IRDAI is targeting 100% cashless hospital treatment by July 2024, but is it viable?

On a particularly cool June night in Meerut, Uttar Pradesh, 60-year-old Ashish Jha found himself reeling from severe chest pain. A visit to a nearby hospital didn’t help. His insurance policy, meant to be a lifeline, was unable to provide cashless treatment for his heart surgery as the hospital lacked the facilities for cashless claims settlement.

Cashless treatment, where the health insurer settles the patient’s bills directly with the hospital, has been a pet project of the Insurance Regulatory and Development Authority of India (Irdai). It has raised the bar further, mandating that all cashless claims be processed within three hours of the receipt of discharge authorisation and has asked insurers to put necessary systems in place by July 31. But as the example above illustrates, the initiative faces significant hurdles. Per the latest Irdai report, 42% of the 23.36 million claims in 2023 were settled through reimbursements.

Recently, the Irdai introduced a series of reforms to enhance policyholders’ access to and benefits from health insurance. These changes specifically address concerns such as quick cashless treatment everywhere, pre-existing disease coverage, and inclusion of senior citizens.

The question now is, will these reforms lead to a smoother experience for policyholders, or will they be presented with more challenges?

OBSTACLES GALORE

When Jha delved deeper into the issue he faced, he found that it stemmed from the complicated back-and-forth between insurers’ claim settlement teams (in-house/third-party administrators), hospitals, and patients.

To help with such eventualities, Irdai has asked insurers to set up dedicated help desks in hospitals and that seems to be a big problem as it requires robust infrastructure and building a network of hospitals is time consuming. Some urban hospitals already have partnerships with insurers and D2C health consulting services (for example, Artivatic.AI, an AI insurance platform, provides rapid claim settlements within 20-30 minutes), but extending this facility to smaller healthcare centres will necessitate significant upgrades.

“I think the three-hour claim settlement is only applicable for tie-up hospitals as all hospitals don’t have partnerships with a health insurer,” says Naval Goel, Founder and Chief Executive Officer of insurance portal PolicyX.com.

Another change that Irdai has brought in is the reduction in waiting periods for pre-existing diseases (PEDs). But policyholders might still face out-of-pocket costs. “The move has reduced the waiting period by one year, but policyholders have to bear all the expenses themselves for three years for PEDs,” says Goel.

WHAT’S THE RUB?

A recent study by insurance marketplace Policybazaar, titled ‘Is India happy with health insurance claims?’, reveals a troubling trend. Nearly 70% of individuals with reimbursement claims were forced to rely on emergency funds.

While the new regulation allows policyholders to seek cashless treatment at any hospital, the facility might be available only in a few non-network hospitals or nursing homes. This situation is more common in Tier II and III cities.

Network hospitals have ties with health insurers and offer cashless claims facilities, while non-network hospitals may or may not. Instead, policyholders are required to make reimbursement claims with their insurer.

“Expanding the cashless facility to include all hospitals, especially in rural and/or remote areas will require significant administrative effort and investment,” says Colonel Sanjeev Govila (Retd), a Certified Financial Planner and CEO of financial planning and investment company Hum Fauji Initiatives.

Govila adds that managing a seamless cashless system requires robust operational frameworks and constant monitoring to prevent abuse and ensure efficiency.

In an emergency, Jha had to settle the bill himself and then claim reimbursement later. Under the ‘Cashless Everywhere’ initiative, Jha could have been treated at any hospital, and a cashless facility would have been available even if such a hospital wasn’t in the insurer’s network.

Dinesh Khare, a 38-year-old teacher at a primary school, has a similar story. He met with an accident in Varanasi and was admitted to a nursing home for emergency treatment, but could not avail of the cashless claim facility as he failed to inform the insurer within 48 hours.

To get a cashless treatment, a customer should inform the health insurer within 48 hours of admission for emergency treatment. Experts say that needs to be increased to about 72 hours.

Reports suggest around 49% of hospitals fall under the network category. “The estimate is that there are over 40,000 private hospitals in India. Of these, insurance companies are present only in 20,000-25,000,” says Girdhar J. Gyani, Director General of the Association of Healthcare Providers in India, a body representing private hospitals.

Irdai’s latest annual report shows that during 2022-23, general and health insurers settled 23.36 million health insurance claims with a total payout of Rs 70,930 crore. And 56% of the claims were settled through the cashless mode, 42% through the reimbursement mode, and 2% were settled through a combination of the cashless and reimbursement modes.

Sarbvir Singh, Joint Group CEO of insurance platform PB Fintech, says, “The National Health Claims Exchange will significantly aid in facilitating the exchange of health claim information between payers, providers, beneficiaries, and other relevant entities. On an average, every health insurer has a tie-up with about 10,000-15,000 hospitals for cashless treatment. However, customers can also raise requests for treatment in other hospitals with this initiative.” The National Health Claims Exchange, to be set up by the Union health ministry and Irdai, is a digital platform that will bring together insurance companies, healthcare sector service providers, and government insurance scheme administrators.

Even with these initiatives, providing cashless treatment at any hospital is challenging. Currently, major cities have a network of hospitals, but rural and semi-urban areas need support. “Nationwide implementation would require partnerships between insurers and hospitals. Standardised procedures and efficient verification processes are essential, enhancing access and reducing out-of-pocket expenses,” adds Rakesh Goyal, Director of broker Probusinsurance.com.

However, a cashless facility doesn’t mean you don’t have to pay anything from your pocket. Health insurance policies have certain terms and exclusions. You must read them carefully. Both hospitals and insurers might need to upgrade their technology infrastructure. Secondly, health insurance policies need to reduce exclusions, co-payments, deductions, etc., to make policies more attractive.

Rupinderjit Singh, Senior Vice President of Retail Health at online insurance provider ACKO, says, “Cashless Everywhere is being run to have a common cashless network across health insurers. This should come by the middle of this financial year. However, as of now, only a handful of hospitals are enabled with cashless facilities.”

Experts propose stricter enforcement by Irdai, coupled with incentives for hospitals to join networks. Policyholders need greater transparency—a clear understanding of network hospitals, covered procedures, and potential out-of-pocket expenses.

They feel the proposed reforms would require a unified list of hospitals compiled by all insurers. A centralised agreement with hospitals should be established through the General Insurance Council, including all licenced insurers. This can ultimately grant every policyholder access to a single, integrated system, streamlining claims processing. Maintaining cashless infrastructure would require investment from insurers, hospitals, and technology providers, which can lead to a rise in premiums.

The insurance industry, which has registered a compound annual growth rate of 10.3% in the last 10 years, could perhaps take the lead.

The stakeholders must focus now on ensuring that the shield of cashless claims settlement facility reaches every citizen soon. 

@imNavneetDubey