An Introduction To Health Insurance

Published Date: 02 Nov 2017

1. Introduction

1.1 Introduction to Health Insurance

Insurance is a mechanism though which losses of a few are made good by contributions from many. It is method of covering financial loss which occurs as a result of fortuitous events.

Health insurance is a way to distribute the financial risk associated with the variation of an individual’s health care expenditure by pooling costs over time (pre-payment) and over people. It is essential that health insurance falls in line with the spirit of ‘Insurance’; therefore health Insurance is restricted to financing of curative expenditure rather than preventive expenditure.

The term Health Insurance is generally used to describe a form of insurance that pays for medical expenses. It broadly includes insurance covering disability or long term nursing or custodial care needs. It may be provided through a government sponsored social insurance program, or from private insurance companies.

Prior to independence the health care in India was in shambles with a large number of deaths and spread of infectious diseases. After Independence the Government of India had laid stress on Primary Health Care and thus India had put in sustained efforts to a better health care system across the country. In 1947, the Bhore Committee report had attempted to analyze the state of health care in India. In 1947, the Bhore Committee Report became the template for the structure of health care services in India in the postcolonial era.

There are mainly 2 ways of tackling health care expenses. It can either be done ‘privately’ or with the help of ‘state or society/public’. In case of private financing, there are 3 options, available with any person, as mentioned below

Out Of Pocket or Self Financing as the person pays from his or her own pocket and savings

Private Health Insurance as the expense is taken care by the health policy, which the person owns.

External Source by the way of managing personal loans from friends and family and banks etc

In case of public financing option, the person has 2 options as under mentioned:

State funded: The government provides for medical care or gives some subsidy.

Social Security: In developed countries by paying a small amount to the state you are covered for medical contingencies.

The national health scene in India is not very encouraging, as only 12-13% of Indian population is covered under some form of health insurance (private insurance coverage is approximately 3-4% only) and the health insurance penetration is just 3% and this depicts that a large sum of money is poised to be out of one’s own pocket. Another adverse feature is the excessive dependence on private health care expenditure I e 3.3% of the GDP, out of the total annual expenditure in the national health sector which is in the order of 5.1 of the GDP. The Public Health Expenditure barely reaches 17% of the total health expenditure and 68.8% of the total health expenditure is ‘out of the pocket’ expenditure. However India’s health care spending is growing at a healthy CAGR of 14% from 5.5% of the GDP in 2009 to 8% in 2012

1.2 Evolution of Health Insurance and the journey of Health insurance In India

Phase 1

Although Health Insurance formally began with the inception of the employees State Insurance Scheme in 1948 and the Central Government Health Scheme (CGHS) which was introduced in 1954, the first standardized health insurance product in the Indian market was MEDICLAIM in 1984 which was introduced by the 4 public sector undertakings simultaneously under the control of GIC which was the parent of all public sector general insurance companies

Mediclaim Policy was designed to cover medical expenses incurred in the event of Hospitalization /Domiciliary Hospitalization incurred in India by the insured for treatment of any disease or illness or accidental bodily injuries at any clinic/nursing home/hospital as an inpatient.

The then introduced mediclaim policy had two schemes. Scheme A which covered hospitalization /domiciliary hospitalization Insurance and the Personal Accident Insurance. Scheme B which covered Hospitalization and Domiciliary hospitalization Insurance.

The Mediclaim of 1984(Hospitalization and Domiciliary hospitalization Benefit Policy) is given below

1) Salient Features of the policy:

In the event of any claim becoming payable under hospitalization and domiciliary hospitalization insurance the company will pay to the insured person the amount of such expenses as are actually and necessarily incurred in respect thereof anywhere in India by or on behalf of such insured person but not exceeding in any one period of insurance the amounts under the category in the TABLE OF BENEFITS

2) Definitions (These definitions attracted change at a later stage)

I. HOSPITAL/NURSING HOME/CLINIC shall be deemed to mean any institution in India operated for the care and treatment of sickness and injuries and which has been registered either as a Hospital or Nursing Home or Clinic with the local authorities and is under the supervision of a registered and qualified doctor. The term ‘hospital’ shall not include an establishment which is a place of rest, a place for the aged, a place for drug addicts, a place for alcoholics or a hotel.

II. SURGICAL OPERATION means

i ) cutting operation(not including any lancing operations or injections)

ii) any operation involving the reducing of fractures

iii) any treatment or adjustment in respect of or any dislocation or joints or bones, orthopedic or Neuro Surgery or plastic surgery by qualified surgeon

iv) Stitching of wounds

Domiciliary hospitalization benefit means

Medical treatment for a period not exceeding 3 days for such for such illness/diseases/injury which in the normal course would require care and treatment at a hospital/nursing/home/clinic but actually whilst confined at home in India under any of the following circumstances namely-

a)The condition of the patient is such that he/she cannot be removed to the hospital/nursing home/clinic or

b) The patient cannot be removed to hospital/nursing home/clinic for lack of accommodation therein or

c)The patient prefers to be confined at home for treatment with the approval of the attending medical practitioner. Subject however that domiciliary hospitalization benefits shall not cover

i) expenses incurred for pre and post hospitalization treatment, and

ii) expenses incurred for treatment of any of the following diseases:

1.Asthama

2. Bronchitis

3.Chronic Nephritis and Nephoric Syndrome

4. Diarrhoeas and all type of Dysenteries including Gastroenteritis

5. Diabetes Mellitus and Insipidus

6. Epilepsy

7. Hypertension

8. Influenza, Cough and Cold

9. All Psychiatric or Psychosomatic Disorders

10. Viral fever of duration for less than 10 days

11. Tonsilits and Upper Respiratory Disorders

12. Pyrexia of unknown origin

3) Exclusions

A) Under Hospitalization and Domiciliary Hospitalization Insurance.

1) Any diseases suffered by the Insured person during the first 30 days from the commencement date of the policy. This exclusion shall not however apply if in the opinion of Panel of Medical Practitioners, constituted by the company for the purpose, the insured person could not have known the existence of the disease or any symptoms thereof at the time of making the proposal for Insurance to the Company.

This shall not however apply in case of the insured person having been covered under this scheme with any of the Indian Insurance companies for a continuous period of 12 months preceding, without any break.

2) Injury or Disease directly or indirectly caused by or arising from or attributable to War, Invasion, Act of Foreign Enemy, Hostilities or Warlike operations (Whether war be declared or not) and breach of Criminal Law by the Insured Person.

3) Circumstances unless necessary for treatment of a disease not excluded hereunder or as may be necessitate due to an accident, vaccination or inoculation or change of life or cosmetic or aesthetic treatment of any description, plastic surgery other than as may be necessitate due to an accident.

4) Routine eye examinations and cost of glasses and contact lenses.

5) Dental treatment or surgery of any kind unless necessitate by an accident or due to a constitutional disease.

6) Convalescence, nervous breakdown( which expression shall cover also general debility ‘Run-down’ condition) or rest cure, congenital defects or anomalies, venereal diseases, insanity, intentional self injury, any disease of injury directly or indirectly attributed to intemperance or the use of intoxicating drugs or liquors.

7) Charges incurred at Hospital or nursing home or clinic primarily for diagnostic, X-Ray or laboratory examinations or other diagnostic studies not consistent with or incidental to the diagnosis and treatment of positive existence or presence of any ailment, sickness or injury, for which confinement is required at a hospital, Nursing home or clinic or at home under domiciliary hospitalization as defined.

8) Expenses on vitamins and tonics unless forming part of Treatment for Injury or Disease as certified by attending Physician.

9) Injury or Disease directly or indirectly caused by or arising from ionizing radiations or contamination by radioactivity from any source whatsoever.

10) Injury or Disease directly or indirectly caused by or contributed to by nuclear weapons/materials.

11) A a) Treatment arising from or traceable to pregnac, child birth including normal caesarean section.

b) Voluntary medical termination of pregnancy during the first 12 weeks from the date of conception.

B Under Personal accident Insurance

a) Insured person working in underground Mines, Explosives, Magazines, Workers involved in electrical installation with high tension supply, Jockeys, Circus personnel, persons engaged in activities like racing on wheels or horse back, big game hunting mountaineering, winter sports, skiing, ice hockey, ballooning, polo and persons engaged in occupation of similar hazard, unless additional premium required is paid.

b) Payment of compensation in respect of Death, Injury or Disablement of the insured person whilst engaging in aviation or whilst mounting into, dismounting from or travelling in any aircraft other than as a passenger( fare paying or otherwise) in any duly licensed standard type of aircraft.

c) Compensation under more than one of the foregoing sub clauses in respect of the same period of disablement.

d) Any payment in excess of the capital sum insured in case of more than one claim under insurance during any one period of insurance.

4) Age Limit

The insurance is available to persons between 5 and 70 years(male and female)

5) Family Discount

A discount of 10 % in the total premium under Section ‘A’ or ‘B’ will be allowed for insurance of a family comprising the insured and any one or more of the following :

i) Spouse

ii) Two dependent children

iii) Dependent parents

6) Cumulative Bonus

(A) Applicable to hospitalization and domiciliary hospitalization Insurance

The limits of benefits under the policy shall be progressively increased by 5% in respect of each claim free year of insurance but the overall amount of such increase shall not exceed 50% of the limits stated in the Table of Benefits. In case of a claim under te policy in respect of an Insured Person who has earned the Cumulative Bonus, the increased percentage will reduced by 10% of the Table of Benefits at the next renewal. However, the benefit shall not be less than the benefits indicated in the Table of Benefits. The Cumulative bonus shall operate separately per Insured Person in case of a family.

(B) Applicable to Personal Accident Insurance

Compensation payable under clauses (a), (b), (c) and (d) of this Endorsement viz death, loss of limb(s) or sight and Permanent Total Disablement arising out of accidental injuries shall be increased by 5% thereof in respect of each completed year prior to the occurrence of an accident for which claim becomes payable under clauses (a), (b), (c) and (d) of the Endorsement. The amount of such increase however, shall not exceed 50% of the Capital Sum Insured stated in the Endorsement

6) TABLE OF BENEFITS

I) HOSPITILIZATION BENEFITS

Category Category Category Category Category Category

I II III VI V VI

Rs Rs Rs Rs Rs Rs

A) a) Room, board and nursing

expenses per day not exceeding 550 350 250 250 250 150

for the policy period not exceeding 16500 10500 7500 7500 7500 4500

b) If admitted in I.C. Unit per day

not exceeding 1100 700 500 Nil Nil Nil

for the policy period not exceeding 11000 7000 5000 Nil Nil Nil

B) Non-surgical & Minor Surgical

benefits (Including pre and post

hospitalization treatment)

1) Surgeon & Anesthetist fees 7000 4500 3200 3200 3200 1900

2) Anaesthesia, Blood, Oxygen,

Operation theatre, Surgical appliances 5000 3200 2300 2300 2300 1350

3) Diagnostic materials and X Ray 5000 3200 2300 2300 2300 1350

4) Medical Practitioners, Consultants

& specialists fees for consultation/vists 2500 1600 1150 1150 1150 700

5) Medicines and Drugs 2500 1600 1150 1150 1150 700

C) Major Surgical and Major Diseases

As defined in the policy( including pre

And post hospitalization treatment)

Expenses incurred at the hospital for

Major diseases/ Illness in addition to the

benefits provided under (B) above.

1) Surgeon & Anesthetist fees 10500 6750 4800 2400 Nil Nil

2) Anaesthesia, Blood, Oxygen,

Operation theatre, Surgical appliances 7500 4800 3450 1750 Nil Nil

3) Diagnostic materials and X Ray 7500 4800 3450 1750 Nil Nil

4) Medical Practitioners, Consultants

& specialists fees for consultation/vists 3750 2400 1725 1000 Nil Nil

5) Medicines and Drugs 3750 2400 1725 1000 Nil Nil

II DOMICILLAIRY HOSPITILIZATION

BENEFITS

(Excluding pre and post hospitalization

treatment)

a) Anaesthesia, Blood, Oxygen 2000 1300 900 Nil Nil 500

b) Diagnostic materials and X ray 2000 1300 900 Nil Nil 500

c) Medicines & Drugs 2500 1600 1150 Nil Nil 700

d) Medical Practitioners, Consultants

& specialists fees for consultation/vists 2500 1600 1150 Nil Nil 700

e) Employment of a qualified nurse to

attend to the patient at his/her residence 2500 1600 1150 Nil Nil 700

PERSONAL ACCIDENT INSURANCE

1. Death only 150000 100000 75000 Nil Nil Nil

2. Loss of two limbs, loss of sight of two

Eyes or Loss of one Limb and Loss of

sight of one eye 150000 100000 75000 Nil Nil Nil

3. Loss of one limb or loss of sight of one eye 75000 50000 37500 Nil Nil Nil

4. Permanent total disablement 150000 100000 75000 Nil Nil Nil

Phase 2

In 1991 the mediclaim policy was revised, wherein the ceilings under each of the various head were removed and the total reimbursements were allowed within the limit of the policy.

Persons between the age group of 3 months to 80 years could also be granted coverage although persons above 60 years of age had to undergo a prescribed medical examination. The policy had also increased the total limit to Rs 5 lakhs against accidental and sickness hospitalization during the policy period

Changes had also been keeping in view the customer requirements such as relaxations in specialized cases where less than 24 hours hospitalization was required and simplification of the pre existing illness exclusion. This scheme was also offered by all the four subsidiaries of the GIC.

Group Mediclaim Policies (GMC) was also offered for pre-determined groups with a malus/bonus clause based on the claim experience wherein the premium was loaded for an unfavorable claim experience and a discount in premium was offered for favorable claim experience.

Phase 3

In the year 2000, the IRDA (Insurance regulatory and Development authority) was incorporated and the Indian insurance market was opened to private players. In the year 2001 the Indian insurance market saw the advent of the TPA,s(Third Party Administrator) which was incorporated as per the IRDA regulations 2001 and which was regulated by the IRDA to provide health services. Hence the claim servicing was given to the TPA, s at a remuneration of 6% of the premium collected and as on date there are 27 TPA’s in operation. The TPA’s was introduced to improve the customer services and with an object of bringing a reduction in the claims ratio by greater pro-active involvement in claims. Although this estimation had failed as the claims ratio had was rising further and the customer grievances were increasing.

Phase 4

In the year 2007 the policy was altered resulting in bringing back the ceiling limits under various heads and its removal had brought in a steep rise in the claims as the insured used to avail deluxe rooms for treatment as there was no restriction on the charges. There were also changes that was made to the policy terms and conditions especially in case of pre existing illness in which in the IRDA had stipulated that it will not operate for more than 48 months

In the year 2008 the government of India had launched the Rashtriya Swasthya Bima Yojna(RSBY) to provide for inpatient hospitalization cover of Rs 30000 to BPL( Below Poverty Line) families as one of its social security programs. Within a short span of 3 years more than 23 million families have been covered under this scheme. Of all the schemes initiated RSBY in the most ambitious scheme at the national level. The Scheme is funded by the central and state government in 25:75 ratio and provides inpatient/hospitalization cover of Rs 30000 per annum to 5 members of a BPL family. The cover is comprehensive including pre-existing, maternity and transportation allowance up to a maximum of Rs1000. A very interesting feature of this scheme is that there is no bar age for inclusion, any 5 members of the household can be covered as per the choice of the family but it is important to note that the head of the family must be covered. The BPL family needs to pay registration charges of Rs30 at the time of enrolment and get a bio-metric smart card which is used to avail benefit in any of the hospital empanelled under RSBY across India.

In the year 2011 IRDA had also permitted the portability of health insurance policies which allows the policyholders to switch for one insurer to another and get the same coverage as provided by the earlier insurer .i.e. they can carry forward the credit gained for pre-existing conditions in terms of waiting period when he/she switches from insurer to another or from one plan to another provided the prvious policy has been maintained without break. This ensured insurers to design the products compatible with the standards adopted by the industry with regard to exclusion clauses, waiting period etc to allow portability. Portability is allowed for all individual health insurance policies issued by the non life insurance companies including family floater policies.

Phase 5

According to the present scenario health insurance is the second largest growing segment in the general insurance industry but it is also a loss making portfolio with claim loss ratios ranging from 110% to 140%.

Customers are having a wide range of over 300 products available from 3 different groups of companies comprising of

General Insurance Companies (Both Public and Private)

Health Insurance Companies (Stand alone)

Life Insurance Companies

Health Service Providers have viewed health Insurance as an income flow as the cost of health services is doubled if the patient has an insurance policy covering him/her.

The present Health policy covers all the expenses incurred in the event of hospitalization and domiciliary hospitalization. It also covers expenses for pre-hospitalization (30 days prior to hospitalization) and post hospitalization(60 days after hospitalization)

Certain common conditions in the health insurance policies

Cooling off period of 30 days which means no illness claim will be covered during the first 30 days of the policy

Certain diseases are not covered during the first 2 years

Certain diseases like maternity are not covered during the tenure of the policy

Coverage is available for Individual as well as family floater. Although Family floater is becoming more popular due to the reason that it is 40% cheaper than the normal policy.

Example: A family consisting of 3 members can choose a sum assured for every member say 3 lakhs and will be given as discount as the family size is more than 2. In such case if a claim is lodged then every family member can claim up to a maximum of 3 lakhs but it is important to understand that this 3 lakhs amount floats. Therefore if at any point of time , all the 3 members in the family lodges a claim then each of the members will only be compensated up to a maximum of 1 lakh

CASHLESS FACILTY IN HEATH INSURANCE

An outstanding feature of Health Insurance that has emerged is the cash-less hospitalization facility. In a Cashless Health insurance facility service, if u get hospitalized with a network hospital then you don’t have to settle the bill with the hospital as the insurance company settles it directly through a Third Party Administrator(TPA). The main reason as to why cashless service was introduced was to reduce the the direct financial burden of the insured in the event of hospitalization. Cashless facilty can be availed in case of both planned and emergency hospitalization.

HOW CASHLESS FCILITY WORKS

To avail the health insurance cashless facility the insured has to first approach the hospital which is under the PPN (Preferred Provider Network) of his Insurance Company. Therefore while you purchase you health insurance policy, you have to check if the if your hospital falls under the Preferred Provider Network of your Insurance Company. Next step is to fill a form while getting admitted into the hospital and this completed form will be sent to the TPA. The TPA depending on terms of the policy will issue an authorization or denial letter to the health care provider and will also specify the denial limit. Once this is done, the hospital will immediately start treatment and all of the insured’s claims up to the admissible limit will be processed by the company in co-ordination with the TPA.

There are certain charges that are not borne by the cashless facility

Registration or admission fee

Visitors/ Attendants fee

Charges for diet

Ambulance charges

Toiletries

Document charges

Service charge

1.3 Indian Health Insurance Market

The Indian Health Insurance industry was worth Rs 5,125 crores with a compounded annual growth rate of approximately 37 percent between 2002 and 2008. The market penetration is only around 3 percent of the total population in India. The health Insurance Industry is one of the fastest growing segments among other non-life insurance segments

Driving Factors are

Meteoric rise in health care expenditure and out of the pocket expenses

Increasing awareness on the need and benefits of health insurance

Availability of quality health care

Government schemes and community based health plans because of their sheer volumes

Medical Tourism

Increase in lifestyle diseases as a result of economic growth driven increase in per capita income

Increasing awareness of Preventive care

1.4 Evolution of Third Party Administrators and their role

The health infrastructure in India is facing daunting challenge of meeting the health care goals and complexities emerging from changing diseases pattern. The proliferation of various health care technologies and increase in the cost of care had necessitated the exploration of health financing options so as to manage the problems arising out of increasing health care costs. Further the uncertainty of diseases or illness is accentuating the need for insurance systems that works on the basic principle of pooling of risks of unexpected costs of persons falling ill and needing hospitalization by charging premium from a wider population base of the same community. With the advent of TPAs the insurance sector had assumed a new dimension. With the advent of TPAs, insurers outsource their administrative activities to TPAs. Their activities include issuing identity cards to policy holders, 24 hour help line for customer service, informing customers regarding empanelled hospitals arranging for specialized consultation and claim processing during admission of the policyholders.

Third Party Administrator was introduced in India through the notification on TPA- health services regulation, 2001 by the IRDA. Their basic role is to function as an intermediary between the insurer and the insured and facilitate the cash –less service of insurance. For this purpose they are paid a fixed per cent of insurance premium as commission.

1.5 Universal Health Coverage In India

Universal Health coverage means every citizen of India receives access to needed health care and people do not suffer major financial risk when seeking the health care services.

Schemes that have been launched in the past to promote Universal Health care In India

1) National Rural Health Mission (2005)

This Scheme was launched to strengthen the public health care system in India and brought with it an influx of government funds that were aimed at increasing the outlays of public health. It aims to revitalize the public sector in health by increasing funding, integration of vertical health and family welfare programs etc. The National Rural Health Mission covers the entire country with a special focus on 18 states that have fairly poor infrastructure and demographic indicators and is one of the most ambitious public health care programme in India s history.

2)Janani Suraksha Yojana (2005)

This Scheme encourages women to deliver in government health facilities or accredited private facilities by providing financial supports. This is a conditional cash transfer scheme and therefore has the largest number of beneficiaries in the world. Another complementary programme is the Muthulakshmi Scheme in Tamil Nadu that provides financial support before and after the delivery period.

3) Rashtriya Swasthya Bima Yojana (2007)

This Scheme was launched by the Ministry of Labour and Employment to provide insurance cover for treatment in hospitals for BPL families. According to this Scheme each eligible family is given a smart card which entitles the member to coverage up to a limit at either public or private hospital at a nominal yearly fee that is paid by the beneficiary. The Central Government contributes 75% of the yearly insurance premium and the rest 25% is contributed by the beneficiary. It also covers cashless care in hospitals, transportation costs and also coverage for pre-existing diseases.

4) Jan Aushadi programme (2008)

It is a public private partnership which aims to set up pharmacies in every district to provide quality generic drugs and surgical products at affordable prices 24 hours a day. The first store opened under this programme started in 2008 and 4 stores were functioning throughout India by March 2010.

Reasons as why the time is apt for Universal Health care In India

The greatest demographic asset of India is its young people (around 650 million people are younger than 30 years). However inability of adequate health care system to address their needs will affect the ability of these individuals to fully participate n the country is future.

Diseases such as pandemic influenza, A H1N1 and tuberculosis are easily spread across the borders. This may result in India importing and exporting diseases as a result of poor health systems and inadequate surveillance.

Global experience shows that universal health care is affordable and feasible provided there is sustained public finance and strong leadership. In turn, universal coverage generates political and financial commitment to improved health.

Although there is a increase in the health care costs, it is still sufficiently low so as to allow major reforms at affordable cost. With more delay, health care cost will rise further and make reforms more difficult and costly in the future

1.6 SWOT Analysis of the Journey Of Indian Health care Insurance Industry

Strengths

India is now the second fastest growing major economy in the world

Indian healthcare has emerged as one of the largest service sectors in India

Healthcare spending India is expected to rise by 12% per annum from 2011-2015

Health care spending could contribute 8.1% of GDP in 2015

Weakness

Inadequate healthcare infrastructure

Limited reach

Significant underwriting losses for Health Insurance business in India

Lack of standardization and accreditation norms in health care industry in India.

Insufficient data on Indian consumers and diseases pattern resulting in difficulty in product development and pricing.

Opportunities

Increasing awareness of Health Insurance as rising health care costs have increased the need for health insurance.

Supporting demographic profiles (Prospering Middle Class, increasing diseases state, population)

There is a clear indication that seekers (annual income between INR 2,00,000 and 4,99,999) and strivers ( annual income between INR 5,00,000 and 10,00,000) population is significantly increasing in the next future. There will be a direct proportionality of this increase to healthcare spending parity.

Shift to lifestyle related diseases

The diseases rates in India are increasing. India has one of the highest heart diseases and diabetes diseases rates in the world.

Threats

New modern private insurance companies are indulging in money making business with a little interest in insurance

Insurance policies contain too many exclusion and clauses

Most insurance companies now use ‘call centers’ and staff attempt to answer questions by reading of the script. Therefore it is difficult to speak to anybody with expert knowledge.

1.7 The Major areas of concern for the health insurance Industry

A) Health Insurance is a bleeding portfolio: It means that the overall loss ratio experience is very high for example (like around 130%) i.e. Rs130 claim payout per Rs 100 premium collected. The main reason is there is destabilization in pricing due to severe completion as insurers undercut themselves to provide premium at uncompetitive rates.

Health insurance broadly falls under 3 categories

Retail policies for Individual Insured

Group Mediclaim

Governmental and other societal schemes

Main reason for high claims outgoes are

1) No ceiling on group mediclaim policies

Although individual insured policyholders pay more premiums for the policy, the Group Mediclaim policyholders bleed the individual contributions with their high claims outgo compared to the premium they pay. This mainly happens for the sole reason that individual policyholders can only go to select hospitals that have accorded approval of the GIPSA certified rates. On the other hand, the Group Mediclaim policyholders can go to any hospital with no ceiling on the expenses incurred

Another reason is that these group mediclaim policies are issued to the corporate clients in attractive packages with no waiting period which extends the policy benefits from day one.

2) Flawed Underwriting practices

Flawed underwriting practices include those under-writing practices that permit group mediclaim policy holders to avail compensation without adequate premium cover and also by wrongly pricing the products without adequate loading is another reason

3) Insufficient or Lack of credible data

Since there is improper management of the data availability on Indian customers, it becomes difficult for health insurance companies to design and price the products

4) Inefficient claims management

The TPAs and the insurance companies have both failed in settling the claims in health insurance and this has led to customer grievances. It occurs mainly because the TPA s interpret the policy different from the insurance companies and they adhere to the policy condition and terms while settling the claims but it is important to understand that there are ambiguities in the policies and this is where the element of subjectivity creeps in. On the other hand, Insurance companies on their part disavow responsibility for the same as they feel TPAs are paid to do their job

5)Increasing Health insurance frauds

During the past years there has been a increase in claims leakage which means there is a difference between the amount actually paid out of claims and what should have actually been paid. There are mainly 3 parties that may be involved

Service providers including doctors, hospitals, ambulance companies etc

Billing services that are actually not performed

Unbundling i.e. bundling each stage of a procedure as as if it were a separate treatment

For the purpose of generating insurance payments they generate medically unnecessary services.

Falsifying patients diagnosis and/or treatment histories

Customers

Falsifying records of eligibility for obtaining a lower premium rate

Filling claims for medical services which are actually not recieved

Insurance companies and intermediaries

Employees involvement in creating false claims

Illegal gratification from service providers

Out all these 3 parties, the one committed by the service providers account for the greatest proportion of the total health care abuse. Therefore detection of the service providers fraud is the most urgent problem

B) Absence of policies for regular management of chronic illness like diabetes

C) Failure of Third Party administrators

It is righty said that if the Health insurance domain is to make a rapid progress, the institution of TPAs should be properly groomed on a scientific and rational basis. The introduction of TPAs into the health insurance sector a decade back by the regulator for unbiased adjudication of claims was one of the factors that led to the phenomenal growth in the Health insurance sector premium i.e. from a modest Rs800 crore in 2002 to a robust Rs 13300 crore in 2012. The establishment of TPAs was mainly to ensure that insurance companies focus on their core activity i.e. marketing and underwriting the business. But off lately a few unscrupulous element have crept which has led to a failure of the TPAs which are as follows

The TPA who were earlier operating independently has now become vulnerable to acquisitions by the insurance companies, network providers and other aggregators which had resulted in killing the objectivity and the insured members paying the premium had to swallow a bitter pill.

Another reason is the establishments of In-house TPAs by some of the private players in the insurance sector which have destroyed the very purpose of maintain checks and balances and maintaining transparency in the Insurance sector.

TPAs are also responsible for the mounting number of grievances from the policyholders whose claims have been rejected. They make claims that are higher than their eligibility, and they are compensated in accordance with the terms and condition of the policy less than what they claim.

The entry of new TPAs in the Insurance sector does not serve any purpose as out of the 29 players in the TPA space, only eight or nine TPAs participate as empanelled TPAs with all insurance companies. Entry criteria restrict the other licensed TPAs from total participation. Thus the insurance companies are unable to explore the fruits of a healthy competition.

It is therefore evident that TPAs have not done their job properly as the public sector insurance companies feel the need of a GIPSA common TPA that can bridge the process gap in the current system

D) Insurance coverage for Persons Living with HIV/AIDS

An ongoing challenge for the insurance industry in India is providing insurance cover to those living with and those vulnerable to the Human Immunodeficiency Virus (HIV) and Acquired Immune Deficiency Syndrome. The exposure draft that has been issued by the IRDA has proposed certain regulation for Insurance coverage of HIV-infected individuals:

Insurers has to develop and emplace underwriting guidelines for both HIV infected individuals and also PLHA, indicating eligibility criteria for obtaining health insurance cover.

The guidelines should take into consideration at minimum the following criteria

Stage of HIV infection( Applicants with Stage 1 and Stage 2 infections should be considered for coverage)

PHLA compliance with prescribed treatment schedules

Guidelines should indicate that depending upon the above criteria, additional premium may be applicable for PLHA and the amount of extra premium that would be applicable.

2. Review of Literature

2.1 A Literature Review on the role of health care management in India

Almost 79 % of the health expenditure in India is borne by private bodies and the rest is by the public. The authors argue that the Indian government should realize health insurance as a separate line of business and differentiate it from other nonlife insurance so that private health insurance growth can be stimulated. A global comparison of some selected Asian countries regarding their national incomes and health expenditure in public and private sectors have generated insights. Third party administrators offer a cashless health service for their customers and also offer back up services to the insurance companies. Desired strategies and ways of furthering the role of the insurance regulatory development authority in acting as a regulator to ensure the industry s smooth functioning is an issue for India s health services

(Hima Gupta, Institute of management studies)

2.2 WIDER HEALTH COVER FOR POOR

NEW DELHI: With assembly elections in six states and general elctions just months away, the government is planning to expand the scope of its health insurance schemes for the poor. At a marginal premium, premium, families above poverty line(ALP) could also get the benefit of insurance cover if the proposal gets through. The health ministry is planning to modify the scope of its yet to take off Rs 8,000 crore National Urban Health Mission(NUHM) for the urban poor to cover services like outpatient care, which are not covered by the Rashtriya Swasthya Bima Yojana(RSBY). Health secretary Naresh Dayal told ET that his ministry was exploring the option of modifying the proposed insurance scheme under NUHM so that the urban poor can get additional benefits. The government is also examining the possibility of raising the cover from Rs 30,000 initially proposed.

4) Health Insurance (both retail and Group Health Insurance) is one of the fastest growing sectors in General Insurance and constitutes about one fourth of the total gross premium income for the Companies.

(F No. G.14017/115/2011-Ins.II

Government of India, Ministry of Finance)

2.3 IRDA working to improve health insurance service

Insurance regulator IRDA is working on a centralized mechanism to gather health insurance data with a view of improving the service and preventing misuse of mediclaim benefits by hospitals. The system aims to improve health insurance services and also prevent over-billing by hospitals. In the long run this would be useful in developing a code in line with the the global practice, besides reducing the cost of health insurance and enhancing its reach. The health insurance sector in India is facing problems of high cost to claim ratio. The cost to claim ratio for the public sector companies was 140% of the premium received under the health portfolio as on June 2012.

2.4 Health Insurance In India- Initial Mediclaim Policy Of GIC

The GIC was set up by the government IN 1973 as a public sector organization so as to market a range of insurance services including hospitalization cover. It had introduced the standard mediclaim cover in 1986 which became operational in 1987. This policy was modified in 1996 to allow differential of premium in six age groups. The policy was framed for both individuals and groups. Before GIC came into existence a number of private insurers were engaged in offering health insurance cover and with the formation of GIC these companies were merged into four of its subsidiaries. Purpose of the merger of the insurance companies was to standardize the coverage and various medical benefits. The standard Mediclaim policy covers only hospital care and domiciliary hospitalization benefits. Although there have been companies who have earlier experimented with direct reimbursements to hospitals and other service providers, at present all that is offered is reimbursement insurance. One of the major weakness of mediclaim insurance is that it covers only hospitalization and domiciliary hospitalization expenses leaving out routine out-patient care.

2.5 Health care challenges in India

There are at least two reasons why improvements in health are desirable. First, it is

clear that good health is, in the language of Amartya Sen, an end in itself.

Second, good health can have quite significant implications for economic development-it

is also a means for economic advancement.

The role of health as a means of economic advancement, although intuitively clear, has

begun acquiring prominence in policy debates only in recent years. A recent influential

article in the Science magazine emphasized four channels through which improvements in health could translate into increased economic growth. These include: the productivity enhancing effects of health; the fact that healthier people live longer and hence have a higher incentive to invest in education and other skills; that healthier people live longer and, therefore, save more, apart from attracting foreign investment and; the "demographic dividend" that could potentially result from large declines in mortality at the beginning of the

demographic transition. (Bloom and Canning 2000).

Bloom and his co-authors also demonstrate that a five-year advantage in life expectancy in one country may translate into a a rate of growth of growth of real per capita GDP that is 0.3 to 0.5 percentage points higher in comparison to another, otherwise similarly placed, country (Bloom and Canning, p. 1207). In other, related work, Bloom and Williamson (1998) demonstrate the possibility of a large "demographic dividend" in terms of a higher growth rate that results from a sharp decline in mortality and an enhanced share of working age-groups in the

total population during the demographic transition. In sum, investments in improving health, particularly among the poor, may be not just good politics but also good business.

The challenge, then, for Indian policy makers is to find ways to improve upon the existing situation in the health sector. We have identified three major areas where a potential for improvement exists – the overall costs of care, financial equity, and the quality of care. A sustained improvement in these areas would play a significant role in advancing the primary goal of health policy – health, itself. The first option that we consider is to do nothing at all. This, unfortunately, does not imply an unchanged situation. First, in the short-run, the Indian health sector would have to contend with the emergence of the private health insurance sector given the passage of the Insurance Regulatory and Development Authority (IRDA) Bill last year. Second, over the longer run, it would have to contend with the increasing burden of expensive chronic

Illnesses such as cancer, diabetes and heart disease, a development that could have substantial implications for the health budgets of the poor and of the government. We also evaluate the existing regulatory regime relating to private health insurance in India, and suggest appropriate changes in it to ensure that private health insurance works to promote the various (intermediate) goals of health policy.

(Ajay Mahal

National Council of Applied Economic Research

Parisila Bhawan

11 Indraprastha Estate)

2.4 Mediclaim should cover day care: IRDA

Insurance regulator IRDA has urged the insurance companies to explore the possibilities of including day-care treatment in hospitals under health insurance policies it has asked the Union Health Ministry to look into issues of lack of scientific standardization of pricing of various health procedures and lack of comprehensive database in terms of infrastructure and qualities, like hygiene of health care centers across the country.

Under day care procedure, a patient who does not need hospitalization beyond 24 hours is admitted to the hospital for limited hours. The existing policies grants claim for treatment of 24 hours or beyond in a hospital.

IRDA has also added that the completion for grabbing group insurance business was bleeding the health insurance industry due to non-viable premium rates.