Health insurance claims data suggests average cashless amount of Rs45,000 compared to average reimbursement claim amount of Rs25,000. The insurance company trend of going for in-house claims processing is to help in better bargaining with hospitals for procedure rates

Insurance companies are of the view that overpricing by the hospitals has had a significant impact on the average claim amount when the insured goes in for cashless treatment. It is not just the rise by 26% in claim amount (cashless) as against 9% (reimbursement) over two years; the average claim size today for cashless is close to Rs45,000 compared to average reimbursement claim of Rs25,000.

According to Arvind Laddha, chief executive officer, Vantage Insurance Brokers and Risk Advisors, “While indifference on the part of patients, resulting in overtreatment and overcharging by hospitals have been regularly blamed for the higher bills  associated with cashless transactions, it is also a fact that people tend to opt for cashless facility for expensive treatments. In case of hospitalization for inexpensive procedures, the insured may pay upfront and go in for reimbursement.”

According to one insurance brokering company, “Certain hospitals may overcharge, but it cannot be generalised. In some cases it may be better room offered in case of cashless. Most will treat uninsured or insured customer in the same way.”

The results were based on Vantage Insurance Brokers and Risk Advisors study of claims data of 4,90,000 employees of 285 employers across major industries.
The insurance company trend of going for in-house claims processing is to help in better bargaining with hospitals for procedure rates, but the lack of regulation in hospital pricing means that the insurer can influence the hospital rates only to a certain extent.

According to insurance company survey done by the same group, insurers believe that having in-built restrictions in the policy is the most effective measure to control claims (92%). This preference was followed by need to negotiate competitive rates with the hospitals (75%) and having in-house TPA (75%), review timelines for claim intimation and submission (67%). The other claim control measures from insurance companies are claims audit (58%) and restricting the network list of hospitals (58%).

Arvind Laddha adds, “In order to control claim cost, insurance companies realize that it is important to have in-house TPA to properly negotiate rates with hospitals. It is a difficult job with high-end hospitals as they get good business from people who are not insured. Lack of hospital regulator and less number of insured in India makes it difficult for insurance companies to restrict health insurance premium hikes,”

“In many government health insurance schemes, hospitals have agreed on lower rates. Government has to step-in to limit the hospital rates for mediclaim. On the other hand, many hospitals claim to not make big profits and hence cannot reduce rates by great extent.”

According to employer survey, corporate insurance premium increased by 40% in 2010, but only by 22% to 28% in 2011. The group expects health insurance premiums to rise, but the rate of increase would be lower at 15%-20% in the short-term and 10%-15% per cent thereafter.

Arvind Laddha adds, “While the premium (corporate) has certainly increased significantly over the last three years, we believe that it is likely to stabilize gradually going forward. In the long-term, premium increases will be more closely linked to healthcare inflation, morbidity patterns and the features incorporated in the benefits package.”

There is different view to stabilization of premium. According to one insurance broking company, “The premium charged by insurance company depends on many factors. New entrants may try to get business at lower premium with the expectation to get other businesses once they develop relationship. In some cases even established insurance company also grab business for financial need or to show growth on paper. Every insurer has different strategy and premium pricing has to be looked from various angles. Moreover, what happens in corporate business may not reflect in retail premiums as the businesses are different.”

On the retail front too, cashless mediclaim had seen overcharging by hospitals. In a bid to curb the increasing losses incurred by hospitals due to fraudulent and inflated claims, General Insurance Public Sector Association (GIPSA), a group of four government insurance companies had decided to restrict the cashless medical facility only to hospitals that agree to join the Preferred Provider Network (PPN). The rule, which was implemented on 1 July 2010, offers a negotiated rate for 43 treatments that are covered under the cashless policy. The four insurance companies are New India Assurance Company Ltd, United India Insurance Company Ltd, Oriental Insurance Company Ltd and National Insurance Company Ltd. While there has been some success in bringing high-end hospitals like Jaslok and Fortis in the PPN, many of leading hospitals in Mumbai are not on PPN.