Public Sector Undertaking Insurers collectively decided to introduce PREFERRED PROVIDER NETWORK Hospitals system between later parts of 2011 to January’2012, whereby the Companies through Third Party Administrators (TPAs) entered into an agreement with the Hospitals /Nursing Homes (NH) in some of the major cities in India for providing CASHLESS BENEFITS to their respective policy holders. In terms of such agreements fixed packaged rates for various SPECIFIED PROCEDURES OTHER THEN TRAUMA & EMERGENCY CASES are agreed upon by hospitals/NH to be charged from the insured in exchange of CASHLESS BENEFIT to be provided to the insured availing treatment in such hospitals/NH. Such package rate varies based on Sum Insured under the policies and are mainly divided into three categories. These hospitals / Nursing Homes are commonly known as PPN approved Hospitals and Nursing Homes (NH). Cashless facilities for specified procedures can only be availed in such approved set-ups. It may be noted that every Hospitals / NH has not agreed for such packages rates and they charge according to their own tariffs and practice and the insured has to make full payment and seek reimbursement subsequently under the policy from the TPA. Also this system is not applicable for the insured persons under group health insurance policy holders of PSU companies as well as for policy holders of the private insurance companies.
Five years are now almost completed ever since this system has been introduced by PSU companies. Let us examine how much this system has worked for all stakeholders in the health sector industry? What were the intended goals when the system was first introduced and whether these goals have been achieved or not? How far the main stakeholders, i.e. insuring public have been benefited?
Before we examine all these relevant aspects let us understand the finer points of the system. When the system was introduced by January 2012 the highlights of the scheme were circulated to the policy holders and relevant provision was incorporated in the policy documents. As per the circulated highlights following main points of the system emerges:
- CASHLESS benefit is provided for agreed package rates and all other cases outside the package procedure only in the PPN hospitals/NH.
- For TRAUMA & EMERGENCY cases the cashless benefits may be provided by the TPA in Non-PPN hospitals/NH.
- Jurisdiction for PPN network hospitals/NH has been specified (mainly within the municipal limits of major cities) and for hospitals/NH outside such specified limits the TPA will provide cashless benefits in all cases, provided the such hospital/NH is network hospital of the TPA.
- Agreed PPN rates are all inclusive rates and only exclude implant cost.
- Rates agreed by the PPN hospital/NH for specified procedure, are the rates to be charged by them for both CASHLESS AND REIMBURSEMENT cases for hospitalisation period and shall be settled based on entitled category in the PPN hospitals/NH.
- Claims shall be payable as per the entitled category for their respective sum insured under the policy. Such entitled categories are General ward for Sum insured upto Rs.100000/-, Semi Private Room for Sum insured more than Rs.100000/- and not exceeding Rs.300000/- and Private Room for Sum Insured exceeding Rs.300000/-.
- Similarly the limits for Cataract Surgery based on sum insured under the policy are also specified.
- In case insured opts for higher room category than the entitled category, he needs to bear the difference of two package charges.
- In case of multiple procedures under PPN the 2nd surgery shall be paid 50% of package charges.
- For treatment other than specified procedures, the cashless facility is available in all the empanelled PPN hospitals/NH also.
- The agreed package rates are for Standard, non-complicated cases as mentioned in the procedure list.
- Sub-limits/disease capping under the policy shall not be applicable for the PPN specified procedures.
- For all reimbursement cases apart from those availed in the PPN Hospitals/NH, the same will be payable as per terms and conditions of the policy issued to the insured.
- PPN is applicable to all retail customers to begin with and shall exclude emergency cases and group clients.
- In case of PPN package rates no break-up is required to be submitted by the PPN hospitals/NH.
While introducing the system the PSU companies declared that the purpose of working out such package rates and stabilizing the hospitalisation costs will benefit the insured in many ways, Lower cost of every hospitalisation will leave a larger balance in the sum insured in the policy for future hospitalisation within the policy period. Lower cost will also reduce loading on policy premium at the time of renewal. This step is in the interest of all health insurance policy holders.
The un-stated reason for introducing PPN system was also to minimise the loss ratio for health port-folio of the insurers, which, in almost all the PSU companies, has been in the red for many years.
Although the idea of PPN system when first introduced looked very good and out of box thinking for the benefit of all stakeholders, particularly the insuring public. There is no doubt that the intension behind introduction of the scheme was to streamline the health services cost and smooth working of cashless system. However If we look at the above aspects of the scheme and analyse how successfully the PPN system has worked in practice we find that the most sufferer is the main stakeholder i.e. policy holders in the industry. How the insuring public has been adversely affected on account of working of the PPN system over the five years can be analysed as under.
Discriminatory aspect of the scheme
For the specified procedures In the PPN Hospitals/NH irrespective of whether cashless benefit is availed or not claim settlements are made on the basis of agreed package rates only. In contrast to this if the policy holder takes treatment in NON PPN Hospitals/NH claim settlements are made on actual basis as per the policy provisions. The premium cost for the policy holder irrespective of whether he avails treatment in PPN System or NON-PPN system hospital is same. If for availing treatment in PPN hospital the insured is not required to pay extra amount beyond the agreed package rates than there is no discrimination but as in many cases the hospital charges more than the package rates the insured has to bear the same and does not get reimbursement for such extra charges under the policy it becomes discriminatory. The one who gets treatment at NON-PPN hospital will get reimbursement more than the package rates invariably complete reimbursement. By providing the cashless facility the insurer cannot create such discriminatory situation for the policy holders which defeats the very purpose of the principle of indemnity.
Sum insured-wise package rates and categorisation is unjustified. The higher sum insured Policy holders say having sum insured up to 50 lacs or basic 5 lac + higher Super Top Up are provided the same package rates as that for the policyholder having sum insured of Rs. 3Lacs. Also the hospitals/NH which is of different standards/categories it is observed that within agreed package rates such hospitals/NH provides deferential standard of rooms than the entitled category as defined in the PPN scheme.
The provision under scheme that in the case of multiple procedures under PPN the 2nd surgery shall be paid at 50% of the package rate is unjustified. This provision again creates discrimination for the policy holders. For the treatment in NON-PPN hospital such restriction of 50% for second surgery is not applicable.
In some of the insurance policies differentiating terms and conditions are applied for treatment taken in PPN system and NON-PPN system hospitals. For example if the treatment is taken in NON-PPN hospitals 10% of co-pay is applied for claims whereas there is no such co-pay is applicable for treatment taken at PPN system hospitals.
For certain specified procedures doctors/hospitals have their different approach of treatment as a result of which cost variation also occur. Standardisation under agreed package under PPN system for such particular procedure deprives the patient to go for treatment of his choice which he feels is best for him.
For cataract surgeries main cost relates to the quality of lens which is selected by the patient. Under many health policies there is already a capping for cataract surgeries and further lower capping under PPN system deprives the patient to select better lens for his treatment.
Such differential treatment is discriminatory under the PPN system and is totally unjustified when at the same premium cost insured persons availing treatment in NON-PPN hospitals are compensated in different manner for similar treatment. It is not desirable that by providing cashless benefit PSU companies create such discriminatory situation.
Annexure “C”’ – Implication
In practice it has been observed that in many cases the PPN system hospitals/NH are charging extra amount much more than the agreed package rates and insured invariably does not get reimbursement for the same under the policy nor the refund for unjustified charges is arranged by the TPA . The patient, when undertakes treatment is asked to give consent on form known as Annexure “C” for any extra charges.
As the scheme provides that the agreed package rates are for standard, non-complicated cases as mentioned in the approved procedure list the hospitals have right to obtain undertaking from the patient for any extra charges arising out of insured availing higher facility than the standard facilities as also for cost escalation on valid medical ground. However wordings of such undertaking must be appropriately stating that “the treatment being provided is at the agreed package rates and by doing so there will be no compromise in terms of medical services for the relevant treatment. However extra cost, if any, arising on account of complicated medical conditions, patient availing higher facilities than the standard facilities and any other valid reasons on medical grounds shall be borne by the patient.”
If the hospital is charging any amount beyond the package rates they must give full details of the charges in their bill stating the reason for the extra charges. As in the scheme there is a provision that ‘No break-up is required to be given for agreed package rates’ specific reasons given by the hospital/NH for any extra charges must automatically be acceptable at TPA office if such extra charges are justifiably relate to valid medical ground and the insured must automatically get reimbursement for the same.
If the TPA after examining details given by the hospital/NH and if required after making further enquiry from them arrives at the conclusion that such extra charges are collected by hospital/NH in unjustified manner they must ensure refund of the same from the hospital to the insured. Since the TPA gets the bills and other claim documents for settlement of claim they have the opportunity to verify the charges under the hospital bill and find out that any overcharging beyond the package rate has been charged for valid medical ground or not. This procedure must be made obligatory on the part of the Insurer and TPA should be made responsible to monitor this because they are getting the hospital bills in each and every case.
Insured cannot be deprived and discriminated merely because hospitals have agreed PPN Rates and in practice charge higher amount by obtaining consent on Annexure “C”.
PPN system in the context of Principle of Indemnity
The preamble clause of any health insurance policy states that “the Company will pay through TPA the amount of such expenses as are reasonably and necessarily incurred”. In view of this it is the moral and legal responsibility of the insurer, and on his behalf of the TPA, that insured is fully indemnified. The insurers and health provider hospitals may enter into any agreements in the context of cashless support benefit but by doing so they cannot deprive the insured of his legitimate right to have complete indemnity under the policy.
When the policy holder applies for cashless in the case of specified procedures in PPN hospital/NH the TPA approves cashless amount as per agreed package rate. However, invariably the hospitals/NH are charging much more than the agreed package rates and when the claim is presented for reimbursement for such extra charges it is repudiated “on the grounds that this excess amount incurred during the hospitalization period is in violation of PPN term and conditions”. Now in this situation the question arises that is the rejection of claim for such extra charges is in consonance with the principle of indemnity? In any policy of insurance the claim amount is determined on the basis of principle of indemnity in relation to the terms, conditions and provision of the policy. For example under Fire policy indemnity for depreciation is not payable if the settlement is done on market value basis but the same is payable when settlement is done on reinstatement basis. Therefore, the criteria for admissibility of claim for any extra charges beyond agreed package rate should be examined in the context of the principle of indemnity under the health insurance policy. The TPA and their team of doctors have to judge why extra charges have been levied by the hospital. From the available papers they can analyse and determine whether the charges are on valid medical ground or not? If require they can obtain further clarification from concerned hospital/NH to arrive at a conclusion. If it is established that the charges are genuinely levied for some medical exigencies then the insured is entitled for reimbursement of the same in terms of the principle of indemnity. The policy provides for reimbursement of reasonable and necessary medical expenses covered under the policy. In such a situation the rejection of claim for extra charges on the ground that it exceeds the agreed package rate does not hold good.
On the other hand if such extra charges are not based on valid medical exigencies it only establishes that the concerned hospital/NH has violated the PPN agreement. In such a situation denial of claim for reimbursement to the insured on the grounds of violation of PPN agreement and allowing the Hospital/NH to get away scot free is gross injustice to the insured as also the breach of the agreement between two parties. Consider this aspect that for the same total charges in the bill in NON PPN hospital/NH TPA would have settled the claim for full amount considering the billed amount as standard charges of the hospital/NH. Since the violation is done by hospital/NH, one of the parties to the agreement, it is the moral and legal responsibility of the other party to either get refund of the same from hospital/NH to the insured or reimburse the same from insurers account to the insured and realize the same from the hospital legally.
If the insured has to bear the extra charges in excess of the agreed package rate in either case he will be deprived of the complete indemnity under the policy and it tantamount to violation of Principle of Indemnity on the part of insurer.
We all are aware that the health services rendered in India by Hospitals/NH in private sector is running on commercial basis as such a legitimate motive of making profit will always be there. Such establishments mainly agree for providing health services against Cashless guarantee for the reason that the cashless system increases their volume of business. But when after entering into an agreement of providing services at agreed package rates and charging extra amount without any valid medical reason they are violating the agreement. In the absence of any checks and balances in the system monitored by TPA they get scot free and as a result of this insured the one who is deprived of the complete indemnity.
The PSU companies do have set up the systems of monitoring loopholes and complaints arising under the PPN system at Head Office level region-wise for all four companies i.e. each Head Office takes care of cases arising in any of the four companies in their respective regions. However despite such mechanism the complaints are many and grievances in insuring public are rising. Wherever such HO level set-up monitor the situation seriously in effective manner the control is good but by and large there are no effective measures against such complaints in general.
In practice the PPN system has not worked in the interest of the policy holders. To achieve the goal set at the time of implementation the PSU insurers must review the entire working and introduce methods of checks and balances in effective manner in all places at the stage of settlement of claim at TPA’s office. TPA officials are in best situation to control such injustices since they get detailed bills of the hospital along with medical papers. Before settlement of the claim they must arrive at conclusion and see whether extra charges beyond agreed package rates are based on genuine medical necessity or not and accordingly settle the claim. If the hospitals/NH is habitual offender of charging without any rhyme and reason beyond agreed package rate and refuse to refund excess amount TPA can take up the matter with insurer for withdrawal of providing cashless benefit through such hospital/NH. By and large no hospital/NH would like to forego such empanelment for providing cashless benefit as this facility is in their advantage for volume of business.
In the absence of such checks and balances insured will continue to suffer, which is not desirable. For the insured option of taking up the matter with grievance authorities or with ombudsman are always open but why they should be forced to go that route for seeking justice. When such extra charging by the hospitals/NH is gross injustice now known to all concerned it becomes moral and legal responsibility of PSU companies to make PPN system meaningful. This system is definitely advantageous for all concerned provided unjustified loopholes are plugged and the insured is not deprived of his right to avail full indemnity under the policy. Also the PSU insurer will do well to review the discriminatory aspect of the scheme as narrated above.
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