The furore over the withdrawal of the cashless hospitalisation services by the four major public sector general insurance companies of India from July 1 would not have been so intense if we had developed taxpayer-funded primary universal healthcare as the foundation for the current system to flourish over it. That is the norm in most OECD countries. Per se, across the world, the allegation of over-billing by some private hospitals is part of the continuous run-in faced by this sector in balancing healthcare with profitability. The health insurance sector?s biggest concern is the management of losses. Numbers show that though health insurance has been the most buoyant segment of the domestic non-life insurance industry?with premiums going up almost five-fold from Rs 1,670 crore in 2004-05 to Rs 6,625 crore in 2008-09 and accounting for one-fifth of the non-life insurance market?it continues to make large losses. The ratio of the net incurred claims to net premium has touched 106% in 2008-09. What is surprising is the sharp difference in the claim ratio between the public insurance companies, where the ratio almost touched 117%, and the private companies where the ratio was just 85%. More worrisome is the divergent trend in the two sectors.
Between 2007-08 and 2008-09, the incurred claims in the public sector companies deteriorated from 112% to 117% even while the private insurance companies improved their claims ratio from 95% to 85%. This substantial difference cannot be solely due to the private sector efficiencies alone, as public sector companies compete well in other non-life insurance areas like fire insurance. A key factor is third party administrators (TPA), who help in member enrolment, hospital network development and claim processing services on behalf of the insurance companies. A committee set up by the insurance regulator in 2008 to evaluate the administrators found that their core activity has become the provision of cashless services, which accounted for around half the claims handled by them. It also highlighted the significant variation in the cost of treatment for the same ailment across providers in different geographies, low incentives for fraud control, leakages and lack of control in health claims processing, and the prevalence of non-standard billing and payment processes (which seems to have been the main reason for the current stalemate, too). The TPA system has rendered yeoman service to the health insurance industry by adding around 15,000 hospitals to the health insurance delivery chain and has now grown to more than two dozen outfits. But despite Irda?s professed neutrality on the issue, it will, in all probability, be sucked into it. The long-run answer must be to develop a universal healthcare model as the base, funded by taxpayer money.
