How to exercise claim control measures in group health insurance
Group Health Insurance premiums in the Indian market are very competitive compared to the world market and have been driven more by prior year premiums than claims experience. As a result, organizations and employers have had a good ride, as they were able to pass the risk to insurance companies and enjoy a great range of benefits without getting impacted by the high claim ratio. (The ratio between the total claims made by the group at the end of the policy and the premium paid by the corporate without tax.). Insurance companies have been facing claim ratios of more than 120%.
Actions have consequences- since most of the coverage is indemnity, insurers have tried to control costs by various methods like identifying fraud investigation, network restrictions, and putting sub-limits. The need of the hour is to focus on managing the indemnity care where the insurers can manage the healthcare delivery. With the unavoidable rise in premiums in the near future, employers must explore some alternate strategies like:
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Room Rent Clause: Generally, in this clause room rent is restricted by linking limits to the percentage of the sum insured. Instead, it would be appropriate to customize the room rent clause for considering the private room or sharing room.
| The room rent restriction is probably the most misunderstood clause in the group health insurance policy. If the room rent is restricted to Rs.3000 per day in the policy and the total bill is let’s say Rs.1 lac after three days of admission with room rent of Rs.5000/- then normally one will assume the claim payable would be Rs.94000 after deduction of Rs.6000 ( 2000*3 days). But the claim payable is proportionate between the actual room rent of Rs.5000 and room rent eligibility of Rs.3000. In this case, it is 60% ie. 60000/-. Hence if not communicated properly the employee will be shocked to see this kind of reduction and will have a negative opinion on the overall benefits program of the company. |
Co-payment Clause: This clause brings prudence to employees. Employees will question hospitals for treatment and charges since a certain amount will also be paid out of the pockets of employees. The percentage of co-payment by an employee shall be nominal. A normal co-payment of 10% of the claim can reduce the claims of the company by more than 15% to 20% at the end of the year.
Disease Wise Cap: It is recommended that a limit of the average cost of treatment is applied to the most common ailments like Cataracts, Piles, Hernia, Hysterectomy, Gall Bladder, Kidney stones, etc. This way claims can be minimized and those who need financial support for serious ailments that create a burden on the pocket get the necessary support.
Deductibles: To restrict small value claims and thereby reduce the premium of the next year deductibles clause must be appropriately designed. It’s a clause where a flat nominal amount of say Rs 1000 or Rs 2000 is applied as deductibles per claim. However, it is advisable to apply this clause to those claims where co-payment is not applied
Preferred Hospital Network: Some of the insurers have a pre-negotiated tariff with some of the top hospitals which is less than the average cost of the treatment elsewhere. Overall, claims can be drastically brought down by encouraging members of the policy to opt for the preferred hospitals, which can be encouraged by removing the co-payment or the deductible clause with respect to the treatment in the preferred hospitals.
Also, the company can work with the insurer or its broker to arrange cashless treatments at the preferred hospitals. Increasing the room tariff limit in the preferred hospitals is also one more way of encouraging the employees to opt for preferred hospitals.
The flip side of applying these measures is if not communicated properly these changes in policy terms are perceived negatively by employees. Consequently, many employers either simply bear the cost of an increased premium year after year or face the risk of diminished employee satisfaction. There is an urgent need to develop long-term measures and metrics which would help in containing costs and ensuring the effective management of health benefits.
Companies should consider a flexible benefits strategy and the kind of structure that would be most appropriate in the context of employee satisfaction, expense control, and revenue growth.
