How we rated health insurance

Published in Mint on 17th January 2014, Written by Kapil Mehta

In July 2013, after Mint had published the first health insurance rating, I received a call from an angry public relations executive of an insurer. “Why have you rated our product low?” he demanded. I pointed him to the rating criteria that were published, asked him to go through those and then get back with specific issues. There was no return call. That’s the power of fact-based assessment.

We objectively rate products by scoring them on eight clearly defined criteria. Criteria weights are thoughtfully set. The highest scorers get an A rating and the worst C. Buying an A rated product is a safe and good choice, though in some specific cases, B and C rated products may also be acceptable.

After the previous ratings were published, many readers and insurers wrote in. That’s good. Health insurance should be a centre stage topic. In the US, the Democrats’ biggest thrust has been to remove restrictions on pre-existing diseases, create a health insurance marketplace and mandate companies to provide health insurance. In India, we are still in the nascent stages of consumer education on these features.

In this ratings sequel, Mint and SecureNow have made four changes. First, we dropped the criterion of lifelong renewability because a new regulatory guideline, which became effective in October last year, requires all products to offer lifelong renewability. That guideline had several other positive changes—all policies must now be available to people aged 65 and below, insurers cannot increase renewal premiums based just on an individual’s claim experience, and disease definitions have been standardized. These improvements are one reason why we have several more A-rated products in the revised ratings.

 

Second, we have updated the information on claim repudiation and increased its negative weightage from 15% to 20%. The best designed insurance is meaningless if a rightful claim is not paid. An insurer sent over 15 emails asking for more information when the claimant kept saying he had none; the claim was promptly paid when the matter escalated. One lady’s hospitalization claim for suspected cardiac arrest was not paid because the insurer felt hospitalization was unwarranted. Why would the person spend two days in an intensive care unit if the doctors did not feel the need? An internal cyst removal claim was denied because the third-party administrator surmised that the cyst had begun growing before the insurance was purchased—shouldn’t the person be aware of a health issue for it to be classified as pre-existing? A claimant was accused of not declaring her past history of “LMP”. We had to point out that LMP stands for last menstrual period, which is not a disease.

Of course, insurers are not solely responsible for this sorry state. Consumers regularly hide information or fake claims.

In this rating exercise, I would have liked to give an even higher weightage to claim payment.

But the data available is inadequate. What a buyer needs to know is the proportion of individual (excluding group) claims settled in a cashless manner, the rejection rate for reimbursement claims and the reason for rejections. These factors have a deep impact on product selection. Unfortunately, such information is not publicly available today. I urge the regulator to make this disclosure mandatory.

Third, we increased the negative weights for disease sub-limits, room rent caps, disease waiting periods and co-pay option from about 17.5% to 30%. These caveats and conditions make for poor health insurance. A friend was hospitalized for a procedure that cost Rs.70,000 but was paid only Rs.10,000 by the insurer because his policy had every possible cap and sub-limit.

Fourth, we fine-tuned the methodology: criteria were made consistent across ages; some new products were introduced and some discontinued; for the 65 years age group, we considered a family of two instead of four. We continue to keep maternity benefits outside our criteria because it is not relevant to the age group selected. Over time we may include some more parameters, such as the quality of out patient department coverage and value-added services offered.

There is a fifth change we wish we could have made—“issuability” of insurance—but did not have the information to. Some insurers have beautifully designed products but will issue the insurance only to those in the pink of health. Applicants with even mild health conditions get reduced sum assured or rejected. Hypertension and diabetes are commonplace. Only a few insurers are comfortable insuring such risks. One measure of issuability is the number of applications compared with the insurances actually issued. Insurers should consider publishing this.

Done right, health insurance can transform our lives. It helped a friend’s senior citizen father get a stent put at the best hospital in Mumbai. It allowed a poor golf caddie have his kidney removed by a leading doctor in Delhi. There are many people who are relieved that they had health cover. But there need to be many more. It is too important an issue not to get right.

 

 

 

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