(Source: Hindustan Times, Chandigarh, July 16)
The insurers and the healthcare industry need to evolve a symbiotic relationship
Insurance is a subject matter of solicitation. Medicine is not. This lies at the heart of the standoff between corporate hospitals and health insurers over alleged gilding of medical bills.
Private healthcare desperately needs the Rs 9,000-odd crore Indians spent on health insurance premiums last year to ramp up scale and improve quality of service. The four state-owned general insurance companies that control 70 per cent of this business have enough heft to be able to keep a lid on claims.
The cat-and-mouse game with high-end dispensers of medical services in the metros over cashless treatment is the latest expression of their collective bargaining power. But this is a blunt tool to keep healthcare costs at bay. Health insurance and private healthcare are relatively recent phenomena in India and both industries could learn from the international experience where co-payment-in which the insurer and the person insured pay out predetermined shares of the total bill -has emerged as the preferred policing mechanism for inflated hospital bills.
Along the way, Indian insurers need to watch out for their own health as well. Medical insurance premiums make up for a fifth of the total business of the 21 general insurance companies plying their trade here. The intense competition keeps premiums low, so insurers have relied excessively on their trading desks to limit the claims ratio to 80 per cent for individual policyholders.
In group insurance, medical claims were contained at 110 per cent of premiums. Unfortunately for the insurers, the financial market meltdown put paid to this business strategy; claims are now again half as much as premiums, with the biggest drain being in the metros. Stateowned insurers are learning the hard way that they cannot get by on investment profits and need to address their bloated costs. Most importantly they must refocus on their principal business: underwriting risks.
Private healthcare spending in India is today thrice that of State expenditure and its share is climbing. Consulting firm McKinsey & Co reckons spending on health could rise to 8-10 per cent of the GDP by 2025 and the country’s health insurance business has the potential to grow to Rs 35,000 crore by 2015.
The stakes are, thus, high for India’s insurers and its healthcare industry. They need to put their heads together to evolve a symbiotic relationship. Costs can be kept lower even without engaging in an adversarial relationship. That would involve spreading the insurance risk over a greater slice of the population, redirecting healthcare towards prevention and by putting in place safeguards against unnecessary diagnostics and medication.
