Only a re-tailored Mediclaim can fit the competition bill

Harjeet Ahluwalia

The country’s premier health insurance scheme, Mediclaim, is in for a major overhaul, including a hefty increase in premium rates. Given the fact that Indians are anyway an under-insured lot—less than 10 per cent of the population has insurance of any sort—the scheme ought to have done extremely well as a cheap cover, along with the tax rebate offered.

Instead, it has met with at best a lukewarm response all these years because of the inherent drawbacks in its various clauses. Originally, there were caps on claims allowable under different heads—room rent, medical bills, hospitalisation, etc. In 1996, the scheme was revamped so that all expenses together were subjected to a maximum permissible sum assured of Rs 5 lakh, from Rs 3 lakh previously. Still, the claims incurred ratio has risen steadily to reach almost 100 per cent now. That means that not only is the claims outgo equal to the premium earned on the policies sold, there is a problem with volumes too. Were Mediclaim policies being sold in great numbers, the risk would be spread out and much larger incomes from premium would balance out the claims paid, notwithstanding factors like cost escalation in all aspects of healthcare.

Like their sister public sector insurer, the Life Insurance Corporation, the four arms of the General Insurance Corporation too ought to have focused on numbers, but apparently lacked the will to market it in spite of the immense scope for such socially-oriented schemes.

Medical expenses have never been small, and the poorer and lower middle classes have largely remained out of Mediclaim’s ambit. The single biggest drawback in the scheme is the rider of upfront payment for hospitalisation and treatment, and reimbursement via claims later. To top it all, sundry exclusion clauses have kept away those who could afford the premia.

To elaborate, Mediclaim generally comes into operation only after 24-hour hospitalisation, and entails intimation to the insurer of treatment being availed of. In the treatment process, the policy-holder may incur costs that the insurance company may simply strike down as inadmissible.

This is especially so in the case of pre-existing illnesses. Once a policy-holder develops a complication that could have stemmed from a previously undeclared or unsuspected disease, he’s had it. His medical history gives the game away, and the exclusion clauses are invoked to avoid claim settlement. The nitpickers allow little room for flexibility even in cases like angioplasty, for instance, which is non-intrusive in nature. Such a case disqualifies a policy-holder from all future covers and precludes insurance for all cardiac and respiratory ailments.

And yet, despite such restrictive conditions, incurred claims are growing alarmingly because latest technology means higher diagnostic costs as well. Insurers point out that there is an increasing incidence of doctors taking liability covers owing to more cases of claims being preferred against them, though not yet on the scale prevalent in the West. Every doctor has a reputation to protect, so he prescribes every test conceivable to play safe before going in for speciality treatment.

The good news, however, is that even the public sector players are contemplating measures to shift from mere medical insurance to healthcare. Just like their counterparts in the private sector, the public sector units too intend to load premia for certain types of illnesses which, if detected, may call for hi-tech, high-cost speciality care. Pre-existing diseases, though, will remain excluded till more refined systems are developed.
Even in this sphere, the focus seems to stay on corporate accounts to avail of bulk discounts, or high networth individuals who can afford expensive covers. As it is, a large chunk of Mediclaim premium stems from group covers bought by corporates for their employees. Apart from the fact that as premia go up there could be fewer optees unless marketing can improve, the decision of the companies to discontinue floater policies will also mean costlier health insurance all round, since individuals will be denied additional cover for their family members.

Needless to say, more progressive thinking must go into medical insurance. The PSUs are, of course, touting concepts like population health perspective and changes in the way they settle medical claims in the future. As they go about this business of fine-tuning a potential money-spinner, they need to stress on evolving simple schemes offering advanced health services. They could also take advantage of the emergence of managed care companies and the resultant impact on clinical autonomy and on patient autonomy. As things stand, they are rather wary of managed healthcare companies eating into their business. However, a healthy mean can positively be worked out to the advantage of the customer, the ultimate beneficiary. Better customer service and perception, more consumer-friendly models and systems as also improved information systems would have to be put in place. These include updated customer database, their medical histories, claim patterns, settlement costs, etc.

Ways and means of reducing costs of treatment by roping in general practitioners as well must be explored, instead of dealing solely with hospitals and nursing homes. The cost implications and high incidence of unplanned care and the reasons for excessive variations in costs and claims too need to be examined, and risk management and adjustment given serious thought.

In fact, there is ample room for manoeuvre, and this is the right time for Mediclaim to be relaunched and repositioned even as the newcomers cast about for the right products and partners. Being a monopoly so far, the state sector must prove it is equal to the task of showing the right path for fulfilling social objectives along with profitability. A healthy mix of the two can work out to be advantageous both for the consumer and the insurance sector as a whole.