Give better deal to health policyholders, says IRDA

To protect the interests of health insurance policyholders, India's insurance regulator has ordered insurers and claims processing agencies to mandate hospitals to reflect the negotiated discounts on the bills.

It was only last week the Insurance Regulatory and Development Authority (IRDA) had proposed the move as part of its exposure draft on proposed regulations governing the third party administrators (TPA) or the health care claims processing agents.

In a circular to insurers and TPAs on June 23, IRDAI has asked them to pass on the discounts received from hospitals to the policyholders.

The IRDAI's move will enable health insurance policyholders two ways. One, they may be left with a decent sum insured as balance to take care of any future claims during the policy period and two, their cash payout will be lesser if the hospital bill is higher than the sum insured.

With the health insurance portfolio logging good growth, insurers and TPAs negotiate discounted rate with the hospitals for treating their policyholders.

However, the policyholders are not aware of the same and they would get a bill for the rack rates charged by the hospitals.

As a result, their sum insured would go down by a higher amount or they would have to shell out a higher amount out of their pocket to the hospital.

On the other hand, the TPAs/insurers would settle the hospital only on the basis of the negotiated rates.

Former IRDA member K.K.Srinivasan recently told IANS that there is a "growing suspicion that behind the back of insurers, TPAs are getting paid directly by hospitals based on the quantum of insurance claim settlements" and the proposed measures will help curb such unethical practices, if prevalent.

While the contract of insurance is said to that of "utmost good faith", in actual practice it was not so as insurers and TPAs acted behind the policyholders.

It is this practice that IRDAI has decided to curb now with immediate effect.

According to IRDAI, every insurer and the TPA shall put in place the following procedures:

* The insurers and TPAs shall mandate the hospitals to reflect such agreed discounts in the final hospitalisation bill of each claim, by which the policyholder or the claimant can also be aware of the actual bill raised by the hospital.

* Where the admissible claim amount is more than the sum insured, the agreed discount shall be effected on the gross amount raised in the bill, before letting the policyholder or the claimant bear the costs over and above the eligible claim amounts.

* Where the underlying health insurance policies have co-payment or the deductible conditions, the insurer or TPAs shall ensure that the said co-payment or deductible is effected only after netting of the discounts offered by the hospital, if any.

* The insurers and the TPAs shall ensure that every discount received or agreed to be received from the hospital is passed on to the policyholder or the claimant in respect of the underlying claim only in absolute monetary terms.

* Every insurer shall make these procedures as part of the detailed guidelines on claim settlement to be provided to the TPAs.

* The above procedures shall be applicable to both cashless services and reimbursements of all the claims of health insurance policies