G Srinivasan: The answer is very obvious. The problem with health insurance is that for many years, the business is bleeding, and because its bleeding, insurers havent been able to develop the business and take it to people. Hardly 20% of Indians are covered, and of this, 12% is through government schemes, where the premium is subsidised. There is no regulation of hospitals, they can charge whatever they wantR100 or R10,000 for the same ailment. Sector regulator Irda doesnt have control over providers; three years back public sector insurers came together to set up a preferred provider network, which created a furore, but it was the first time insurers and hospitals talked to one another.
Antony Jacob: It may be a fact that some hospitals are charging more than they should, but there are others that dont. But there is a lot within the control of insurers there is still 10% or 15% that we can get from the system and put on the table. We can be more efficient in managing our network of hospitals, our processing and underwriting. We need to note that costs for hospitals are also going up; medical equipment, for instance, has become more expensive with the rupee depreciating.
Subramanian: Mr. Malik, do you get the sense that there is a fair bit of under-pricing because corporates have too much bargaining power
Rakesh Malik: Absolutely, thats the sense that we get. There are too many companies chasing small business now, and weve been too used to the social way of pricing, and as commercial pricing happens, people are not ready to pay the real price for healthcare in India. So, artificial pricing leads to artificially excess competition, and everyone is trying to hit the bottom on pricing. So when the claims hit home, thats when realisation strikes; pricing is a big challenge. We need to let customers know what the price of healthcare is.
Subramanian: But whats also unfortunate is that corporates seem to be cutting back on healthcare. Studies show that companies will scale back on room rents, ailment categories and so on. Mr. Shankar, would you say this is an emerging trend
Ramesh Shankar: Good companies are concerned about employee health. However, its a fact that insurance costs as a share of employee costs are going up every year. We believe there is a symbiotic relationship between hospitals and insurers and there is also a symbiotic relationship between the pharmaceutical companies and hospitals. There is also a nexus between doctors and bio-medical labs. I agree that all stakeholders need to do their bit, but the fact is that customers are paying for this and theres no doubt that hospitals do tend to charge more if patients are covered by insurance.
Ranjit Shahani: As an industry, we have done a very poor public affairs job of ourselves. All governments do focus on healthcare costs, in the US, it is 18% of GDP and a McKinsey study says that by the end of the century, it will be as high as 50%. Clearly, somethings got to give, this is totally untenable. India has the lowest priced medicines in the world, we have 53,000 brands, competition is really the killer. The recent pharma policy brings all drugs and formulations under price control. So, the value of pharmaceuticals, as a share of total healthcare costs, which was earlier 6-7% will fall further. The bigger challenge is access, given that beyond the cities the facilities are negligible. Its also a fact that hospitals do tend to focus on insurance while pricing their services. The challenge is that India is a country of many markets; we need to address all segments.
Subramanian: The nexus between the hospitals and insurers isnt really helping health insurers. Mr. Jacob, why dont insurers do something about this
Jacob: Our business mix, at Apollo Munich, is 60:40 in favour of group policies and were not losing money. But we need to negotiate with hospitals, and I see insurers having a bigger say in terms of charges as we go along. We must bear in mind that even for the best of hospitals, not more than 30-35% of revenues come from insurance. So we are still a small player, but when this ratio moves to 60 and 70, the discussions will be different.
Subramanian: Mr. Srinivasan, are things improving
Srinivasan: I wish I could say that. I dont want to sound pessimistic but there is a huge challenge and as the largest health insurer we understand these. India doesnt have good hospital infrastructure beyond the cities. There are hospitals that dont care about insurers, especially those that have a big brand because they will get customers anyway. As insurers, we have to control them but we have not been successful, thats the reality. I dont want to cover it up by saying we have done a good job. Probably it will take five or seven years, but this war has to go on. Otherwise, we can just balance our premiums and claims by charging more, we can increase retail premiums every year by saying costs are going up, which many of us are already doing. On the group side, its a different ball game because there is a bouquet of business, not just group health, we get other business, so we look at overall profitability and may cross-subsidise certain lines. But, at the end of the day, are we going to manage the portfolio by just increasing premiums In that case, we will be restricting people who can afford health insurance.
Subramanian: If premiums go up, the pool might become smaller since it is a push product
Malik: Thats why you need to expand the market. Currently, health insurance is a corporate product, few people buy a cover and we need to increase the pool. Corporate hospitals are moving into tier-II cities and insurers need to move there too. The services too need to get better, right now they are restricted as you want to restrict the claim.
Shankar: In my view, insurers need to cross-subsidise the health business with other policies. Also, we all need to practise fair business practices we can list the hospitals and a fair tariff thats a win-win situation for everybody. We also need to remember that the average age of employees is going down in Siemens, for instance, 60% is less than 35 years, and that will go up. So when the average age is going down, the claim ratios will go down and premiums will go up.This could be a big opportunity for health insurers.
Subramanian: Thank you all so much for sharing your thoughts and perspective. I am sure each of us has something to take away from this discussion.