CAG audit analysed TPA-wise allocation of business (annual premium) and TPA wise Incurred Claims Ratio (ICR) and found that all the four PSU insurers allocated major share of business (15 to 44 per cent) to one TPA (Medi Assist India TPA Pvt. Ltd.) despite high ICR of above 100 per cent in the claims serviced by the TPA in some year(s)
The four PSU insurers together have PPN agreements with only 2,552 hospitals (as against 9,900 hospitals in the network of Star Health Insurance Co. Ltd. and 10,000 hospitals in the network of HDFC Ergo General Insurance Company Ltd.)
PSU insurers’ market share in health insurance business is also reducing continuously vis-à-vis the Stand-Alone Health Insurers and private insurers, cautioned the report
New Delhi:
All the four PSU general insurers incurred losses in the health insurance portfolio in all the five years from 2016-17 to 2020-21. Aggregate loss of the four PSU insurers was ₹26,364 crore during 2016-17 to 2020-21. The losses of health insurance business of PSU insurers either wiped out/decreased the profits of other lines of business or increased the overall losses, according to a report by the Controller Auditor General of India(CAG) that has been tabled in the Parliament.
The four PSU general insurers are- New India Insurance(NIA),Oriental Insurance Company(OIC), National Insurance(NIC) and United India Insurance(UII)
The losses were on account of group health insurance policies where premium charged was less and claim outgo was more in comparison to retail policies, observed the report.
PSU insurers’ market share in health insurance business is also reducing continuously vis-à-vis the Stand-Alone Health Insurers and private insurers, cautioned the report.
Underwriting of Group Health Insurance Policies
Implementation of Underwriting policy of PSU insurers through test check of 188 group health insurance policies of PSU insurers revealed that non-adherence to outgo calculator and non-loading for adverse claim experience resulted in undercharging of premium of ₹1548 crore in 155 policies and excess discount of Rs9.28 crore in 3 policies (out of 188 policies examined).
Incurred Claims Ratio (ICR) of coinsurance business of PSU insurers during the three financial years from 2016-17 to 2018-19 ranged from 85.31 per cent to 196.54 per cent. In all the companies and in all the years, this was higher than the ICR of total
health insurance business (except during 2016-17 in OICL and NICL).
Hence the incoming coinsurance business was not profitable for PSU insurers, said the CAG report.
Ministry of Finance (MoF) laid down (September 2012/May 2013) guidelines for underwriting of Group policies as per which the Combined Ratio of Standalone Group policies shall not exceed 95 per cent and for group policies involving cross subsidy, the Combined Ratio shall not exceed 100 per cent. Audit noticed that MoF guidelines were not complied with by the PSU insurers and the combined ratio of group health insurance segment as reported by PSU insurers ranged from 125–165 per cent, pointed out the report..
Also, the PSU insurers (except United India Insurance Company(UII0) carried out empanelment of Third Part Administrators(TPAs), but New India Assurance(NIA) and Oriental Insurance (OIL) allocated business to non-empanelled TPAs also. Review of performance of TPAs was not carried out regularly by the insurance companies, pointed out the report.
CAG audit analysed TPA-wise allocation of business (annual premium) and TPA wise Incurred Claims Ratio (ICR) and found that all the four PSU insurers allocated major share of business (15 to 44 per cent) to one TPA (Medi Assist India TPA Pvt. Ltd.) despite high ICR of above 100 per cent in the claims serviced by the TPA in some year(s).
For other TPAs also allocation of business was either increased or maintained at same level despite high ICR in the claims serviced by the TPAs in previous years.
Safeguards such as timely signing of Service Level Agreements with TPAs, maintaining valid bank guarantees of TPAs and regular collection of claim records from TPAs were not prevalent. Resultantly, when fraudulent activities by a TPA came to light and their registration was cancelled by IRDAI, the PSU insurers could not carry out a proper investigation into claims settled by the TPA.
Health Insurance TPA (HITPA) is a joint venture of PSU insurers, formed with an objective to enhance customer experience and bring greater efficiency in health insurance claim processing. Despite, HITPA having comparable performance parameters and presence in major cities, allocation of business to HITPA by the PSU insurers was minimal.
PSU insurers took the initiative to have their own network of hospitals by forming Preferred Provider Network (PPN) but even after 10 years, enrolment of hospitals under PPN coverage was inadequate. The four PSU insurers together have PPN agreements with only 2,552 hospitals (as against 9,900 hospitals in the network of Star Health Insurance Co. Ltd. and 10,000 hospitals in the network of HDFC Ergo General Insurance Company Ltd.).
This indicates inadequate efforts by PSU insurers in tying up with a greater number of hospitals for wider coverage and geographical spread,
Claims Management
The processing of claims is largely on digital platform both at PSU insurer level as well as TPA level. The IT systems in PSU insurers lacked appropriate validation checks and controls, undermining the smooth functioning and reporting system.
This has resulted in lapses such as multiple settlement of claims, excess payment over and above the sum insured, excess payments due to ignoring waiting period clause for specific diseases, non-application of co-payment clause, breaching of capping limit for specific diseases, incorrect assessment of admissible claim amount, irregular payments
on implants, non-payment of interest on delayed settlement etc.
Data analysis by CAG audit revealed that NIA and UIICL have settled claims more than once on different dates although the policy number, insured name, beneficiary name, hospitalization dates, illness code, hospital name and disease were the same.
Audit pointed out 792 cases (₹4.93 crore) of multiple settlements in NIACL and 12,532 cases (₹8.60 crore) of multiple settlements in UIICL, as seen from database.
Further, the CAG audit observed in NIA that the claims settled to policyholder exceeded the sum insured plus cumulative bonus in 139 retail claims indicating excess payment of ₹33 lakh. In UIICL the claim paid exceeded sum insured in 2,223 claims involving
₹36.13 crore, which included group claims.
TPAs need to carry out mandatory investigation of claims as per Service Level Agreement but in NIACL, UIICL and OICL, 562 claims (for ₹40.46 crore) out of 2,735 sample claims did not contain investigation reports.
Analysis of fraudulent cashless claims in NIACL indicated that in 122 claims (₹1.39 crore) management of PPN hospital or its employees were involved and in 105 claims (₹75 lakh) management of other than PPN hospitals or its employees were
involved. NIACL failed to initiate action against such hospitals in line with deempanelment clause and investigate all claims relating to such hospitals to safeguard its financial interest.
Also, TPAs failed to report such fraudulent reimbursement claims to NIACL and continued to settle claims from the insured even after their earlier claims were proved to be fraudulent, instead of taking up with NIACL to cancel the policy, by invoking the clause regarding cancellation in the policy.