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How cashless medical insurance works
Freny Patel | January 21, 2003
Your wife needs to a hospitalised. You rush her to hospital, but they won't admit her without a cash deposit.
You tell them you are covered under Mediclaim, but no, they need payment upfront. You have no option but to rush to the nearest ATM for some immediate cash.
The next few days you have to spend more for the crucial operation and room charges and medicines, and you sell some of your shares at a time when the market is down.
Sure, you'll get reimbursed -- eventually -- after you submit your bills to the insurance company. But meanwhile there is no way you can avoid dipping into your savings or selling your investments in the short term.
Unless you're the type to stash loads of cash under the mattress.
But things are about to change with the introduction of third party administrators (TPAs).
Take the case of Darius Mehta. His 54-year-old mother suffered a stroke and was rushed to Mumbai's Breach Candy in the wee hours some days ago.
Daraius did not have to go in the middle of the night to the nearest HSBC ATM to withdraw money to pay the hospital.
All that was taken care of with a simple phone call to the call centre of New India's Assurance's TPA -- Paramount Health Services.
The TPA arranged for an ambulance on special request, instructed the hospital to keep an ICU bed ready and also got in touch with the top heart surgeons associated with the hospital.
Insurance firms have appointed TPAs with the key objective of servicing the customer. But they are also doing it for their own reasons. They are trying to bring down the adverse claim ratios in health insurance.
Today, for every Rs 100 earned by the state-owned general insurance companies, over Rs 130 goes towards the settlement of claims under the Mediclaim. The use of TPAs is costing you money.
Since October 2002, insurance companies have levied a 6 per cent additional charge on renewed Mediclaim policies.
But this is a small price to pay looking at the benefits associated with TPAs, the major highlight being cashless hospitalisation.
Darius Mehta did not have to sell any shares to pay his hospital bills as he got his mother admitted to a ‘network' hospital -- that is, hospitals that are on your TPAs list.
Even the post-hospitalisation charges were fully taken care of under the risk cover and paid by the TPA and his mother is currently convalescing at home from the bypass surgery.
Effectively, TPAs are a kind of single-window stop for all claim settlements for pre- or post-hospitalisation expenses.
Admission to network hospitals is advantageous because not only do you get cashless treatment, the hospital also is prevented from overcharging.
Moreover, the TPA verifies the treatment. As TPAs develop a network of approved hospitals, hospitals can only charge according to pre-negotiated rates.
In the past, hospitals tended to overcharge anybody having a Mediclaim policy since it was presumed that the insurance firm would cough up any sum. This was one of the reasons for the adverse claims ratio.
The TPAs, on the other hand, scrutinise all bills before settlement. Not only that, they also can be consulted about the type of treatment a policyholder should take.
Darius's brother took his wife to a gynaecologist when she was suffering from fibroids on the uterus. On consulting the TPA, the couple realised that the treatment suggested was not the best and sought a second opinion.
The TPA -- this time Ican Medical -- suggested the names of a few other gynaecologists. They suggested an alternative course of treatment. TPAs are able to do this because they are not solely administrators.
They have a number of doctors in their payroll. In Paramount's total staff strength of 250, there are 36 doctors and this number will increase with time as it markets a whole range of preventive and protective health services, says the company's MD, Dr Nayan Shah.
But there can be a dark side to TPAs, too. Under cashless hospitalisation, as the TPA is to be reimbursed by the insurance firm and has been appointed to bring down claims, it could end up recommending fewer tests than necessary.
There could be occasions when the treatment proposed by the hospital could differ from what the TPA recommends. It could lead to ticklish situations where the doctor treating the patient will be arguing with the one settling the bills.
Going cashless: When you renew your Mediclaim policy, ask you insurer to give you an ID card and a booklet listing the hospitals on his network.
If you need to be hospitalised, call the TPA's 24-hour helpline and explain the ailment and medical history (f there is one).
The TPA will guide you on admission to the hospital and will issue an authorisation letter for cashless treatment, provided it is convinced that the illness falls under the ambit of the policy.
Cashless treatment can be denied when there is insufficient information on the ailment or past medical history.
However, Nayan Shah says that even if policyholders are denied cashless treatment, they ought to simply pay the initial token deposit and start the treatment.
They will be refunded the money later after verification of one's medical history. "All hospitals are supposed to start treatment for emergency cases without charging money," he adds.
And that's not all. Some TPAs already offer discounts on medicines purchased from specific chemist shops.Others are looking at offering add-ons like preventive and protective. Warts and all, TPAs are a necessary evil -- even if not always beneficial to policyholders.