STANDARDIZING & STREAMLINING OF INDIAN HEALTH INSURANCE SECTOR

In a bid to streamline health insurance in the country, the Insurance Regulatory and Development Authority (IRDA) have issued a slew of instructions through a gazette notification. Health insurance companies can no longer load an individual policy claim. Also, discounts on premiums will not be at the discretion of the insurer. Discounts will have to be disclosed up front in the prospectus and the policy document, along with the objective criteria, which has to be approved by IRDA under the file-and-use procedure. Also, the cost of any pre-insurance medical examination will have to be factored in at the time of calculating the premium. However, in case of products with a term of one year or less and where such a cost is to be incurred by the insured, not less than 50% of the cost will have to be borne by the insurer once the proposal is accepted. In travel insurance, however, such costs will not be reimbursed by the insurer. The IRDA notification underlines that insurers can offer cumulative bonuses on indemnity-based health insurance policies, which will be stated explicitly in the prospectus and the policy document. If the insured makes a claim in a particular year, the cumulative bonus accrued may be reduced at the same rate at which it is accrued. However, cumulative bonus will not be allowed on benefit-based policies.

IRDA has also mandated that all health insurance policies will have entry age of at least up to 65 years and once a policy has been issued, it will have to be renewed periodically without any break. Insurers cannot deny renewal on ground of age. IRDA wants a health policy should ordinarily be renewable except on grounds of fraud and misrepresentation by the insured. Also, insurers cannot deny the renewal of a health insurance policy on the ground that the insured had made claim/s previously, except for benefit-based policies. Like all other policies, health insurance plans will also have a 15-day free-look period. If the insured has not made any claim during the free-look period, a refund of the premium paid, less any expenses incurred by the insurer on medical examination of the insured person and the stamp duty charges will be made. If the risk has already commenced and the policyholder wants to cancel the policy under the free-look period, a deduction towards the proportionate risk premium for the period under cover will be deducted. While portability has been allowed in health insurance, insurers offering health cover specific to age groups, such as maternity covers, will offer an option to migrate to a suitable policy at the end of the specified exit age or at the renewal of the policy by providing suitable credits for all the previous policy years, provided the policy has been maintained without a break. In order to remove ambiguity and confusion regarding the claim process, interpretation of health insurance terms and names and procedures related to critical illnesses across insurance companies, the Insurance Regulator of India has  come out with new guidelines.

STANDARD DEFINITIONS & TERMINOLOGY:

The regulator has also defined standard definitions of terminology, procedures for critical illness, pre-authorization and claims form and even standard excluded expenses in hospitalization indemnity policies. There will be a standard file-and-use application form, database sheet and customer information sheet and even standard agreement between third-party administrators (TPA), insurers, provider and the insurer. A common industry wide pre-authorization and claim form will significantly streamline processes at all stages and will enhance the ability of providers to obtain a timely prior authorization. Moreover, the data will have to be presented in an optical character format, which will go directly into the IT system and reduce data-entry issues for TPAs and the insurers. Health Insurance continues to be one of the most dynamic and fast evolving sectors of the Indian insurance industry. Gross written premiums by insurance companies has increased from Rs.17565 crore in FY’ 2005 to Rs.59898 crore in FY’2012 showing a very healthy 19% CAGR growth. The industry has shown significant improvement in operational parameters even as claims ratios continue to remain high. However, the growth is fraught with numerous challenges including efficiency, affordability and accessibility of health insurance. The efficiency in the health insurance system is also plagued by mistrust between providers and insurers due to non-standardized practices and formats in an evolving industry. Standardization therefore is critical to enhance quality delivery of health insurance, encourage innovation and greater penetration of health insurance in the country. The standard listing of 199 excluded items, an area which has otherwise been fairly variable in its interpretation and implementation, has been finalized.

“TPA” ADMINISTRATION:

The IRDA recently notified the health insurance guidelines 2013 to standardize health insurance in the country. The regulator has mentioned that the guidelines are meant to reduce ambiguity and enable all stakeholders to provide better services and enable customers to interact more effectively with insurers, third-party administrators and providers. All procedure related to claim processing will be handled by the TPA regional offices and any intimation of claim and receipt of claim papers by the respective underwriting office of the insurance company will be forwarded to the regional processing office of the TPA. On its part, the TPA will process the claim and facilitate the insurer to take decision on claim settlement or rejection. Insurers will only have the right to settle or repudiate a claim and the TPA can only convey the repudiation of a claim to the insured. As a norm, if the TPA sends the letter of repudiation to the claimant, it will have to be clearly indicated that “the claim has been repudiated as advised by the insurer” and specific reasons will have to be mentioned. The repudiation letter will also clearly mention that the insured may approach the grievance cell of the insurer. The TPA will process all claim applications within two working days after receipt of the complete set of claim documents. The TPA will provide management information system reports and the insurer will be provided the information regarding the enrolment, pre-authorization/reauthorization and claims processed.

In case of emergency cases, which result in symptoms that occur suddenly and unexpectedly and require immediate care by a medical practitioner to prevent death or serious long-term impairment, the provider should initiate the procedure for pre-authorization using the format provided and the insurer will discuss with the doctor the eligibility of coverage. For any life, limb or sight saving procedure, the provider cannot withhold or delay emergency medical attention on the pretext of waiting for pre-authorization. The provider may treat the insured by taking a token deposit and once the pre-authorization is issued, the provider will have to refund the deposit. Once the patient is medically stable, he must be transferred to the room he is eligible for as per the health plan. If the TPA is not satisfied with the medical details, it may call for all relevant details immediately. The TPA will have to verify from the network service provider the nature of ailment and if the policyholder is found to be eligible under the terms of the policy, the TPA will convey the guarantee of payment letter to the network service provider.

VARIOUS FACETS OF STANDARDIZATION:

The guidelines includes various facets of standardization including definitions of critical illnesses, definitions of commonly used insurance terms, list of excluded items in hospitalization indemnity policies, billing formats, discharge summary and standard contracts between TPA, insurers and hospitals. Undoubtedly, this represents a very important milestone in ushering standardization in the health insurance sector. The discharge card will have to mention the duration of ailment. The signature or thumb impression of the policyholder must be obtained on the final provider bill. The provider will submit all original medical bills, discharge summary and investigation reports with the final preauthorization request. All payments to the insured will have to be made by direct electronic fund transfer within 24 hours of submission of the claim documents. If payments are not made within 24 hours of such submission, the insurer will have to make payment of all eligible bills within the 21 days of receipt of such submission.  New norms are:

* Health insurance companies can no longer load an individual policy claim

* Discounts on premiums will not be at the discretion of the insurer. It will have to be disclosed upfront in the prospectus and the policy document, along with the objective criteria, which has to be approved by IRDA under the file-and-use procedure

* The cost of any pre-insurance medical examination will have to be factored in at the time of calculating the premium

* Insurers can offer cumulative bonuses on indemnity-based health insurance policies, which will be stated in prospectus & policy document

* If the insured makes a claim in a particular year, the cumulative bonus accrued may be reduced at the same rate at which it is accrued

* All health insurance policies will have entry age of at least up to 65 years and once a policy has been issued, it will have to be renewed periodically without any break.

PPERFORMANCE OF STANDALONE HEALTH INSURERS:

According to IRDA data, the four companies that include Star Health and Allied Insurance, and Religare Health Insurance, earned Rs 1,315.77 crore till January in fiscal 2013, compared to Rs 1,446.91 crore during the same period. The fall was led by Star Health, which saw its premium collections fall from Rs 1,009.56 crore to Rs 664.10 crore. Its collections in January 2013 stood at Rs 78.05 crore, compared to Rs 153.45 crore, a fall of 49 per cent. The total healthcare insurance business is estimated to be Rs 15,000 crore and growing at about 25 per cent annually. The performance of all the four standalone health insurance in the financial year 2012-13 was as follow:

Max Bupa, the 74:26 joint venture between Max India Limited and Bupa Finance Plc, UK, is confident of better days ahead for the health insurance segment in India. The recent IRDA notification to allow life insurance agents to work as health insurance agents also, subject to fulfilling certain stipulations, is a positive trigger, especially given the low penetration of health insurance in India. Max Bupa’s gross premium collections stood at Rs 156.49 crore during April 2012 -January 2013, up from Rs 88.81 crore during the corresponding period last fiscal. The company aims to double to about 2 million lives by December 2013 from 1 million at December 2012. The Company will gradually increase the equity base from the current Rs 450 crore to Rs 750 crore by fiscal 2015, by which time we are hopeful of breaking even. The company gets 80 per cent of its premium comes from individuals. With healthcare costs going up by about 15 per cent every year, the potential for health insurance is high in India.

COVERING THE UNCOVERED:

The Guidelines aim to reduce the existing ambiguity between the insurer/reinsurer, provider and consumer due to varied critical illnesses definitions. The differences in the definitions of Critical Illnesses adopted by the different insurers have created confusion in the minds of consumers wherein products are difficult to compare and the industry especially at the time when insurers and re-insurers have to arrive at a point where lump sum payment is made. The availability of standard definitions would now ensure better comparability and uniformity in the understanding of critical illness definitions. With a reach of just about two percent of the country’s 1.2 billion population, India offers a huge potential in health insurance market. There are over 30 health insurance products in the category offered by both life and non-life insurers. And for both the Insurers IT is crucial IT has a very major role to play in the Indian health insurance sector. The major adopters of such applications are the insurers, the TPAs as well as brokers (intermediaries). IT in health insurance sector has made the availability of various products much easier to the common man with web based applications, online premium payments, online policy issuance and renewals. IT has played a big role in under-writing for the insurers as well as claims settlement has become very quick and easy making it very customer focused.

Apart from the rise of lifestyle related diseases the factors that have contributed to the improved health insurance portfolio of insurers are more options in coverage, employers including health insurance for employees as an attraction, increase in medical care costs driving people towards insurance, introducing cashless hospitalization, quicker turnaround times for claim settlement and competition created by standalone health insurers.  The effectiveness of insurance standardization will be further enhanced once the healthcare sector adopts standard treatment guidelines for common disease conditions. The guidelines also specify the minimum standard clauses of the service level agreement entered between the Insurer and the TPA as well as agreement between the healthcare provider and the Insurer/TPA. A skeletal framework for the contract would bring uniformity, more clarity about the service standards and minimize the chances of disputes over interpretation. The document would be instrumental in streamlining other standard processes and documents like pre-authorization form, discharge summary form, bill formats, etc.

APPLICATION OF ADVANCE TECHNOLOGY:

The use of IT applications in the Indian health insurance segment has been growing rapidly over the past decade. With changing demographic base of customers across the vast expanse of the country, it is critical to deploy technology to serve the customers. The growth of the mobile platform, the increase in the country’s telecom infrastructure and web penetration are all forces that are boosting the adoption of technology by the health insurance industry. Customers now demand faster, cheaper and better solutions that can only be attained through a combination of innovation and technology. Adopters of technology include the entire insurance ecosystem – customers, insurers, providers, TPA’s, regulator, etc. The efficiency of integrated processes lies in the efficient collaboration across this network and therefore technology adoption has been apparent across all these entities.

IT forms a backbone of the operations for Insurers and serves as a key enabler to a lot of hassle-free transaction and related servicing aspects. We have deployed several applications for an enhanced customer service experience. When a customer contacts through call center, information about the customer such as policy details, claim history, previous complaints, status of any pending requests etc. is provided by an “intelligent” CRM application. This information is available in a single screen view which equips the Customer Service Executive for proactive communication and service. The other area where insurers uses IT effectively is in ensuring the pre-authorisation of cashless claims at the hospitals is completed in less than an hour. Pre-authorisation is a crucial step in case of cashless claims which used to take more than three hours earlier. In addition, IT applications also enable agents and distributors to respond to customer’s requirements on a real-time basis as all information is available at their fingertips. This is enabled through applications on mobile and Internet platforms that allow the sales team to access information on products, targets, achievements etc. at their convenience. Agents also receive SMS alerts for renewal of their customer’s policies and our portals serve as a mini-office for them.

Use of IT applications in Indian health insurance sector has gained significant importance especially in retail space, implementation of Government health schemes as well as in group health insurance schemes. Today, end to end product offerings, service delivery and feedback mechanism operates on various IT platforms. Various IT applications are also available to maintain individual health records. This in turns helps the insurance companies in data analyses, product innovation, multi channel distribution, consumer wellness programmes, value added services, health risk management and hospital /TPA management. The three pillars of successful innovation are wider range of health insurance products covering risks, financial mechanism and preventive care along with health advisory services. IT in health insurance sector has made the availability of various products much easier to the common man with web based applications, online premium payments, online policy issuance and renewals.

STRENGTH & WEAKNESSES OF HEALTH SECTOR: 

Despite the growth factors Indian health insurance has not been able to create expected turnaround because lack of willingness to get insured. Mostly, the masses are dispirited about taking a health insurance scheme as there is no immediate benefit. Therefore, they look at health insurance as expense rather than a life saving investment.  Indian health insurance sector has huge potential as it is under penetrated. Post privatization of Insurance sector, the general insurance penetration in India has grown from 0.55 percent in 2001 to 0.7 percent in 2011. However, the health insurance portfolio has grown more than 20 percent over last few years and it is estimated that in the coming 6 to 7 years, it might overtake motor insurance in terms of the overall premium. The core weakness of the health insurance sector is lack of awareness and low penetration level as compared to the other developed countries. Further, there are limitations in distribution network / reach as compared to the population spread in the country. The inequitable growth pattern also is not helping wider spread of the general insurance products in general and health insurance in particular. There are other facets of standardization in the IRDA guidelines including the Standard Insurance Terms and Standard Pre-authorization and Claim form. Insurance terms continue to remain jargons for the laymen. Terms notified in the guidelines would reduce ambiguity, enable all stakeholders to provide better services and enable customers to interact more effectively with insurers, TPAs and providers.  A common industry wide pre-authorization and claim form will significantly streamline processes at all stages. This will also enhance the ability of providers to obtain a timely prior authorization. By implementing it in an optical character recognition (OCR) format, the ability to transfer data from a handwritten paper based form to IT systems has been enhanced thus reducing the data entry issues for TPAs and insurers. Every company shall attach set of claim forms along with policy terms and conditions to the policyholder.

Indian Health Insurance sector is now the second largest line of business among the General Insurance or non life insurance companies and also the fastest growing segment with a very high potential for growth. The only drawback is that the retail line of business is still not growing at the rate it has been accepted to grow. Health Insurance Industry on the whole is still not generating profits though some companies have broken even. One major reason is the unregulated healthcare sector in this country.”Necessity is the mother of invention; market demand will surely give room for fresh and customized health insurance schemes. Meeting the need of the market, fresh initiatives are on the way. The health insurance industry is growing rapidly and is poised to become the largest contributor in the non-life sector in the years to come. As for the industry, insurers have innovated. Researched, developed and marketed products that cover maternity benefits, cashless hospitalization, no claim bonus, sum insured restoration facility and also cover such as critical illness riders, top up plans, senior citizens plans. We have come a long way from the basic mediclaim product. A customer research shows that there isn’t a single product that has been able to garner widespread acceptance, as people’s requirements have changed over the years. One size doesn’t fit all and hence the need for customization has become the norm today in the insurance segment. Customers now demand individual attention and products that cater to differing needs. With the rising level of awareness and income levels, customers would seek specific benefits suitable for their lifestyle and requirements. Insurance companies are using customer research to develop much needed products with features such top up covers, restore benefits, multiplier benefits, OPD coverage, lifelong renewal, critical illness covers, etc.

PRODUCT RANGE:

Indian insurers do have a wide range of products in place for corporate clients. The market has seen new products being introduced into the market for retail lines on a continuous basis which are innovative in terms of coverage and also wider in coverage and sums insured offered. We still have to see a true comprehensive cover which includes true out-patient cover, preventive covers, etc on a wider basis. Some insurers have introduced covers to this effect including wellness programmes however we still have a long way to go. One major impediment is the unregulated health- care sector.  As compared to other countries, health insurance in India is a relatively new market. Although there is still much to be desired from awareness point of view, even in urban towns, health insurance has gone through an evolution in the last decade. The industry has today moved beyond the ‘mediclaim’ mindset and features like OPD, dental cover, benefits like hospital cash etc have been introduced in the portfolios of health insurers. Geography wise pricing is another innovation which will catch on in the future. Gender-specific benefits such as maternity covers, cover for women specific illnesses and gender based pricing are other upcoming trends.

With each passing day, the scope of IT in different aspects of healthcare has been increasing. In health insurance too, the scope is tremendous. For this, the IT vendors should understand the need of different health insurance companies and then should develop their products and solutions. To understand the need, better authentic market surveys, R&D initiatives should be the way forward. IT has a major role to play. Good integrated software from policy administration to claims settlement web based applications, fraud detection software, work flow management, etc is a basic requirement. IT has a major role to play to make data flow from insurers to providers/ hospitals/ TPAs flow easily and quickly to allow quicker service levels.  With a burgeoning health insurance industry, IT solutions providers will be able to introduce a plethora of solutions that fit the needs of the segment. IT products that are developed for life and other general insurance streams are being customized to fit the needs of health insurance, as there is a need for tailored products and not basic solutions anymore. There is great opportunity ahead for IT companies to create integrated opportunities through software solutions that can bind and seamlessly connect insurers with their customers, providers, IRDA and TPA’s for better customer services. IT companies can use this opportunity to leap-frog technology with solutions, by borrowing best practices from the more mature western world and fit them for local requirements. Going forward, IT intervention would be required to aid distribution in the untapped markets. Low cost solutions for transmission of data and funds needs to be developed. The transmission would need to not only ensure correct data / fund transfer at the time of enrollment, but also accurate and efficient distribution at the time of claim payment. Essential to the development of such solutions would be standardization and seam-less networking of various stake holders’ viz. insurers, banks, service providers, hospitals etc.

The insurance regulatory framework has evolved over the last decade to match the needs of the sector, whose landscape has changed post 2000 when the first set of companies were registered by IRDA. The regulatory framework has to stabilize to enable various stakeholders to work at further reaching out to meet the needs of the customer. India has developed a strong foundation by aligning the regulatory structure to international best practices while, at the same time, keeping in mind the needs of our people. The industry and the regulator both need to lay down the roadmap for the medium term. Certainly, addressing mis-selling and protection of policyholders’ interests is a priority. The major changes that will require new regulation will be allowing reinsurance branches, regulating reinsurers who offer reinsurance to Indian market and recognizing health insurance as a separate category with different capital requirement. For life and non-life companies, there will not be any major changes in regulations. There are committees in place in the basis of their reports IRDA will finalize the regulations. The drop is not particular to insurance since the macroeconomic factors are also at play. The positive factor, however, is that statistics show that the share of insurance funds in financial savings of households has grown, albeit marginally. This reflects the customer’s faith in insurance companies and products. Certainly, there has been a shift towards traditional products which is a huge positive. Insofar as the tax laws are concerned, these would evolve to meet the needs of the growing economy and the dynamic environment in which we operate. The insurance industry will just have to keep pace with them and structure their products around meeting the needs of the policyholders and facilitating in taking the best tax advantage. IRDA, being a young regulator, has the advantage of planning and executing projects without the baggage of past legacy. The dream of seeing an insurance policy in electronic form will be fulfilled soon. In addition to the two on-going projects, IRDA is working on a Request for Proposal for an industry-wide fraud analytics system. The project envisages addressing issues of health insurance fraud and will also extend to all other personal lines of insurance business, including motor, life, among others. With the standardizing and streamlining efforts health insurance segment is bount to witness seamless growth.

Author
JAGENDRA KUMAR
Insurance Counsellor, 71/143, “Ramashram”
Paramhans Marg, Mansarovar, JAIPUR – 0302020

References

tophealthinsurancenews.com
irda.gov.in
financialexpress.com
businesstoday.intoday.in