Health insurance companies to offer 100% ‘cashless’ treatment in hospitals: All you need to know

How will 100% cashless treatment work in hospitals?

• Under the ‘Cashless Everywhere’ system, policyholders can receive treatment at any hospital without upfront payment, even if the hospital is not in the insurer’s network. The insurance companies will settle the bill on the day of discharge.
• Policyholders are required to inform their insurance company at least 48 hours before admission, or within 48 hours of admission in case of an emergency. The claim and cashless facility should be admissible as per the policy terms and the insurance company’s operating guidelines.
• Segar Sampathkumar, Director of health insurance at the General Insurance Council, stated that the 100% cashless system will be supported by a technological platform developed with the help of the National Health Authority. This new system also requires significant standardization of rates and services.

What’s the situation now?

• In the fiscal year 2022-23, 56% of health claims were settled through the cashless route, as per the IRDAI Annual Report. The cashless facility is currently only available at hospitals that have an agreement with the respective insurance company.
• If a policyholder chooses a hospital without such an agreement, they must opt for a reimbursement claim, which can delay the claim process and lead to disputes. This is particularly challenging for policyholders in rural and semi-rural areas who often struggle to access network hospitals.
• Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance, noted that only about 63% of customers opt for cashless claims, while the rest apply for reimbursement claims as they might be admitted to hospitals outside their insurer or TPA network.

Will the move boost insurance penetration?

• Insurance officials believe that the ease of claim settlements without financially burdening policyholders will benefit all parties involved - hospitals, the public, and insurers.
• The biggest beneficiaries will be the policyholders, who won’t have to pay during the treatment period, depending on the policy terms.
• The new initiative is expected to encourage more customers to opt for health insurance and reduce, and eventually eliminate, fraud. This will enhance trust in the system.
• The Life Insurance Council and General Insurance Council are actively working to enable common empanelment and interoperability with hospitals, making claim processing seamless for policyholders.
• If all insurers develop solutions for cashless treatment at all hospitals, it could revolutionize the health insurance industry and improve the insured experience, thereby increasing penetration.
• Despite potential initial glitches, this move is expected to greatly benefit the insured, according to Sudip Indani, National Head- Health & Benefits, Howden Insurance Brokers (India).

What are the issues in reimbursement mode?

• Patients often struggle to identify hospitals within their insurer’s network, leading to out-of-pocket expenses and later reimbursement claims. This process can cause difficulties, frustrations, and delays.
• Despite having insurance, many customers lack sufficient funds to cover hospital expenses and resort to borrowing money at high interest rates for urgent hospitalization. This issue is particularly acute when hospital bills are high, as seen during the peak of the Covid pandemic.
• Patients are also required to pay a substantial advance in the reimbursement system. A common complaint is that insurers often significantly reduce the claim amount or reject claims on various grounds in the reimbursement mode.

What’s to be kept in mind?

• In the cashless system, insurers will cover costs up to the sum assured in the policy. For instance, if the sum assured is Rs 5 lakh, insurers will pay the hospital up to this amount during the year.
• Some illnesses have a waiting period of two or three years before insurance coverage applies. Customers are advised to carefully read the policy documents to understand the waiting periods and choose a plan with the shortest waiting period and maximum illness coverage.

How many claims were settled?

• During the fiscal year 2022-23, general and health insurers settled 2.36 crore health insurance claims, paying Rs 70,930 crore towards settlements, compared to Rs 69,498 crore in the previous year.
• The average amount paid per claim was Rs 30,087 in 2022-23, down from Rs 31,804 a year ago. Of the claims settled, 75% were handled through the TPA, and the remaining 25% were settled in-house.
• In terms of settlement mode, 56% of claims were settled through cashless mode, 42% through reimbursement, and 2% through both modes. The health insurance segment is projected to exceed Rs one lakh crore in premium mobilization in fiscal 2023-24, with insurers having already mobilized Rs 79,559 crore in the nine months ending December 2023.

Conclusion- The introduction of the ‘Cashless Everywhere’ system by general and health insurance companies in India marks a significant shift in the health insurance landscape. This system, which allows policyholders to receive treatment at any hospital without upfront payment, is expected to simplify the claim process, reduce delays and disputes, and increase insurance coverage across the country. Despite potential initial challenges, this initiative is seen as a game-changer that could greatly enhance the insured experience and increase insurance penetration. The success of this system could set a new standard for health insurance, benefiting policyholders, hospitals, and insurers alike.