Negotiated Hospital Rates under Health Insurance – For Whose Benefit?

Negotiated Hospital Rates under Health Insurance – For Whose Benefit?

There has been a huge growth in the health insurance sector over the past two decades. While intense competition among the ever-increasing number of insurers and brokers has provided the necessary push, rising medical inflation has been responsible for the pull from the insuring public. The backing of an insurer behind the patient helps the business of hospitals too. There is a symbiotic relation between insurers and hospitals – hospitals are ready to offer discounts for insurers whose larger volumes could mean more patients for them with better capacity to pay. Insurers gain by adding more and more hospitals across different geographies, thus conveying to their clients the prospect of easy cashless settlements.

While private sector insurers enter into separate agreements with hospitals fixing rates for as many procedures as they can, the four public sector insurers do so under the aegis of Public Sector General Insurance Association (GIPSA). The common platform provides them considerable muscle to get very competitive rates from hospitals as they collectively control 45% of the health insurance premium in a market comprising of 30 players.

But who are these rates intended to benefit? Are these for the benefit of the insuring public? Well, that’s what the insurers claim. But is the claim supported by facts?

For the limits to be for the benefit of the insured, two conditions must be present. Firstly, and most importantly, that the hospital actually charges only as per the rates agreed with the insurer. Secondly, that the Sum Insured under the policy (or the sub-limit for particular procedures / expenses) should be low enough to get exhausted (or considerably diminished) in the absence of such limits. If the insured has a relatively higher sum-insured, the absence of a lower negotiated rate does him no harm, so long as the insurer pays the entire admissible amount. But it does harm the insurer. If the hospital charges the negotiated rates, the insurer gains, while it makes no difference to the insured.

But do hospitals always charge the negotiated rates? Very often they do not. What happens in such cases? The insurer pays only up to the agreed rates, and the insured is left to bear the balance amount. It may not matter much to the insured if the difference was marginal. He is more focussed on the well being of the patient to bother about minor irritants. But that’s not always the case. I am currently dealing with a matter in which the insurer’s agreed rates were 20% of the actual amount charged by the hospital. That leaves a huge hole in the insured’s pocket, and takes away the rationale for him to buy any insurance.

The insurer sticks to its position that it is committed to pay only up to the negotiated rates, thereby implying that the hospital has overcharged. The hospital argues that complications in particular cases cannot be dealt with within the negotiated rates. The insured does not have the wherewithal to argue with the hospital or the insurer on these points. Of course, he has recourse to the Insurance Ombudsman and the Consumer Commissions. The institution of Insurance ombudsman does not allow a lawyer to represent the insured, and not every insured has the ability to represent himself before the Ombudsman, even with behind the curtain coaching by a lawyer or claims consultant. Consumer Commissions take considerable time to dispose of the matter. The worst part here is that the insurer expects the insured to enforce the agreement it has made with the hospital. An agreement the insured is a total stranger to. Respondents most often know from the very outset that their position is not tenable in law. They know they will have to eventually pay if the insured goes to court. And they do not mind paying after the award. After all, they were banking not on the legal tenability of their position, but on the hope that not every aggrieved party goes to court.

I do not know how often such short payments are made under the guise of negotiated rates. Perhaps my client’s case is unusual so far as the difference between the negotiated rate and actual amount charged is concerned. Are these matters simply deficiency in service? Or do these go beyond being mere disputes regarding fulfilment of contracts, and are capable of being classified as FRAUD on the part of the insurer? 

#bimavakil #healthinsurance #insuranceclaims