Impact of new health insurance norms

An overview of how the regulations are going to affect insurers, customers, TPAs and hospitals

The Insurance Regulatory and Development Authority (Irda) revamped the health insurance regulations last month. The new regulations have tried to plug in the various loopholes to ensure speedy and fair settlement of claims for customers and also bring in legal clarity among the relationships between the stakeholders, that are, customers, insurance companies, third party administrators (TPAs) and hospitals.

Financial Chronicle analyses the impact these regulations are likely to have on stakeholders:

Impact on hospitals: The new regulations have clearly mentioned a list of 199 exclusions besides stating the expenses that will not be paid by the insurer. Therefore, hospitals will now have more clarity on what expenses will be paid and what will not be paid. Also, the regulations state that the insurers will have to enter into direct agreements with hospitals or could enter into a tripartite agreement, that is, insurer, hospital and TPA. Inflating medical bills could thus be arrested as the regulations mandate that the hospitals agree on charges with insurers. The new regulations are also likely to revive the sagging interest of top hospitals in getting insured patients as insurers will now have to settle claims within seven days. Hospitals will also have to change their software/systems as the billing will be standardised.

Says Mahavir Chopra, head of e-business and personal lines at Medimanage.com, “The regulations state that claims have to be regulated electronically and should be paid within seven days. Today, many top hospitals that do not depend on insurance patients for their revenue, do not want to offer cashless hospitalization, as it takes 45 days to settle claims. Now, with insurers being asked to settle claims within seven days, many hospitals may be interested in taking insured patients for cashless treatment.”

Impact on insurers: They have already begun the mammoth exercise of revising their existing products on the lines of the new regulations. More than 50-60 per cent of the existing products will require changes in their features and premium rates in line with the new regulations. All retail products that do not comply with these regulations have to be withdrawn by October 1, while the deadline for group health insurance products is July 1. Besides the deadlines, the new regulations also ask insurers to improve their communications with customers. For instance, insurers will have to put up their policy wordings and rate structures on their website. There are many companies that do not have all their policy wordings on their website. Any change in premium or terms will have to be informed to customers three months in advance. “This is again a great move towards transparency and will avoid the bad blood between customers and insurance companies due to sudden increase of premium. Moreover, customers knowing in advance, will be able to opt for portability if a better plan with better pricing is available,” added Chopra.

Also, insurance companies cannot change their premium for three years after it has been approved.

Impact on TPAs: At present, claim processing, claim settlement/ rejection is the job of a TPA. However, the new regulations puts the onus of claim acceptance and rejection on the insurance company. TPAs will only admit and process claims. While most private insurers already have a central claim processing hub to settle claims directly, the public sector insurers do not have such a system. The TPA has to coordinate with the policy issuing office of a public sector insurer for every claim. Since every PSU insurer has more than 2,000 offices across the country, the TPAs role will not get marginalised so soon, said industry officials.

“TPAs will now not have to worry about court cases as the job of claim rejection will be with the insurer. Our role will increase in medical management that is giving the right treatment of choice to the customer,” said Nayan Shah, managing director, Paramount TPA.

Customer is the king: The regulations state that insurers will have to renew health insurance policies life long. Not only this, an insurer cannot increase your premium every year just because you claimed. The entry age limit has to be minimum 65 years.

Interestingly, if a claim falls between two policy periods, the customer will get advantage of both years’ sum insured. Claim will be paid, deducting the second years premium from the claim amount. Also, insurers will not be allowed to reduce the no-claim bonus to zero if you claimed, but will have to reduce no-claim bonus at the same level it increases when there are no claims. A customer will have a 30-day grace period beyond the expiry date of the policy to renew his policy. As in the case of life insurance policies, all health insurance policies too will now have to offer a free-look period of 15 days from the date the documents are received by the customer. To ensure that customers get a better grasp of the product, Irda has also standardised the customer information summary. The one-pager summary of benefits, terms and conditions will have to be issued for each product by insurers. Any change in premium or terms will have to be informed to customers three months in advance which will help you opt for portability, if you find a better plan with better pricing.