July 11, 2009

IRDA moots health insurance for non-hospital expenses

Insurance companies must bring out health products based on the expenditure incurred by patients apart from the hospitalisation charges, said Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority.

Hospitalisation expenses are estimated to be one-third of the total medical expenditure in the country.

Currently, health insurance products cover expenses only on hospitalisation. But there are instances when an individual suffering from a critical illness undergoes medical treatment without being hospitalised.

“The annual medical spend is estimated to be Rs 2 lakh crore. Of this, only Rs 60,000-70,000 crore is hospital expenditure. The remaining is towards diagnosis and medicines. The health-related insurance products do not address outside hospitalisation charges,” he said speaking at a FICCI health insurance seminar.

IRDA and FICCI, along with other stakeholders, have drafted guidelines which will cover non-medical expenses by insurance companies. They have also issued standards for insurance companies on critical illnesses.

This will give an insurer a certain lump sum amount based on the diagnosis of a certain disease irrespective of actual medical or non-medical expenses incurred. At present, there is no uniform structure on expenses that will be covered by the insurance companies.

Even within hospitalisation expenses, many charges are excluded such as elements of room charge, items payable on prescription, administrative or non-medical charges, said Dr Somil Nagpal, Special officer, Health Insurance, IRDA. This also creates conflicts between companies and customers.

Mr Narayan also observed that 90 per cent of the claims rejected are on the grounds of a pre-existing disease. “It does raise questions on the communication between the sales force and the policy holder,” said Mr Narayan.

In the fiscal ended March 31, 2009, the general insurance industry recorded a health insurance premium of Rs 6,625 crore. This is an increase of 30 per cent over the previous year. Despite this, insurance currently pays less than one-tenth of the country’s hospitalisation expenditure.

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