Make Insurance Frauds a Punishable Offence

The recent decision of insurance companies and TPAs to stop extending cashless mediclaim to patients in some cities was hasty and uncalled for. Agreed that some hospitals (often in collusion with patients) are inflating bills or indulging in fraudulent claims (which is estimated at 10 to 15 per cent of total claims), and that besides motor, health insurance is most prone to insurance-related frauds, but penalising policy holders for misdeeds of some healthcare institutes has been an erroneous decision and a regressive move. Differences are bound to surface in the fledgling health insurance sector between insurance companies, TPAs and hospitals. After all, it's just a decade that private players were allowed to enter the insurance industry. What may have evaded our observation is that the Government has introduced a service tax of 10.30 per cent on insurance companies for cashless claims from July this year and that could well be the reason for insurance companies' reluctance on cashless claims.

It's indeed a good tiding that some hospitals, TPAs and insurance companies are in discussion to devise a viable tariff card for medical procedures, but some long-standing concerns need to be addressed, immediately. The basic concern is that general insurance companies are bleeding in health insurance portfolio. But the irony is that health insurance sector is showing a steady growth. Estimates state that the medical insurance sector, which collected a premium of Rs 8,100 crore in 2009-2010, would account for $ 3 billion in the next three years, up from the estimated current size of over $ 1 billion.

So, what can be done to ride the growth and reverse losses? The first step would be to design and sell the right health policy, to understand risks properly and not be in a hurry to underwrite policies to just meet targets. Here are some hard-hitting questions: Are all medical officers in charge of doing risks assessments of potential policy holders doing their job properly? Are the medical tests one is supposed to undergo fool-proof enough to expose the risks? How is that potential policy holders are getting away with hiding risks? Why is that GICs selling health insurance as a rider and then claiming that their health portfolio is in a loss?

A lot more work is needed in not just designing the right policy, but also in tightening the loopholes to stop fraudulent claims. It's estimated that the Indian health insurance sector is losing approximately Rs 1,000 crore on false claims every year. Besides depleting the insurance companies, fraudulent claims also impact policy holders, as the latter have to pay higher prices for insurance products. So, preventing fraudulent claims should be addressed urgently. India should take a leaf out of the US, where to prevent losses over $ 30 billion annually to healthcare insurance frauds, the Government has introduced Health Insurance Portability and Accountability Act (HIPAA) that makes insurance frauds a criminal offence liable to imprisonment of over 10 years and financial penalties, depending on the nature of the crime. What a shame on us that recently two Texas-based NRI doctors have been convicted of conspiring to commit healthcare fraud over a 10-year-period! Besides stringent laws, we also need to create awareness about the dangers of committing frauds; we need to mainly address the smaller healthcare institutes, where such incidents are reported more often. Some studies have shockingly revealed that people feel that there is nothing wrong in inflating bills, as insurance companies/TPAs would anyways reject some of the claims. Such misguided notions need to be corrected. We also need to have more qualified people in detecting fraudulent claims.

Rita Dutta
rita.dutta@expressindia.com