News reports through the week about the storm gripping the health insurance sector are bound to have some ill-effects on the health of mediclaim policy holders. With four PSU general insurers?New India Assurance, Oriental Insurance, United India Insurance and National Insurance? pruning the list of hospitals where cashless cover benefit on individual policies is applicable, popular corporate hospitals across Delhi, Mumbai, Chennai and Bangalore are left out in the cold. So, God forbid if you need medical attention in the next few days and you have an individual mediclaim policy by any one of these four insurers, your cashless card would not work at hospitals such as Max, Apollo, Ganga Ram, Escorts and other top private hospitals. Instead, you will have to pay for your treatment and then seek a reimbursement from the insurance company.

PSU insurance companies have been bearing heavy losses for quite sometime and have accused large hospitals of employing antics like inflated bills to fill their coffers with insurance money. The hospitals, on the other hand, accuse the companies of acting bullish and curtailing the patients? right of choice. Amidst attempts of reconciliation by industry bodies like the CII, the battlelines are drawn. And, interestingly, both the sparing blocks claim to be with the consumer, even as the same consumer gets sandwiched in the confrontation for no fault of his.

?It is not the insurance companies that are being harsh on the consumers in any way. There has been a lot of mis-reporting on this issue. Some hospitals that are just focusing on making money are the ones exploiting the consumers. How can the rates of similar treatment on similar cases be so varied across various hospitals? At times, unnecessary procedures are made a part of the treatment to just inflate the bill and it has also been found that certain hospitals have two bills for the same treatment?one for those who have the cashless cover and the other for those who don’t. Is all this right?? asks NK Singh, general manager, Oriental Insurance Co Ltd.

Singh adds that the process of including hospitals in the insurance companies? Preferred Providers Network (PPN) is a dynamic one and negotiations are on with those who still haven’t agreed to the package rates decided by PSU insurers. ?We are basically trying to get these hospitals to agree to lower and more reasonable rates. In fact, whatever we are doing is for the welfare of our consumers. It will be beneficial to them only, as the insurance cover is actually their hard-earned money,? he says. The PPN model came into effect from July 1 in Delhi and NCR (131 hospitals), Mumbai (74 hospitals), Chennai (65 hospitals) and Bangalore (58 hospitals).

Pawan Bhalla, CEO of Raksha, a third party administrator (TPA) that was involved in working out new package rates with the insurance companies, concurs. ?All of this is being done for the consumers. It is the people’s money actually that is being siphoned off by these hospitals. If such a step is not taken, then the insurance companies would be forced to hike the premiums substantially and the policies would go beyond the reach of the common man. Would that be good? There was an urgent need for some discipline,? he says.

Insurance experts believe that the insurance companies were walking a tightrope and such a step was imminent. ?There are a lot of leaks in the health insurance system due to which the insurance companies lose a lot of revenue. The claims are as high as 120-130% of the premiums received. For how long can a company survive in this scenario?? says Rahul Agarwal, CEO, Optima Insurance Brokers. Agarwal further states that in the Rs 8,000-crore health insurance sector, over 60% is the market share of these four PSUs, while around 80% of the insurance claims go to these big corporate hospitals. Given those numbers, coupled with a rapid growth in the sector, it was just a matter of time before a confrontation took place.

Samir Bali, partner and head of insurance, Ernst & Young, links the present crisis to global trends and views it through the lens of time and the growth in the sector. ?It’s not only an issue specific to India, but across the world there is a conflict between healthcare providers and insurance providers. PPNs are a part of the scheme of things in healthcare policies all over the world. The penetration of health insurance is substantial in developed markets and the insurance providers are in a position to direct patient traffic to the hospitals, which means that they exercise a fair amount of control over the hospitals. But in India, the penetration is low and hence, the hospitals have been dictating terms,? he says. But things are changing fast and the current crisis is one of its indicators. ?Health insurance is one the fastest growing sectors and we are now seeing the balance of power shifting towards the insurance companies,? he adds. Bali feels that while the sector needed such a reform long ago, the weak position of the health insurance companies minimised its scope in the past. ?It is not the first time this has been thought of. The only difference is that earlier the sector was weak. Health insurance used to be about group insurance and health policies were priced much lower due to cross-subsidies from other insurance sectors. But in the past few years, there has been rapid growth in the sector and today the companies are in a position to negotiate,? he says.

The growth is reflected clearly in numbers. As per the latest data released by the Insurance Regulatory and Development Authority (IRDA), the total health insurance premiums written by non-life insurance companies grew by 25.2% in the past one year. Most of this growth is attributed to the four PSU insurers which together grew by 27.7% and occupy the top four positions and capture nearly 60% of the market. However, it is important to note here that this wonderful growth story has primarily been led by the cashless cover facility. ?Cashless service is not a guarantee under the terms and conditions of the policy but a value-added service. However, the fact remains that people buy mediclaim policies because they provide cashless cover. The sector has grown by almost 800% in the last decade or so and that is mainly because of the cashless facility. The withdrawal is definitely a setback to the policy holders,? says an industry insider, on conditions of anonymity.

What is also interesting here is that the private health insurers have largely prevented the kind of losses that are incurred by PSU health insurers. Agarwal explains the major reason behind this, ?Large private sector insurance companies have stopped hiring TPAs and have made it an internal process. They thoroughly scrutinise the claims and are much more vigilant now. That is why they have not been bleeding as heavily as the PSUs. However, smaller players and newer entrants even in the private sector would be just waiting to see the result of this step by the PSU insurers in order to make their move.?

On the other side of the confrontation, the voices are anything but docile. While the insurers are blaming the hospitals for siphoning off the consumers? savings, dissent against the insurers? alleged lack of concern in causing inconvenience to the consumers is also being considered as a key issue. ?People are very much in trouble because of this crisis. It amounts to betrayal on part of the insurance companies. The whole point of mediclaim policies is the cashless cover and it is the right of the consumer to choose where he should go for treatment and not of the insurance company. It is, indeed, an irresponsible act,? says Dr Naresh Trehan, noted heart surgeon and chairman of CII?s healthcare council. CII is actively engaging with the stakeholders and bringing them on the negotiation table. However, there hasn?t been a breakthrough yet. Trehan adds that instead of forcing all hospitals to toe a particular line, the insurers should have gone on record to name the hospitals that were found to be indulging in malpractices, and should have blacklisted only those. IRDA, however, has washed its hands off the whole issue. ?It is a matter between the insurance companies and the hospitals. The IRDA can’t really say anything on the matter. It is not a regulatory issue,? says J Harinarayan, IRDA chairman.

Meanwhile, the hospitals also are in no mood to back down. ?Whatever has happened is really unfortunate. At one end we talk of the health insurance sector as the sunrise sector and on the other, all of a sudden and in absolute violation of the promise, the consumer is told that his cashless facility will not be honoured. This is a violation of the consumer’s right of choice,? says Sanjay Rai, director (marketing and customer management), Max Healthcare (owners of Max Hospital chain). He adds that the image of the hospitals is taking a blow because of this step by the PSU insurers. ?They could have provided a notice period to the consumers. Why weren’t the consumers informed in advance? The patient comes to my hospital unknown to all this and we have to tell him that his cashless cover can’t be honoured. We are left to do the dirty job of explaining the whole issue to the consumers. Of course, it has a negative impact on our reputation,? he says.

In response to the accusations made against the hospitals by the insurers, Rai says, ?This is the most disastrous allegation against a brand like ours. If there is real evidence against anyone in this regard, by all means punish the guilty. Please take recourse to the court of law and natural justice based on real evidence. This is no way to deal with it. They are penalising those providers who have invested crores in the sector in terms of infrastructure by getting the very best and the latest technology and hiring the best available doctors.?

However, it is hard to say what legal options are available with the consumers if at all the need for them arises. ?It’s a very tricky question. One will have to study the fine print of the terms and conditions in the contract that is provided to the policy holder by the insurance companies. If the contract is left ambiguous, as it is in most cases, the companies would be able to get away with it. If they have clauses that say that the list of network hospitals can be altered or that hospitals can be dropped or included in the cashless list, it won’t be difficult for the insurance companies to push this move ahead. However, the consumers can explore the National Consumer Forum and the Competition Commission of India to safeguard their rights,? says lawyer Tarun Gulati of Economic Law Practice.

But Gulati opines that this step by the insurers is grossly unfair. ?As a mediclaim consumer myself, I feel it?s an unfair practice by the insurance companies. I have paid my premiums through the years and I deserve the facilities that were promised to me when I bought the policy,? he says.

The only silver lining is that most experts feel the issue would be resolved sooner than later. ?I am certain that an agreement would be reached very soon. The hospitals can’t afford to take the blow of reduction in patient traffic and the companies, on the other hand, can’t afford to keep the better hospitals out of their networks for a long time,? says Bali.

Dr Trehan also feels that the issue would be resolved soon. However, he doesn?t want to take any chances. ?It’s a serious issue and we are working hard on a daily basis to reach an amicable agreement as soon as possible. We gave a proposal to the companies to reverse this decision for 15 days so that things could be sorted and negotiations could take place without causing any harm to the consumers. Let’s see how things shape up in the days to come,? he says. The sooner the issue gets resolved, the better it is for the consumer, whose shoulder is being used by either party to take shots at the other. It is easy to guess who will face the maximum damage due to the crossfire. So, till the house doesn?t get back in order, stay safe and keep some cash handy.