Even as healthcare costs keep rising year after year, health insurers have managed to bring down medical inflation rates by half on policies settled via the cashless route. It has achieved this through negotiating predefined rates with hospitals on major surgical procedures.

For instance, for appendicitis surgery, if the rack rate is about ₹30,000, a patient with a cashless package could be charged ₹25,000. 

 Under the cashless facility, the health insurance company settles the bill directly with the network hospital, unlike reimbursement policies where the policyholder first pays for the medical expenses from his pocket and later gets reimbursed by the insurer.

Amit Bhandari, Head – Health Underwriting and Claims, ICICI Lombard, said that his company has been increasingly negotiating and entering into agreements on package rates with hospitals, which are locked in for two years. 

Medical inflations

So, while the rate of medical inflation is currently around 15 per cent, insurers managed to cap it at 5.5 per cent during 2014-15 for cashless claims, according to data provided by ICICI Lombard, the largest private general insurer. In 2011, the four public sector general insurers, which control 70 per cent of the ₹20,000-crore health insurance industry, in a bid to contain losses resulting from inflated medical claims from hospitals decided to standardise rates for around 42 medical procedures across various categories of hospitals for settling cashless claims.

Preferred provider network

Consequently, the General Insurance Public Sector Association (GIPSA) restricted their cashless service only to hospitals that accepted these price bands called the PPN (preferred provider network). While the step to set up a PPN was vehemently opposed by most large hospitals, insurers say that they have now become more receptive. Incidentally, officials from GIPSA met last month to discuss the progress and expand the PPN network of hospitals.

 Segar Sampath Kumar, General Manager at New India Assurance, the largest domestic general insurer, said that the PPN network currently has around 1,000 hospitals and has helped insurers get a discount of a minimum 15 per cent in all major surgical procedures.

 He said that general insurers have also been blacklisting those hospitals that have been consistently overcharging insurers. 

KG Krishnamoorthy Rao, MD and CEO of Future Generali Insurance said that as the insured market grows, hospitals, including the large ones which were earlier resistant to come on board, are keen to join the cashless bandwagon.

Insurers, however, admit that they are still in the evolutionary process of monitoring hospitals as they often charge insurers more than the pre-defined rates citing complications in procedures.  

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