Consumer Guidance Seminar on Medical Insurance - Part 1: Introduction and Present Day Challenges in Medical Insurance

CAG, Chennai organized a consumer guidance seminar on October 05, 2016, to discuss the complexities in the medical insurance industry and to increase consumers’ awareness about the intricacies specific to this field . This is the first of a series of five blogs discussing the day’s events and addressing issues raised over the course of the programme. The five blogs are listed together below for viewers’ convenience.

1. Introduction and Present Day Challenges in Medical Insurance
2. Understanding a Policy Document
3. Evaluation of Claim Reimbursements
4. ​Hospital Perception to Insurance
5. Complaints Handling by Ombudsman

Part 1 of 5 (Introduction and Present Day Challenges in Medical Insurance)

The seminar’s inaugural address was given by Mr. L. Singaram, Deputy Commissioner, Department of Civil Supplies and Consumer Protection, Government of Tamil Nadu. Dr. Arjun Rajagopalan, Trustee at Sundaram Medical Foundation (and a CAG Trustee) moderated the sessions. Dr. Arjun welcomed everyone to the seminar and reiterated that the purpose of the seminar was to increase clarity on the critical topic of health insurance. He explained why health insurance is becoming increasingly crucial giving three statistical facts:

1. First, India spends a pittance on on healthcare. More specifically, 5% of the GDP is spent on healthcare and from this, only 1% is the government’s healthcare spending. India’s spending on healthcare is among the smallest in the world. Healthcare in India is predominantly handled by the non-governmental sector. Three-quarters of this healthcare spending is handled by the private sector, out of which 40% is by the not-for-profit private sector. Thus, essentially 60% of healthcare spending is in the hands of the for-profit private sector.
2. Secondly, two-thirds (i.e., almost 70%) of healthcare is purchased by individuals, placing Indian medical consumers near the top in the world in out-of-pocket medical expenditure). Contrast this with the United States, where despite massive health care spending, out-of-pocket spending is only 10-12%. 
3. Thirdly, catastrophic illnesses accrue very high treatments costs, often to the tune of five lakhs to ten lakhs, making it unbearable for Indians already living in high inflation.

Dr. Arjun summarized that as seen from the big picture above, the healthcare situation has become truly out of control in India and has made medical insurance a necessity.

Next, Ms. Saroja, Director - Consumer Advisory and Outreach, CAG addressed the seminar audience in Tamil and provided the consumers’ perspective of what consumers feel about medical insurance and common complaints faced by consumers using medical insurance. She stressed the fact that many new diseases have surfaced today requiring new treatment procedures that result in high bills for the common man. Average lifespans have increased to about 65-70 years and senior citizens living now need healthcare support more than generations before to cover rising medical costs. The government’s role and support has been steadily declining while medical costs are steeply increasing. Economically disadvantaged sections mortgage their assets or enter into loans just to settle their medical bills. She stated that having medical insurance can support these expenses to reasonable levels.

Next, Ms. Saroja described the medical insurance landscape briefly. She said the major stakeholders include the insurance company, the consumer, hospitals/healthcare providers, third party administrators (TPAs), insurance agents, and regulators e.g., IRDA.

She went on to describe several cases of consumers’ complaints she had handled and feedback she had received from consumers regarding use of their health insurance.

Positive feedback from consumers about health insurance included:

1. That it was useful and essential for policyholders over 40 years of age, when health typically begins to decline
2. That  it was useful as an investment plan
3. That  it was an absolute necessity for living
4. That it was useful for emergency situations.

Complaints from consumers included:

1. Insurance companies give no proper reasons for refusing claims:
   
   1. In one case, a 2 year old boy with a type of cirrhosis disease needed surgery. The boy’s father, a Rs. 13,000/- per month salaried employee, had bought health insurance coverage. The surgery’s estimated cost was Rs. 15,000/- but the father was eligible only for Rs. 5000/- cover. So he did the surgery at another hospital for a lower cost of Rs. 10,000/- and claimed a refund. His claim it was rejected on the grounds that the disease was “congenital”, nullifying his policy.
   2. Another case was that of a senior citizen whose wife was covered for Rs. 2 lakhs as a basic cover with a critical illness cover for an additional Rs. 2 lakhs. Subsequently diagnosed with cancer, she needed Rs. 3 lakhs as treatment expenses. The insurance company refunded only Rs. 90,000/-. After CAG’s advocacy efforts, they got a full refund after 6 months of claims processing and convincing. In this particular case, even though cancer was clearly covered as a critical illness, the claim was still rejected.

Thus consumers felt insurance practises to be unfair.

1. Important ailments and treatment procedures are not covered in policies:
   
   1. In one particular case of a patient needing bypass surgery, the treatment method approved by the government was not accepted by the insurance company. It cited a unique reason that this new treatment required no hospitalization and hence was not covered.
2. Some feel that health insurance benefits hospitals more than the consumers.
3. There is very little clarity on what benefits are actually received following enrolment in health insurance schemes. A case in point was that of a consumer who enrolled in Rs. 2000/- worth of basic insurance coverage. He had shared his existing medical condition of hypertension with the company when he enrolled in this coverage. He now enrolled in an extra coverage of Rs. 5 lakhs which did not explicitly ask him to disclose all existing health conditions again. So when he went for treatment under the new higher-level coverage, they canceled his policy saying he did not disclose his hyper-tension in the new higher-level cover policy application. He said it was already in their records in the basic coverage documentation.
4. Irrelevant?: A few consumers from the poorer sections of society felt that health insurance was not relevant to them and intended only for educated people, businessmen, etc.

Ms. Saroja added that agents sometimes mislead consumers with wrong information. This is true in the case of banks where bank employees sell insurance to their account holders. Customers place implicit trust in these familiar, knowledgeable people and might not think the purchase through carefully. She also noted that people in general do not read long documents carefully and often pay the price for this later.

Video link of the seminar available here: https://www.youtube.com/watch?v=h0Y1nd1RGPQ