SC order | Standardisation of treatment rates will reduce undue charges, premium hikes: Bajaj Allianz CEO

Insurers hope SC order will prompt governments to take steps towards greater transparency in medical treatment rates

The Indian general insurance industry is upbeat after a recent Supreme Court order directed the central government to hold consultations with state governments and arrive at a consensus on determining treatment rates at hospitals across the country.

Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance, who is also chairman of the General Insurance Council, industry association, said standardisation would bring in much-needed transparency in the healthcare sector, which currently does not have a regulator. It could lead to lower healthcare inflation and insurance premiums, he said, adding, “Transparency in rates will reduce frauds and any kind of extrapolation of undue costs.”

The Supreme Court had, on February 27, pulled up the Centre for shying away from its responsibility of implementing the provisions of the Clinical Establishments (Registration and Regulation) Act, 2010 by putting the onus on the state. “The Union of India cannot shirk ... its responsibility by merely stating that communication(s) have been addressed to the State Governments/Union Territories and they are not responding,” the apex court said. It pointed out that the Act was enacted to provide medical facilities to citizens at affordable prices. The counsel for the government had argued that the rates could not be determined as state governments had not responded to its communication on this matter.

The apex court made the observations while pronouncing its order on the writ petition filed by the Veterans Forum for Transparency in Public Life against the government of India. The plea called for directions to the central government to determine the rate of treatment charged to patients under the Clinical Establishments Act and the rules framed in 2012.

The petitioners were of the view that until rates are determined, the central government should notify the charges applicable to Central Government Health Scheme-empanelled (CGHS) hospitals. With regard to this, the Supreme Court stated that it would consider “issuing appropriate directions” to the centre if it fails to come up with a concrete proposal by the next hearing, in six weeks.

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Standardisation, regulations must for healthcare industry

Not surprisingly, the general insurance industry is in favour of the implementation of the apex court's order. “It is important to ensure that citizens of the country have a fair and transparent mechanism of accessing medical treatment for which they should be able to pay a fair price," said Singhel. "If you look at this holistically, everyone—be it the Supreme Court, finance ministry or General Insurance Council—is saying that transparency is needed. This will serve the nation well.”

Singhel also threw his weight behind the idea that the healthcare industry needs a regulator. “We have always been saying that there should be a regulator for hospitals. In addition, there was a note from the finance secretary to the health secretary mentioning the need for a health regulator. When there is such a big industry (healthcare) that affects the life of every citizen in the country, there has to be some regulatory structure in place (to govern hospitals),” he added.

Contentious ‘customary and reasonable charges’ clause 

If the central and state governments can ensure standardisation of treatment rates across hospitals, disputes between insurers and policyholders will come down, said Singhel. Insurers often make part-payment of claims citing unreasonable charges levied by hospitals. “The moment you bring in transparency in charges, the (customary and reasonable causes) clause becomes redundant. This issue comes in because of variation in charges (across hospitals and geographies). If you implement what the Supreme Court is saying, then this clause has no relevance.”

Hospitals resist ‘Cashless Everywhere’  

In January, general and health insurance companies came together to roll out a ‘cashless everywhere’ facility that allows policyholders to seek cashless treatment even if the hospital of their choice is not part of their insurer’s network. However, some hospital associations’ response to the move has been lukewarm, Singhel said. “Most hospitals welcomed this facility, but we did see resistance from some hospital associations.”

The hospitals have not been forthcoming about their concerns around the implementation of this arrangement, said Singhel. “We were surprised as it is a simple, customer-centric initiative that should be welcomed by hospitals. I am not certain what their concerns are, but we will be happy to answer their queries. As hospitals, they will get more volumes and access to more customers. Overall, ‘cashless everywhere’ will bring in more transparency,” he said.

He pointed out that if more hospitals come on board, patient-policyholders will not have to pay for treatment. The facility would bring close to 40,000 hospitals into its ambit, making people’s lives easier, he added.

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No discrimination between corporate, retail policyholders

Singhel refuted the charge that corporate group health insurance claims get settled without hassles, while retail claims face greater scrutiny as individuals have no voice. “It is not so. I do not agree. I do not think this is an issue of discrimination—the issue is around policy wording. I do not see this as a group versus retail issue. For instance, in our case, over 90 percent of individual claims are getting settled straightaway. The issues around partial claim settlement come up when policies purchased have sub-limits or co-pay.”