The American Journal of Managed Care February 2011
Health Insurance in India: Need for Managed Care Expertise
Member Liability Models
In the current indemnity scenario, members do not carry any liability. Health insurers have to introduce risk-sharing models with increased member liability, including benefits such as coinsurance and deductibles. This model will ensure cost sharing with the member on all treatment expenses and consequently regulate the utilization of acute services and inpatient services.
Indemnity plans encourage patients and hospitals to utilize specialist skills and opt for inpatient treatments. There are no checks and controls to prevent excessive utilization of medical facilities. Introduction of utilization control mechanisms (eg, assigning a gatekeeper or primary care physician, a firstlevel prospective utilization review) will significantly address excessive utilization.18
A typical health insurer has a provider network of around 4000 hospitals. Of these, only about 60 are in the upmarket tier-1 category, having relevant accreditations from the Joint Council International or the National Accreditation Board for Hospitals and providing international-level healthcare with high services costs.19,20 Due to the undifferentiated benefit coverage offered by health plans, members prefer treatment at these upmarket tier-1 hospitals, even if it means long wait periods and travel. This trend was confirmed in a recent study, where it emerged that 10% of the hospitals submit 80% of the claims.21 By introducing tiered networks and member incentives, members can be encouraged to utilize the other hospitals in the network, thereby ensuring balanced utilization of the provider network and resultant cost optimization.22
In India, many hospitals have a dual price list for their services. The price list is lower for patients without health insurance than for patients with health insurance. Moreover, because only inpatient benefits are provided, hospitals encourage patients to get admitted for a day to be eligible to claim the insurance. Hence, instead of lowering the costs, the indemnity nature of health insurance has actually led to cost inflation. By negotiating provider contracts with discounted reimbursement rates, insurers can help ensure that overall medical costs are reined in. Over the long term, health insurn ers have to evolve toward the more complex capitation and pay-for-performance models of provider reimbursement.23,24
Given the consumer propensity for savings and the industry trend of large out-of-pocket expenses, health insurers have to work creatively to launch products that leverage these 2 attributes. The model needs to be designed so that consumers have control of their healthcare funds and also have a financial incentive to control costs and increase their savings. Consequently, consumers will tend to selfregulate and become more judicious in the use of healthcare services.25
With more group coverage and family coverage plans in force, members are likely to be covered under more than 1 health plan. There is an increased need to study the coordination of benefits among the multiple carriers and ensure that insurers work with each other to achieve equitable liability management.
Despite the wide prevalence of chronic, lifestyle, and infectious diseases,26 Indian health insurers have not focused on wellness and preventive care. Plans have to include benefits that provide interventions and incentives for members to undertake wellness initiatives. Even though private insurers have introduced disease-specific insurance products, the benefit coverage continues to be for inpatient hospitalization services.
Although the health insurance segment in India operates in a highly challenging business environment, several options are available to the insurance firms to address the inherent impediments. Within their current framework, the insurers need to innovate in their product offerings and tighten their existing processes and cost structures. At a more strategic level, the firms have to introduce managed care techniques, which can drive wholesale changes in the healthcare industry and help create a more sustainable insurance model.
Even as the firms evaluate the various managed care models, recent developments seem to suggest that key managed care concepts have been accepted by the industry. For example, the industry regulatory body, the Insurance and Regulatory Development Authority, has recently proposed flexible premiums to support tiered networks.27 The industry has also taken the initial steps toward contracting with providers for standardized reimbursements.28 These proposed changes are a positive beginning. The health insurance industry should also implement the various other managed care levers that have the potential to mitigate the wider industry challenges (Table 2).
As the industry evaluates and introduces these managed care techniques, adequate care has to be taken to avoid the pitfalls associated with managed care. In the absence of commercial-scale pilot programs and reference results, the industry also needs to be aware of the potential weaknesses in the managed care approaches. For example, excessively restricted access, inflexible utilization controls, or excessive cost shifting to consumers can undermine all the benefits that managed care promises. Therefore, it is advisable for the industry to take a regulated and nuanced approach to managed care.
Health insurance in India cannot be examined in a vacuum. The success of the industry depends on many factors such as the health services infrastructure, financial and economic ecosystems, and government regulations and support. Health insurers in India currently face many challenges, including poor awareness, low product acceptance, and uncertain business profitability. Although external factors could be partly responsible for this situation, the health insurers also need to introspect and develop innovative models to build on the existing base. In this context, it is imperative that health insurers in India deploy managed care concepts, which will go a long way toward addressing the systemic issues in the current operational models of health plans. Managed care firms, with their relevant expertise, should leverage this opportunity and extend their services to help the Indian healthcare sector be more effective.
Author Affiliation: From Karpagam University, Coimbatore, India.
Funding Source: Mr Thomas reports no external funding for this work.
Author Disclosures: Mr Thomas reports no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.
Authorship Information: Concept and design; acquisition of data; analysis and interpretation of data; drafting of the manuscript; and critical revision of the manuscript for important intellectual content.
Address correspondence to: Thomas K. Thomas, MBA, Plot 11, Spartan Avenue, Thiruvalluvar Nagar, Mogappair, Chennai 600 037, India. E-mail: firstname.lastname@example.org.
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