they would be receiving for treating a patient for a particular ailment by way of surgery or otherwise.” 
 

The next hearing will be after three weeks which will discuss the pending issue of hospital rates and whether mediclaim policy should specify rates eligible for the insured for 42 standard ailments. 
 

Read - IRDA comes up with landmark draft health insurance regulations

User

COMMENTS

Ubaldo C DSouza

4 years ago

Who will implement the resolutions arrived at? I did not have even an acknowledgement, much less action, when I was struggling for my Varishta mediclaim settlement with one of the insurance companies for which eventually I got redress through the Ombudsman. During my struggle, the IRDA was wasting money offering their intervention to aggrieved victims through flashy ads in premium newspapers.

REPLY

nagesh kini

In Reply to Ubaldo C DSouza 4 years ago

That's exactly why the Office of the Ombudsman is there for!
You are lucky, since Oct.,2012 there is no Ombudsman, the vacancy after the earlier one demited is not yet filled.

Ubaldo C DSouza

In Reply to nagesh kini 4 years ago

So, is this one more step towards marginalising Senior Citizens?

nagesh kini

4 years ago

The fact that Insurance companies have been incentivising the TPAs with additional commission for reducing the claims was contrary to IRDA regulations, IRDA now maintaining - "We did not know that they did it" does not pass muster. In that case it should be recalled or just adjusted against commissions payable. Something that is unauthorized justcan't be paid.
When any insured specifically requests, in writing and the insurer records this by way of an endorsement in writing on the policy document that he does not want to avail of either the services of any agent and/or TPA, the commissions not payable to both ought to be reduced from the annual premium.
The companies paying 'incentives' to the TPA refuse to part with the benefits to their insured as being "not authorised to do so by the IRDA" - a case of perverted logic that IRDA ought to rectify.

Domestic institutional investors are betting on a totally different set of stocks compared to FIIs

Domestic Institutional Investors (DIIs) have sold an estimated $3.5 billion worth of equities, in contrast to their foreign counterparts who have been pumping money as if there is no tomorrow. They are averse to financials while FIIs are heavily betting on exactly those

Yesterday, we had written about how FII ownership in Indian equities has reached an all-time high (http://moneylife.in/article/fii-holdings-in-indian-equities-at-an-all-time-high/31227.html ), and how the Indian stock market had reacted with respect to influx of foreign money pouring in. Equally interesting is the action of domestic institutional investors (DIIs) who remain cautious. DIIs have sold an estimated $3.5 billion worth of equities and hold only 12% of the BSE100 stocks in the third quarter, when compared to over 19% held by FIIs.
 

Interestingly, FIIs and DIIs have taken opposing stance on the same sector—banking and financial services. FIIs are bullish while DIIs are bearish.  The top 10 FII underweight list in many ways mirrors the top 10 overweights list of domestic mutual funds (DMFs). In fact, while FIIs have kept ITC, L&T, State Bank of India, Tata Steel and NTPC as underweight while the DIIs have kept these stock in the overweight category. Similarly, while FIIs are bullish on HDFC, Infosys, Axis Bank, Kotak Mahindra Bank and Sun Pharma, DIIs have kept these stocks in the underweight category, reflecting their own investment strategy.
 

FII underweight

DII overweight


DIIs have continued to be big sellers in January and February. They continue to be overweight on consumer, capital goods and energy, while remain underweight on banking and software. The top stocks bought by DIIs were NMDC, Reliance Power and Cairn India.
 

DIIs have been reducing exposure to domestic cyclicals including autos (which FIIs are bullish on). They have also been switching out of defensives and putting more money into materials.
 

On other specific stocks, FIIs have sold Cairn India while DIIs have lapped it up. Ditto for United Phosphorus.

Last year, DIIs were net sellers for nine months out of 12 while the Sensex has moved up roughly 25%. As the market moved up, they’ve been taking advantage of the situation by cashing out, probably because they are facing redemptions as new money into mutual funds and insurance companies have dried up. Some of the DII dominant-held sectors, according to Edelweiss, as of the third quarter of 2013 fiscal are: 23% in capital goods, 17.6% in consumer goods (down from 18.1%), 11.9% in autos (down from 13%). Interestingly, DIIs have sold as much as Rs16,207.32 crore in the month of January 2013 alone, which is nearly the same amount that DIIs have sold in the third quarter of fiscal 2013 combined. On the other hand, FIIs have bought over Rs19,000 crore in January 2013 alone. FIIs have been net sellers in just two months out of 12 months last year, helped by quantitative easing of central bankers which found their way to Indian shores.
 

According to Edelweiss, of all the money that FIIs poured in the third quarter, a whopping 41% was taken up by financial sector companies, followed by the auto sector (11%). This is probably in gleeful anticipation of interest rate cuts, without realizing that the RBI is not like other central banks.

User

COMMENTS

Nem Chandra Singhal

4 years ago

It seems that trading is done in a closed group. When one buys, another sells. Otherwise also, stock trading is a zero sum game.

Krishnaswami CVR

4 years ago

"DIIs have sold as much as Rs16,207.32 crore in the month of January 2013 alone, which is nearly the same amount that DIIs have sold in the third quarter of fiscal 2013 combined."- Something wrong here.. or should it read as ..." same amount FIIs have sold.."

While there may be some substance in the article, comparing Q1 F13 and comparing Q3 F13 does not make any support to the conclusion.. Or it is not clear to me?

REPLY

saravanan

In Reply to Krishnaswami CVR 4 years ago

yes, agree with CVR on Q1 vs Q3 !

prem sunderdas

4 years ago

It is wrong to say that diis and fiis have taken opposite stand. They are both part of cartel. From years when fiis buy, diis are always sellers and when fiis sell diis are always buyers. The major losers are always mutual funds (controlled by diis). Despite nifty moving up from 4500 to 6000 mutual fund investors do not get 50% returns of bank deposit rates.

REPLY

Suiketu Shah

In Reply to prem sunderdas 4 years ago

MF deserve to be losers.Their agents/wealth management companies in their greed for abnormal commission have mislead clients thruout India.Todays ET states 56% MF purchased directly and if this trend continues it wl spell doom for MF agents and deservingly so.

prem sunderdas

In Reply to Suiketu Shah 4 years ago

Yes. Besides, even the volumes in the stock market have shrunk drastically because of the greed of algo manipulation by unscrupolous operators which ensures that every intraday trader loses.Pity is that despite rampant manipilation and insider trading the regulator is a silent spectator.

saravanan

In Reply to prem sunderdas 4 years ago

True. retail investors do not understand why these two complement each other in trading. retail investor may adopt different strategy of buying what DII buy and investing in MFs of FII !

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