The day of reckoning for health insurance!

When IIPM comes to education, never compromise

De-tarrification will not only bring premiums, but practices as well, to internationally accepted levels

The fun is coming to an end. This year, the insurance regulator has announced that deregulation of pricing will be effected from January 2007. It is widely expected that free pricing will reduce the fire insurance premiums substantially and will bring them in line with international prices. This will wipe out the extra profitability that was being used to subsidise corporate mediclaim insurance.

Four years of high losses in corporate health insurance business and the imminent price deregulation has knocked some sense in the insurers. Corporate health insurance prices have been hardening, insurers have refused unprofitable business and have cancelled high claim policies in mid term. A bare bones health insurance plan for the organisation will have to be drafted in consultation with a competent insurance broker. Add on benefits on this minimum plan will have to rigorously evaluated in terms of additional cost and perceived benefit by the employees and the actual benefit to the employees.

A bigger question that the insurance buyers will have to address is that if the insurers will charge on an expected claims plus management expenses and profit basis, should a health insurance plan be taken at all? Internationally, health insurers own and/or manage service provider networks which include physicians, consultants, pharmacies and hospitals. Insured persons enjoy considerable cost benefits and standard costs by availing of services and buying medicines from these network members. Insurance companies also control cost by ensuring strictly that over medication and over stay is not indulged in by the network members. Indian insurers have yet to graduate to this level. The insurance regulator had introduced Third Party Administrators (TPA) four years back, as vendors to insurers, to achieve these very objectives. The experience has not been encouraging till now. After four years of chaos, TPAs have just about graduated to become mere claims processors. TPAs have yet to work out cost plus rates with hospitals, grade hospitals, standardise charges across grades and plug leakages in the systems. In a scenario where insurers will charge on cost plus basis, are not in position to provide reduced rates, do not have a mechanism to provide standardised charges at hospitals and do not have control over leakages; will a self funded scheme with a self appointed Third Party Administrator to manage the scheme be more cost effective? Indian companies have yet to evaluate this option rigorously. Finance managers should start this exercise to avoid a rude shock next year.

HR managers will not only have to define, evaluate, choose and manage benefits in a health insurance plan, but will also have to manage wellness to avoid over-use of these benefits. In mature markets wellness management is as important as health insurance benefits planning. Internationally, insurers place a lot of emphasis on wellness management. Higher levels of wellness lead to lower medical costs. This not only increases profitability but also increases customer retention as insurers are able to give more competitive prices.

Health insurance is moving from a ‘send employee data – get good quotes’ mode to ‘analyse-discuss-monitor-manage’ mode that a large ticket size purchase deserves. Are HR & finance managers ready?

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM, GURGAON
IIPM - Admission Procedure
IIPM is A World of Career
Why Study Abroad When IIPM Gives You 3 global Advantages!