Unit 4 : Subtopic :Documentation for Health Insurance and

Claims

You acted responsibly by purchasing a Health Insurance policy,

but this is not where the responsibility ends. The benefit of the
health insurance policy can be realized only if you are able to
successfully make a Claim in case of hospitalization.

To ensure you are able to get an appropriate claim from your health
insurance provider, it is important that you are fully aware of the
terms and conditions of the health insurance policy and claim
process.

So when you sign a health insurance policy, ask your insurance

advisor to explain to you the terms of the policy regarding claims
processing. Read the policy document carefully and ask your
advisor to explain to you the concepts you are not able to
completely understand.

Your Mediclaim form must include all relevant OPD expenses up to

30 days prior to your admission to the hospital. To get a claim for
post-hospitalization expenses, all relevant expenses up to 60 days
from your hospital discharge should be submitted along with
relevant bills within 90 days from your date of hospital discharge.

Please be aware, you MUST submit Reimbursement claims within

30 days from the date of discharge from the Hospital. As you would
need to submit original documents, keep them safely, also save a
copy for your reference.

To make a hassle-free claims processing, you need to save

following documents carefully:

1. Discharge Card
This is a very crucial piece of documentation that contains basic
details such as date of admission, date of discharge, condition of
the patient when hospitalized and a short note on diagnosis and
treatment administered to the patient besides the advice of the
doctor on discharge.

2. Letter of First Consultation and advice for hospitalization

Insist your doctor give you a letter of the first consultation in
writing on his letterhead. This letter informs the reason for your
hospitalization, treatment desirable for your medical condition and
whether you need to undergo any surgery. Make sure the letter is
dated correctly.

3. Duly stamped and signed hospital bills with receipts

Get detailed bills from the hospital and make sure the bills are duly
stamped and signed by the hospital authorities. Make sure that the
hospital’s registration number is mentioned in the bill.

4. Medicine Bills along with doctor’s prescriptions

Remember to save all the medical bills. Make sure the bill states the
patient’s name correctly and bears the date. When submitted along
with a doctor’s prescription, your claim gets more authenticity.

5. Test reports, bill receipts along with doctor’s letter for all
tests performed
You need to submit bills related to all medical tests that you
undergo for your treatment. These bills should be supplemented
with a doctor’s letter and receipt from the test center. Keep X-ray
films ready, as sometimes TPA may ask for those.

6. Consultation receipts
Likewise, you also need to save consultation receipts. So, it is
advisable that you insist on getting a consultation receipt every time
you visit a doctor.

7. Documents pertaining to your specific condition

In addition to the above documents, you may need to submit
documents pertaining to your special conditions along with your
mediclaim forms. These documents will help to give more
authenticity to your claim and help you get your due claim.
For instance, if you were hospitalized because of a road accident,
you may need to provide a copy of the FIR describing the incidence.

8. Duly filled and signed the claim form

Along with the above-mentioned documents, you would need to
submit a completely filled up and signed the claim form. If you
personally submit the claim form, collect a signed receipt for the
same.

Please note that this list mentions the most important

documentation requirement for claims settlement but is not an
exhaustive one. Your TPA may ask for more documents relevant to
your condition. Keep all Hospitalizations and related documents
carefully.

Unit 4 : subtopic: Ethical Issues in Health Insurance

Improved health and healthcare are of vital concern to the welfare of

Indian society. The nascent health insurance system of the country
is experiencing an explosive expansion and various models of health
insurance provision are under trial by different agencies. Since the
country has been relatively late in introducing health insurance, it
can study the effects of different systems of healthcare and
insurance and develop a system of health coverage which addresses
the unique social character of our country as well as the ethical
questions of comprehensiveness and inclusion. This article seeks to
explore these issues in detail.

Disease is inevitable in the life of every individual, and brings along

with it the burden of physical pain, emotional distress, and
financial strain. Cutting-edge technology has brought tremendous
improvements in the quality and of life and lifespan but at the cost
of affordable healthcare for the majority.

Surveys have shown that ill health and its related costs are the
biggest causes of indebtedness in rural India, with one fourth of the
rural population in the poorest groups falling into a debt trap to pay
for healthcare.
In an ideal world, the state and the community should shoulder the
burden of caring for sick individuals till they return to productive
health and work. The government of India has proved to be a poor
provider of health services, thus creating a gap which private health
services have exploited. This has necessitated the development of
mechanisms to provide an adequate financial buffer to cover the
costs of treatment for a large part of the population.

The “return on capital employed” is considered in both social and

financial terms, and thus deciding the model of payment creates
contradictions that give rise to questions regarding the nature of
insurance in India.

Current state of health insurance in India

In the current situation healthcare is financed through general tax
revenue, community financing, out-of-pocket payment and social
and private health insurance schemes.

The per capita total expenditure on health in India is US$ 36, of

which the per capita government expenditure on health is US$
5 (1). India spends about 4.9% of its GDP on health (2). The
breakdown is public expenditure (0.9%); private expenditure (4.0%).
The private expenditure can be further classified as out-of-pocket
(OOP) expenditure (3.6%) and employees/community financing
(0.4%). (3)

Over the last 50 years we have developed a large government health

infrastructure with more than 150 medical colleges, 450 district
hospitals, 3,000 community health centres, 20,000 primary health
centres and 130,000 sub centres. In addition there are a large
number of health facilities run by private, and non governmental
organizations (NGOs), and private practitioners scattered
throughout the country.

India is a low-income country with 26% of the population living

below the poverty line, and 35% of the population illiterate and with
skewed health risks. Yet the private sector is the dominant sector;
50 % of those seeking indoor care, and 60-70% of those seeking
ambulatory care, do so from private health facilities which include
paramedical providers and even quacks. Despite the higher cost, a
majority of both rural and urban Indians prefer private care
because of the perceived inferior quality of public care. The entire
burden of cashless, prepaid private care is shared among 500 odd
private care providers in the country who are approved by
insurance companies for this purpose.

Viability, coverage and types of insurance available

The existing schemes can be categorised as:

1. Voluntary health insurance schemes or private-for-profit

schemes;
2. Employer-based schemes
3. Insurance offered by NGOs / community based health
insurance, and
4. Mandatory government-run health insurance schemes.

With less than 11 % of the country’s population covered by any

formal health insurance, and only 1 % by private medical
insurance, the product has been seen to be made for the privileged,
and as a luxury (4).

Currently, India chooses to have a healthcare payment system

which is somewhere between the American and German systems.
The American system of healthcare is a private, for profit system
where the owners of insurance companies and the providers are
largely privately owned. Premiums are collected from the insured,
their employers and, for certain diseases, federal funds. The
amount of premium is based on actuarial risk, and selections and
refusals do occur; reimbursement to providers is based on costs
and a per procedure basis. The nature of subsidy is from the
healthy to the sick; choice of procedures and providers is governed
by health management organisations. Co-payments are high, and
there is competition between different insurers. Regulation of the
schemes is largely governed by good business practice with minimal
interference from the government. This system is currently groaning
under the weight of progressively high costs and is being subjected
to introspection and reform. About 70% of the population is covered
by one or the other scheme (1).
In contrast to this, the German system is funded by sickness funds
collected by workers; coverage is very high – more than 99% of the
population; and contribution is made as a percentage of one’s
income. No selections or refusals are allowed and reimbursement is
on a per-capita, per case basis. The nature of subsidy is socialistic –
from the healthy to the sick, from the high income to the low
income, from the young to the old and from small families to big
families. The choice of providers is limited, coverage is good and co-
payment is low. Generally accepted good practices and treatments
are followed and there is self regulation of the companies. Shortfalls
are paid out of federal funds. Inflation in costs is limited. The
system, however, assumes the presence of excellent government-
aided or -owned hospitals, a robust and efficient payment system
between the government and hospitals, and a degree of economic
strength, and high socioeconomic indices which reduce the overall
claims. Such a system also exists in Canada and to some extent in
the United Kingdom (6).

In 2004 the Indian government introduced the Universal Health

Insurance (UHI) scheme, which was aimed at those living below the
poverty line. The UHI, also referred to as the “Government Rupee-a-
Day” scheme (because the annual premium is Rs 365 per person),
was largely unsuccessful at attracting the poor, mainly because the
insurance companies, that are required to implement the scheme,
found it “loss-making” because of adverse selection, and did not
market or sell it sufficiently. There is no mechanism or
infrastructure for collecting mandatory premia among the large
informal sector. There is insufficient and inadequate information
about the scheme.

The recently relaunched Rashtriya Swasthya Bachat Yojna is more

successful as it has enrolled 1.95 crore beneficiaries as of 2010.
The budget is largely state-funded with the central and state
governments contributing 75% and 25% of the premium
respectively, and a small enrollment fee of Rs 30 being charged from
the beneficiaries. The scheme is more in the nature of a subsidy
with little participation from the beneficiaries; it is targeted at
people living below the poverty line and hence its financial success
is not ascertainable. Factors that run against the scheme are its
relatively low coverage of Rs 30,000 and its continued focus on
private hospitals (7).

Self-governed “micro insurance schemes” can create tailor-made

policies for people with low incomes. These differ from commercial
insurance policies in that the policy is a low-valued product with
modest benefits, modest premium amounts, and simpler
documentation. Advantages of member-owned self-insured schemes
include lower risk of moral hazard since the membership has an
economic stake in the risk pool and “one for all and all for one”
solidarity, conducive to improved participation. Local knowledge
and administration of self-insured schemes results in better service
such as reduced time required to process claims. Lastly, all profits
or surpluses remain with the members and can be used to build up
additional reserves or to increase benefits in the future.

The International Labour Organization estimated in 2005 that there

were 51 micro-insurance schemes operating in India covering
approximately 5.1 million people (5).The majority of them operate
within a partner-agent model in which an insurance company is the
“partner” insuring the risk of the group, and with a second
organisation such as a community based organisation (CBO) acting
as implementer or “agent” handling marketing and administration.
However, some are entirely self-insured and some are a
combination of the first two, partnering with a health insurance
company which assumes part but not all of the risk with the CBO.
The performance of micro insurance schemes varies widely and
cannot be considered exemplary. Efficiency as measured by
administration costs, including marketing, is not properly
documented. There is evidence from the Karnataka scheme that
increased size may reduce these costs as a percentage of premia.
Schemes with comprehensive coverage are heavily subsidised while
for-profit microfinance insurance channels such as BASIX provide
very inadequate coverage. Most of the schemes do not emphasise
health education, prevention or primary care.

There is also a need to evolve criteria to be used for deciding upon

target groups, who would avail of social health insurance scheme/s,
and also to address issues relating to whether indirect costs would
be included in health insurance.

Underwriting and regulatory issues

The health benefits environment in India went through a
substantial change in the early 1980s, when four government-
owned general insurance companies in India launched the Group
Mediclaim Policy – a group hospitalisation and surgical
reimbursement policy – for the private sector corporate market. The
healthcare delivery market shifted with strong leadership from the
private sector, especially in the urban centres. Group insurance
helped employees access the newly emerging private healthcare
services.

Unfortunately, at least initially the group Mediclaim coverage was

sold more as an “accommodating business” to corporates for
acquiring the highly profitable property and casualty businesses
(because of government-mandated premium rates). The product was
intentionally sold at a loss, and by the late 1990s claims were
almost double the amount of premia. This loss was accepted by
insurance companies since the loss made was small compared to
the profits from the other business brought in.

Health insurance products are generally complicated and it has

been suggested that general insurers who deal in the non-life
insurance market, which is dominated by mandated insurance
such as accident, fire and marine, do not have expertise in pricing
and administering health insurance, which is why this scheme is
not popular. For example, Mediclaim represents just 10% of the
overall business of General Insurance Corporation and its
subsidiaries; hence they have also not focused their attention in
this area. Even the latest yearly financial reports of these
companies lump health insurance with the “miscellaneous” group
which is the biggest loss-making group of the company. It should
also be recognised that because of technicalities of the health
service business there are a number of cumbersome rules which
have hampered the acceptance of the scheme.
It is reported that in a number of cases applicants of older ages
have been refused admission to the Mediclaim scheme due to the
unnecessary conservatism of companies since it is felt that the
outgo of these schemes will be more than the premium collected.

Companies are also refusing to upgrade or increase the sum

assured for older patients.

One reason why pricing anomalies prevail is that insurance

companies lack the data they need to assess health risks
accurately. In addition, today’s insurance products work on an
indemnity basis i.e. they look at health only as a series of payable
events. It covers hospitalisation costs, which could be catastrophic
as it gives precedence to tertiary level healthcare and encourages
inpatient treatment. This is coupled with the fact that in the
absence of any costing mechanisms, there is difficulty in calculating
the premium, and the easiest and most illogical way wins viz, the
reverse auction system or the lower bid.

Suggested ways to cover the gaps in regulatory issues with private

insurers are as follows.

• Lay down a minimum regulatory definition of a pre-existing

illness or condition to provide clarity and uniformity of its
interpretation, including prescribing maximum “look-back”
and “look-forward” periods.
• Ensure that a health insurance contract is incontestable after
it has remained in force for a specified period of time from the
date of inception. This would ensure that the “preexisting
disease” clause would cease to be operative after a certain
period of time.
• Prohibit post-claims underwriting in order to allow automatic
renewal of policies even after claims have been made.
Appropriate front loading of premia in the initial years could
be allowed with a gradual reduction in premia after a certain
holding and no claim period.
• Require insurers to offer both group and individual policies in
order to remove the present bias towards corporate and group
insurance and also allow insured people to carry their
insurance with them even if they changes jobs or occupations.
• Prescribe standards on point-of-sale and after-sales
disclosures specific to health insurance.
• Adopt reserving rules specific to the different types of health
insurance contracts.
• Lay down additional regulations particularly for medical
expense covers that prescribe the following:
o availability or accessibility;
o transferability or portability, and
o continuity (renewability and cancellation)
• Establish rules on over-insurance in the case of individual
covers, and coordination of benefits, in the case of group
covers.
• Refine the micro insurance regulations in the following
aspects:
o eliminate the minimum and increase the maximum sum
insured;
o eliminate or relax the “one-partner-one-agent rule”;
o eliminate commission caps and
o expand the authority of micro insurance agents who are
also organisers of health micro insurance to specifically
include, among others, enrolment of members, collection
of premia and post-sales servicing including settlement of
claims.
• Adopt special agent licensing rules to allow officers and staff of
panchayats, rural health practitioners and postmen to solicit
health micro insurance.
• Since the social health model seems better suited to a country
like India, other mechanisms that could be used to encourage
social insurance are:
• encouraging the evolution of specialised medical insurance
corporations which includes separating and then hiving off the
health business of companies into separate companies;
• using part of the central health outlay in capitalising these
companies;
• encouraging companies to collaborate and develop regional
areas of competence;
• encouraging mergers of smaller health companies with larger
ones to ensure financial stability;
 • encouraging corporates to use these stand-alone health
corporations by offering tax benefits and regulatory muscle;
and
• using a national task force to rapidly increase the percentage
covered to about 20% to generate a positive feedback cycle for
growth.

The Insurance Regulatory and Development Authority will need to

evolve mechanisms by which it puts some kind of statute in place to
ensure that private insurance companies do not skim the market by
focusing on rich and upper-class clients, in the process neglecting a
major section of India’s population.

The regulators should also encourage NGOs, co-operatives and

other collectives to develop products for the poor as well as for the
middle class employed in the services sector, such as education,
transportation and retailing, and the self employed. This could be
run on a no-profit-no loss basis.

While following the basic principles of insurance is necessary for

success, health insurance is a special branch of insurance. It
includes concepts such as prepayment for health services, through
which large portions of the insured are not only expected but are
also encouraged to use primary care services so as to reduce the
risk for future, often costlier, services. Pre-natal care and well-baby
care are excellent examples of services that, when properly
provided, can actually save the insurer from future claims.

Administrative and servicing issues

Insurance claims are frequently rejected due to minor, technical
reasons leading to disputes. Conditions and various points included
in insurance policy contracts are generally not negotiable and are
binding on consumers. There is no analysis on what is and is not
fair practice. Given that insurance companies are large monopolies,
the consumer is treated as secondary and does not have an
opportunity to negotiate the terms and conditions of a contract.
Insurance companies may not strictly follow the conditions in all
cases and this creates confusion and disputes. This has been
poignantly brought out in the recent impasse where individual
policy holders were denied insurance on a cashless basis, though
their policies entitled them to cashless insurance.

There are several exclusions, for treatment of sexually transmitted

diseases, AIDS, delivery and maternal conditions, etc. These are not
socially and ethically acceptable. Insurance companies must take
care of all the risks related to health though they may charge an
additional premium for certain conditions.

The recent impact of controlling costs does not focus on improving

the quality of care. Mediclaim has been modified in ways that make
it less a programme to control the cost of care and more a
reimbursement target for providers. As a result, policy holders pay
higher charges for services than those without insurance. Products
such as “dreaded disease insurance” and “critical illness” policies
may make money for the insurance companies but usually much of
the focus of the existing schemes is on hospital expenses.

Private healthcare providers continue to operate in an almost

unhindered manner. The growth of health insurance increases the
need for licensing and regulating private healthcare providers and
developing specific criteria to decide upon appropriate services and
fees.

No one in the industry is taking responsibility to develop knowledge

and awareness of health insurance among the public; nor is specific
expertise in health insurance being developed within the private
sector, an expertise that is essential to dealing effectively with
providers of healthcare services.

Indian companies writing health insurance seem to have focused on

controlling claims payout by following strategies designed to
minimise the insured person’s ability to collect on claims. There is
an excessive emphasis on disqualification because of pre-existing
conditions and post-claim underwriting. Because of these practices
health insurance has become one of the largest litigation areas for
insurers, exceeded only by motor third party cases.

Private insurers’ administrative costs may be as high as 40 % of

total premiums, double the benchmark target of 20 %. Much of the
actual administrative work is being done by third party
administrators (TPAs) but at a fixed rate that varies regionally from
4 to 5 % of premia. Further, TPAs have little incentive to control
costs, and big incentives to collude with providers.

Provider-related issues
A mechanism to contain provider behaviour and costs can only be
implemented by developing mechanisms in which government and
individuals can together pool their funds.

Health insurance is also different in that the providers of care

whose services are covered by insurance enjoy high prestige,
income and political influence. Also, because of their unique skills,
the state often grants these providers extensive independence and
autonomous power over medical decisions. Their efforts are focused
on preserving one of the most precious of human assets, life itself,
and it requires special skills to work with them to make sure
insurance enhances access and the quality of care while keeping
costs reasonable.

There are reports of fraud and manipulation by clients and

providers, which have implications for the growth and development
of this sector. Monitoring systems are weak and there are chances
that if the doctor and patient collude, they can do more harm to the
system. Various mechanisms like identity issues, masking,
bundling, unbundling, upgrading, etc are used by providers to
charge more from insurers and thus defeat the purpose of providing
access to good quality healthcare with adequate facilities and
skilled personnel at an affordable cost.

Currently the schemes of hospitalisation and payment also seem to

infringe on the individual’s right to choose a service provider.

It is also a moot legal point whether insurers can decide how much
to pay for a particular disorder or whether insurance should restrict
its role to financial coverage or act as a treatment modifier and
healthcare guide.
Confidentiality issues
Medical information is sensitive information since it affects the life,
employability, career, earnings, marital prospects, and social
standing of a person. As the pool of insurable prospects increases,
insurers will sit on a mountain of personal data which is potentially
damaging to the individual. Correspondingly, a system of data
banks should be created where the information regarding
individuals should be relatively inaccessible except for purely
commercial reasons in pricing and administering insurance
products.

Dangers
The main danger in the health insurance business is that private
companies will cover the risk of the middle class who can afford to
pay high premiums. Unregulated reimbursement of medical costs
by insurance companies will push up the prices of private care and
a large section of India’s population who are not insured will be at a
relative disadvantage as they will, in future, have to pay much more
for private care

Unless privatisation and development of health insurance is

managed well it will have a negative impact on healthcare especially
for a large segment of the population in the country.

Health insurance is different from other segments of the insurance

business and is more complex because of serious conflicts arising
out of moral and ethical considerations to treat. For example,
experiences from other countries suggest that the entry of private
firms into the health insurance sector, if not properly regulated, has
adverse consequences for the costs of care, equity, consumer
satisfaction, fraud prevention, and ethical standards. Analysis of
Mediclaim data, though fragmented, indicates a wide variation of
charges for the same operation in the same city. Anecdotal evidence
from doctors also indicates that charges are increased if patients
are insured. All these effects will tend to increase the prices of
private healthcare, thus hurting the uninsured.
Positive factors
The demand for health insurance has been growing at a rate of 25
% per year, driven by rapidly increasing awareness, and is going to
develop even more rapidly in the future. The challenge is to see that
this benefits the poor and the weak in terms of better coverage and
healthcare services at lower costs without the negative aspects of
cost increase and overuse of procedures and technology in the
provision of healthcare. The experience from other places suggests
that if health insurance is left to the private market it will only cover
those who have a substantial ability to pay, leaving out the poor
and making them more vulnerable. For India this represents an
opportunity to proactively make efforts to develop social health
insurance in a virgin environment; it can ensure universal coverage
and equal access to all and implement cost-controlling measures
such as prospective per capita payment to providers.

The current effort by the government to develop the Universal

Identification Number will also aid the development of a sound
database for analysis and research.

Conclusion
There is an urgent need to document global and Indian experiences
in health insurance so that different financing options are
developed for different target groups. The wide differentials in
demographic and epidemiological status and in the delivery
capacity of health systems are a serious challenge to a nationally
mandated health insurance system. but one that has to be tackled
head on. Health policymakers and health systems research
institutions, in collaboration with economic policy study institutes,
need to gather information about the prevailing disease burden at
various geographical regions; develop standard treatment
guidelines; undertake costing of health services for evolving benefit
packages to determine the premium to be levied and subsidies to be
given; and map the healthcare facilities available and the
institutional mechanisms which need to be in place for
implementing health insurance schemes. Skill building for the
personnel involved, and capacity-building of all the stakeholders
involved, will be critical components to ensure the success of any
health insurance programme. The success of any social insurance
scheme will depend on its design and the implementation and
monitoring mechanisms which will be set in place. It will also call
for restructuring and reforming the health system.