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