Run from cover

Run from cover

Saif Siddiqui spent a little under Rs 14,000 on his appendicitis operation three years ago. The 35-year-old dentist from Bhubaneswar relied on an insurance cover for his family from Reliance General Insurance Company Ltd. He paid Rs 5,184 as premium for the policy.

The surgery happened two months after he got the policy and Siddiqui filed the claim a week after the operation. The insurance agent promised a cheque at the earliest. When it did not arrive for several months, Siddiqui started making calls. The reply was always the same his claim was being processed.

He visited the companys office. He was informed that his claim had been rejected because it was a case of a pre-existing disease. Arguments along the lines that appendicitis could not have pre-existed and that he was operated immediately after severe pain and fell on deaf ears.

The agents though persuaded him to go for a fresh policy since his earlier policy had lapsed.Siddiqui bought it with the hope that he might still be able to recover the money he spent on his operation. His clinic keeps him too busy to move the consumer court, or write persistently to the company.

The company told the Down To Earth correspondent that it would not be able to provide any information because the case was old.

Siddiqui does not want to renew or get into such a racket anymore. We get health insurance cover hoping it will be of help in difficult times. But such experiences shake ones faith in the system, he said, adding, he still gets calls from insurance agents at odd hours. More than 75 per cent of the insured get to hear about policies through insurance agents. According to the Insurance Regulatory and Development Authority, a Central autonomous body, insurance companies, public and private, reject 30 per cent of the health claims. Of this, 90 per cent are because of the pre-existing disease clause in policies, which agents do not reveal while marketing their policies.

Reality hits when a customer becomes a patient.

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Growth by leaps and bounds

The health insurance industry grew by 37 per cent between 2002 and 2008 and the business was worth Rs 5,125 crore in 2008. Industry insiders said the insurance sector has the potential to become a Rs 25,000 crore industry by 2012.

The sector currently comprises more than 30 private insurance companies and four public insurance companies. The growth rate of private companies, in terms of premium collected, is more than public health insurance companies (see graphs).

For 2007-08 and 2008-09, the increase in premium collected by 12 major private insurance providers in the country was 23 per cent. The four public sector companies registered a premium growth of about 20 per cent for the same period. When it comes to profits, private companies dont want to reveal the figures. According to media reports in early 2009, Star Health Insurance, a private health insurance company, hoped to earn a profit of Rs 6 crore for 2008-09.

Does growth help people?
There are different views on this. It is too early to judge whether private insurance companies have decreased the cost of healthcare because the reach of insurance is still low, said Shobha Mishra Ghosh, director, ficci. At present, health insurance covers about 3 per cent of Indias population.

Umesh Kandpal of Max Healthcare said insurance had lowered peoples expenditure on health from 90 per cent to 78-80 per cent in the past five years. This figure though is just for Max Healthcare.

There is no data to prove whether health insurance has decreased the cost of healthcare as private companies do not reveal data, said Amar Jesani, expert on ethics and health systems of the non-profit Anusandhan Trust in Mumbai. We have to go by the US data where private insurance has increased the cost of healthcare, he added.

Why insurance?
In India, Insurance in the health sector was introduced because the public healthcare system did not have sufficient funds and hence, was unable to meet the healthcare needs of the country. Lack of doctors and medicines have always been common problems in public healthcare facilities.

A 2007 report by McKinsey, management consultants in the US, estimated that people would spend around 60-65 per cent of the total health expenditure on their own at private healthcare facilities.

Under the 11th Five Year Plan, the amount of money spent was less than 1 per cent of the countrys gdp. Since health is a state subject, every state budgets for healthcare separately. But there is never enough because when the Centre increases its allocation, the state conveniently reduces its own budget.

For example, the Centres approved outlay for health for Bihar went up from Rs 7,988 crore in 2004-05 to Rs 11,305 crore in 2006-07; Bihar reduced its own budget from Rs 141 crore to Rs 137 crore for the same period.

Such problems in public healthcare made way for private health players. But they could not make profits because people could not afford it. This paved the entry for insurance, with the idea of creating a pool of money where the healthy could subsidize the care for the sick.

Circa 1940s
In India, insurance started with the Employment State Guarantee Scheme in 1948. The scheme covered healthcare and insured people against loss of wage due to illness. Then, more than 100 private Indian companies entered the market. In 1972, the insurance industry was nationalized and the existing insurance companies were brought under the General Insurance Corporation. Four companies provided health insurance.

Post liberalization, the Insurance Regulatory and Development Act (irda) was passed in December 1999, which allowed foreign insurance companies to collaborate with private companies in India.

But this collaboration did not come easy. The irda was passed after much debate in Parliament. The Left parties were opposed to opening up the sector to private players; the Congress supported it, and bjp supported just the entry of Indian private players.

Employees of insurance companies demonstrated that the bill was against the interests of the country. Ajoy Chakraborty of cpi(m) called it an infringement on the economic sovereignty of the country in a debate in the Lok Sabha in November 1999.

Chakraborty suggested that the proposed bill should be referred to a select committee for reconsideration, and pointed out that the public insurance companies were more competent and efficient than US multinationals.

Despite the opposition, irda was passed. And now, most private companies are collaborations.

icici Lombard General Insurance Company Ltd is a joint venture between icici Bank Limited and Fairfax Financial Holdings Ltd in Canada; Bajaj Allianz is a collaboration between Allianz SE of Germany and Bajaj Finserv Limited; and iffco Tokyo is a joint venture between the Indian Farmers Fertilizer Co-operative and Tokyo Marine and Nichido Fire Group, the largest insurance group in Japan.

Such companies and the nature of insurance business, including public companies, are changing the nature of treatment.

Private companies grow fast

Marketing, investment have helped boost private insurance companies

Public companies earn more premium

But growth rate is lower than that of private companies

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Treatment has changed

Doctors abuse the insured status of the patient by performing unnecessary surgeries and investigations, said N Devadasan of the Institute of Public Health in Bengaluru. Hysterectomy (surgery to remove the uterus) for women under 35 is common. Normally, it is recommended only in special cases.

People end up staying in the hospital 24 hours for something that can be done in day care to meet the criteria of an insurance policy, said Malay Nandy, consultant oncologist in Delhi. It is a waste because a bed could be used by a genuine patient, Nandy added.

Then, there are third party administrators, or tpas, to deal with. The tpas, meant to facilitate cashless treatment and act as middlemen between hospital and the insurance company for claims, were inducted into the system in the mid-1980s.Nandy added that the tpas usually make it difficult for the hospitals by finding ways of not reimbursing claims. The tpas send unnecessary queries. Doctors have to answer them and run after tpas, Nandy added.

The tpas, say the insurance companies, delay payment; the insurance companies say they have paid the tpa, said T S Kuckrejja, executive vice president of amri hospital in Kolkata. When a patient is admitted to the hospital, a doctor prepares the initial report according to the medical history and the patients immediate complaints. Doctors send this report to the tpa. As treatment progresses, there is every chance that the diagnosis might change and the final report is different from the initial one, said Kuckrejja.

If the tpa refuses claim saying there is a difference between the two reports, what can be done? he asked. The fine print of most policies mention that any difference between the initial report and the discharge summary would result in the cancellation of the claim. Kandpal of Max Healthcare added that most hospitals had problems with tpas on administrative lines, such as delayed authorization and unjustified deductions.

For a small hospital, the cost of getting the money back from an insurance company is high. We have had to hire a person only to do this work, said Nimrat Gujral, director administration of inscol, a hospital in Chandigarh.

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The way ahead

When it comes to health insurance, the common apprehension among people is they should not be taken for a ride. Sixty one-year-old Praveen Damani from Bilaspur bought a policy from the Oriental Insurance Company Ltd in 2000 and got himself covered for Rs 3,50,000. In August, two months after getting the policy, he developed chest pain and was advised coronary angiography. The company rejected the claim of Rs 26,747 for the surgery saying the disease had pre-existed. Damani then underwent a bypass surgery in January 2002. This claim was also rejected. But the court ruled in favour of Damani and ordered the insurance company to pay Rs 1,38,691, with interest.

The court admonished the company and said it seemed to have entered the contract with the purpose of accepting the premium without the intention of giving any benefit to the insured under the garb of pre-existing disease.That way, the court said, the company would not have to pay any claim as every human being was born to die.Then there are unclear policies.

Health insurance policies last one year. The policies are not portablea policy buyer has to stick to one insurance company otherwise there is the risk of the person not getting insurance cover under the garb of pre-existing diseases. People who have group policies through their employers also need to keep a personal policy, else they might face difficulty in getting one after retirement. It is not easy for the elderly to buy policies without high premium because of several pre-existing diseases.

The most vulnerable are paying more under the insurance system. A retired person pays more premium than a young person even though he has lesser means to pay for them, said Jesani of Anusandhan Trust in Mumbai. Despite the irda, the health insurance industry is unregulated, said Ajay Mahal, associate professor of International Health Economics at Harvard School of Public Health, in a paper published in Economic and Political Weekly in 2002.

Even though irda should protect the interests of the policyholders and regulate terms and conditions of the policies offered by insurers, there is no clause for redressal. A consumer can only approach the court. Introducing health insurance where the providers go unregulated and charge on a fee-for-service basis is a recipe for disaster, said Devadasan. The government must put in place a technical body at the Centre and the state, he said. The body should have representatives from the society, doctors, patient groups and insurance industry. This body should also help the government design the health insurance programme for the state and coordinate with other health insurance programmes to minimize duplication and monitor implementation of the programme.

Self regulation will not help
The industry is trying to self-regulate. The ficci health insurance committee took an initiative to create standard treatment guidelines for major diseases in July this year. The guidelines have been prepared for 21 diseases so far.

The guidelines provide a list of tests and procedures acceptable and reimbursable under the policy. At the release of the guidelines, Lloyd Nazareth, chief operating officer of the Wockhardt Hospital Group, said the protocol would improve treatment quality and reduce cost. But Dinesh Singhal, senior consultant at Pushpawati Singhania Institute in Delhi, said the guidelines were based on Western models and should just be desirable, not mandatory.

If standard guidelines are prepared, it should be made either by a technical body of the government or the who and not the insurance industry and the private hospitals, said Dileep Mavalankar of Indian Institute of Management in Ahmedabad. Ghosh though alleged the health ministry was not taking any initiative towards regulation. The ministry should standardize healthcare facilities across the board, she said.

It is also important to have data, which helps insurance companies decide the premium and identify the diseases that need to be covered, Mavalankar said. This requires pilot projects to gather more information about the population to be targeted. This could be done through micro-insurance schemes.

What works?
Micro-insurance schemes, administered by ngos, have worked well in the country. The insurance cover in such cases is given by either a public or a private insurance company. Under these schemes, members prepay a set amount each year for specified services. Everyone pays the same amount. Coverage of such schemes is low and includes around 30-50 million people.

An assessment of community health insurance in Gudalur in Tamil Nadu showed insured patients had a hospital admission rate 2.2 times higher than uninsured patients. The researchers concluded in the study published in the October 2009 issue of Health Policy and Planning that a well-designed community health insurance scheme had the potential to improve access to hospital care. Devadasan, who was part of the study, suggested the informal sector should be divided into subgroupsfarmers, drivers, tradersand policies designed according to their needs.

In another micro-insurance scheme, Yeshasvni Trust Cooperative Farmers Health Insurance, started in Karnataka in 2002, pre-existing diseases, outpatient treatment and 1,600 surgical procedures are covered for premiums of Rs 120 for an adult and Rs 90 for a child per year.

Certain simple public insurance schemes such as the Rashtriya Swasthya Bima Yojana also work. Launched in April 2008, the yojana plans to cover the entire below-poverty-line category population within five years. Twenty-six states have been covered so far.

Under the scheme, a beneficiary gets free hospitalization, irrespective of whether the hospital is public or private. The government has amounts fixed for different diseases, which they pay to the hospital. The insurance company in such cases just administers the policy. Though hospitalization is free under the scheme, said Devadasan, the poor people have nowhere to go to for common ailments such as malaria and diarrhoea, which they often suffer from. The scheme should cover these as well, he said.

Other existing public insurance schemes include Central Government Health Scheme (cghs) and the Employees State Insurance Scheme (esis). Premiums for these schemes are set according to income and can range between Rs 15 to Rs 150 a month. Started in 1954 by the Union ministry of health and family welfare, the cghs scheme is available to all employees of the Central government, including those retired, MPs, judges, freedom fighters and journalists.

The ministry of labour administers esis, which targets those who earn less than Rs 10,000 a month. The scheme provides protection to employees against loss of wages due to sickness, maternity, disability and death due to employment injury.

Global debate
The government needs to decide whether it wants to provide its own service or depend on private players for insurance, Mavalankar said. Insurance is a social protection measure and cannot merely be a money-making business. Simple social schemes can work, he added.

While India is debating what should be the nature of regulating the insurance industry, worldwide too, health insurance systems are in a flux and debates are on. The US recently passed a bill to introduce public-funded healthcare for the poor, which has not found favour with Republicans or insurance companies (see box). Under the existing system, 30 million people are not insured in the country and are unable to afford healthcare.

Unlike the US, Germany and the UK rely more on public insurance companies and cover most of its population. But these countries now are also headed the private way to ease the burden on the state, but without disturbing the existing system. Under the existing system in Germany, employees pay 7.9 per cent of their income and employers put in 7 per cent towards health insurance. Under the suggested reforms, the taxpayers contribution towards insurance would be increased, but not that of the employers. Critics argue the plan would make the system expensive.

In the UK, private healthcare has continued parallel to the public health system. Under the new reforms under review, people can have more choices in the form of private insurance and healthcare but the government says that this would not be at the cost of existing public health system.

With inputs from Ashutosh Mishra