How Narayana Health’s Viren Shetty plans to deepen insurance penetration? By keeping patients out of the hospital

Narayana Health's executive vice chairman Viren Prasad Shetty spoke to Moneycontrol about challenges in the conventional insurance business, pain points the company can address, profitability, future plans, and more.

Edited excerpts below.

What was the rationale behind adopting the managed healthcare model over the conventional health insurance one?

The model we follow is referred to as health management organisation, managed care, integrated care, value-based care etc, in different parts of the world. It means that there is a direct connection between the patient and the hospital, which bears the risk. So, the insurance firm doesn't become the intermediary.

It's not traditional health insurance. It's health insurance provided by the healthcare provider. In India, health management organisations do not exist as a separate category of insurers. So, we took the traditional route and procured our health insurance licence (in December 2023).

Also read: Narayana Health launches health insurance covering Rs 1 crore in surgeries for Rs 10,000 per year

The chief concern of policyholders is that their claims are rejected or part-settled. Insurers say their claim ratios are high. And, hospitals say they face hurdles in pricing and claim settlement. How will your model address these issues?

Yes, there is a need to align the incentives. Today, the incentive of the insurance company is to sell the policy — and then cross their  fingers and pray that policyholders do not fall sick. Now, if you're single-mindedly focussed on selling policies, you will sell to as many people as possible; the underwriting discipline goes away.  This is what has happened for many years. Also, customers have  become used to not disclosing their pre-existing conditions.

Anyone can buy insurance — the entry is easy — but the claim process is miserable. Claim ratios are very high. Our analysis is that health insurance in India is underpriced, much lower than what it should be. And then, most insurance companies go with the intermediary-led distribution model, where they have to pay them 35 percent of the first year's premium. Distributors are important. But they are not part of the healthcare cost, and this is what's causing hassles.

Health insurance is underpriced and the cost of distribution is very high. So, we wanted to try something completely different. We won’t chase scale. We will not sell across the country, not even across Karnataka. In fact, not even across all of Bengaluru. We will start in one area and grow.

Also read: Moneycontrol-SecureNow Health Insurance Ratings: Your guide to picking the right policy 

You will focus on a limited number of locations and hospitals…

It works best in our healthcare network. As we get a sense of the geographical spread of the patients and numbers, we will start adding more network hospitals. But we don't want to start with a wide network and lose control.

And will you monitor the patient's health throughout the policy term? What if patients do not cooperate?

You have to get your health checked by our doctors. You have to be declared healthy per these check-ups. But once you have the insurance, if you get treated at any of our or our partner facilities, no questions will be asked. We made a promise and there's no reason for us to deny (claims).

The tests are mandatory. If you do not keep us updated, do not follow the clinical protocol we have put in place, then you would have marked yourself as a high-risk patient. So, in future, we may say that you did not adhere to our protocol, hence we will not be able to continue the policy.

How will you evaluate a person's health before issuing a policy?

The screening will determine whether you fall in the ‘safe’ category, which is green, ‘mild risk,’ which is orange, or ‘high risk,’ which is red. If you fall in the green bracket, then you will get the policy then and there. But if you are in the orange group, then we will take a call based on the opinions of clinicians.

Even if you are in the red category, there will be no automatic rejection. We will enroll you in a One Health plan, where a doctor will be in touch with you for six months. After six months, we will assess and see whether you have been compliant, been able to control your health issues. If you have managed to do so, we can sell you the plan and you move to the orange bucket.

You mentioned that health insurance in India is underpriced. But under Aditi, a family’s yearly premium (where eldest member is aged 45 years) will be Rs 10,000 for a surgical and medical management cover of Rs 1 crore and Rs 5 lakh, respectively. And you will also cover pre-existing diseases. So, how will this be sustainable?

That’s the sad thing. Since everyone’s underpriced, we have to do the same. The truth is, we don't know. Rs 10,000 is the annual premium for a family floater policy, where the eldest member is 45 years old. If you are younger, the premium will be lower, and higher for older individuals. We believe that we can just about break even or sustain.

This won't be a highly profitable, money-spinning opportunity for us. We priced it low as this is an entry-level plan. We will try to put in a lot of clinical and underwriting discipline to make sure that we don't end up losing too much money. We are learning. In one-two years, if we realise that this is not sustainable, we will have to raise prices, change the product configuration, and so on.

Aditi has two variants now. Do you plan to launch more variants?

Right now, our clinics and hospitals in Mysuru are enrolling patients. We have enrolled a few thousand people and will be starting the check-ups for them.

For surgeries, the (annually renewable) cover will be Rs 1 crore, and Rs 5 lakh for (other) admissions. It comes with free annual health check-ups, tele-consultation, and so on. The coverage will be provided within the network, which right now means Narayana Health, but over the next few months we will add more hospitals to the network.

Since this is an entry-level plan, policyholders will be eligible for general ward (shared with 10 people). Soon, we will launch the next tier product, where patients will be eligible for a semi-private ward (rooms shared with one or two other patients). It will offer a lot of outpatient benefits, while this one is more surgery-oriented. It will also cost a lot more. Then, there’s another variant that will come much later, which is meant only for single occupancy rooms. That will be more expensive.

What lessons have you picked up from the global managed care models? 

The biggest one is around prevention. When insurance companies sell you policies and cross their fingers and hope you don't fall sick, nobody actually does anything to ensure that you don't fall sick. Now, every Indian is at risk of cardiac disease, metabolic dysfunction, diabetes, etc.

As a hospital, we can do something about it — conduct frequent check-ups, do risk stratification, ascertain the family history, and ensure regular monitoring. We need to know the patient's health status so that we can keep them out of the hospital as long as possible.

Because our numbers are fewer and we are designing this product around patients who belong to our coverage area, we can take these steps. But for health insurers, it’s too much of a hassle.

What are your plans over the next two to five years?

For now, we are focussing on Mysuru and the surrounding districts, as also Bengaluru and its  adjacent districts. Initially, we will focus on this region. Once we've  stabilised in two-three years, we will look at Kolkata, and then look at other cities.

This is not a product where you buy a policy and then don't do anything with it. We're here to take care of your total health; not just surgeries or cancer, but also your blood pressure, cold, cough, and fever.

The idea is to change the equation that regular insurance customers have with the insurance firm. If we can't do that, then we may not be able to scale nationally. But if we can prove that we can actually build something people love, which can be scaled while we make a sustainable amount of money, then we will look at expanding nationwide.