Chapter 7- Strategies for Synergy, Findings & Conclusion

184
7.1 Strategies for Synergy

Hart (1991) has noted ―Higher performing firms appear capable of blending competing
frames of reference in strategy making. They are simultaneously planful and incremental,
directive and participative, controlling and empowering, visionary and detailed‖. Based on
our research study which includes a closer look at the Indian health insurance market and
trends, stakeholder‘s analysis, insight gained through the study of provider‘s perceptions,
value chain analysis and competitive diamond of health insurance in India indicates that
there are different strategies that can help develop synergy among insurers and providers.

These strategies could be categorized, given the efforts required, the environment and
potential impact at different level i.e. at the industry level, at the firm level and at the
insured level (Figure 7.1).

Figure 7.1: Strategies for Synergy (at different levels i.e. Industry, Firm and Insured)

185
7.1.1 Strategies at the Industry level

At the industry level four different strategies are being proposed that can help bring
synergy among insurers and providers. These are standardization; focus on technology and
training; building trust and transparency; and regulatory and government interventions.
Let‘s discuss each of these strategies one by one.

7.1.1.1 Standardization

The standardization strategy is all about bringing in standardization in different processes

and systems that are followed by the insurers and providers at the industry level. It
includes activities like selection of providers, documents like service level agreement,
processes like standard treatment guidelines (STGs) and different forms and formats.

• Selection of providers: In health insurance business the selection of provider is a

very critical activity and most of the time requires a dedicated team. This activity is
critical because wrong selection of providers can lead to host of problems leading
to decrease in profitability and market share and also loss of reputation. Based on
the findings of our study the selection of providers is undertaken for following
reasons: First, to have a list of hospitals where the insured customers can go and
avail cashless services; Second, to select providers such that they are geography
well distributed and well within the reach of the targeted customer segment; Third,
to provide quality care at reasonable and customary charges; Fourth, to be able to
provide value added services like ambulance, health check-up, discounted out-
patient services and diagnostic services; Fifth, in few cases to built a unique service
proposition, for example, by getting in to a strategic tie-up with a provider which
has exclusive relationship for processing cashless benefit.

Out of the above reasons, one can argue that the most important is the third one i.e.
to provide quality care at reasonable and customary charges. The term ―reasonable
and customary‖ is defined as charges for services or supplies, which are the
standard charges for the specific provider and consistent with the prevailing

186
 charges in the geographical area for identical or similar services among comparable
providers, taking into account the nature of the illness/injury involved. But from a
synergy angle all the other reasons are equally important because it give a chance
for both the insurer and providers to contact at regular intervals and also help
understand each other requirements and needs better.

One of the key findings of the study which was highlighted by the healthcare
professionals was that they feel that the selection of providers is not done fairly.
That it‘s the discretion of the TPAs or the insurance company and that there is no
standard process followed for undertaking this activity. It was also suggested that
there are few TPA‘s which charge kick-back from the providers for getting into
their panel. Now, if this is the condition to get into empanelment, then why the
hospital should not charge more for insured patients? Well, what clearly comes out
from the field investigation is that there is a pressing need to have a standard
process that should be followed for selection of providers and it should be
transparent in nature, to an extent that the providers know the reasons for not
getting selected for extending cashless benefit. Our reading to this whole situation
is that if the process of selection of providers is standardized then the insurance
companies would be able to create confidence in the minds of the provider and in
return would expect the providers to bring in standardization in the areas like
treatment guidelines and billing. Thus, factors like - selection of providers can
affect the level of synergy between the insurers and providers and should be
addressed appropriately at the industry level.

• Service Level Agreement: The term SLA is quite frequently used in the health
insurance industry. This may be because of the fact that there are multiple parties
involved in processing and extending benefits under the health insurance policy. It
includes the TPA‘s, the providers, the insurers, the brokers and ancillary service
providers (providing services like investigation and pre-policy check-up). An SLA
with the insurer and provider normally contain the following sections: Definitions
and Interpretations; Admission of patients; Pre-Authorization and Case
Management; Charges for Services; Billing and Payment; Management of Care and

187
Quality Standards; Inspection, Audit and Access Rights; Confidentiality; Data
Protection; Trademark, Promotions and Publicity; Liability and Indemnity;
Relationship Management; Terms and Termination Rights; Notices; Assignment
and Sub-Contracting; Remedies and Waivers; Relationship between the parties;
Invalidity; Entire Agreement; Governing Law and Jurisdiction and set of Schedule
and Annexure.

The current problem is that there is no standardization of SLA‘s between the

different parties and on few critical key performance indicator like- turnaround
time for processing cashless hospitalization and turnaround time for processing
reimbursement claims. Since as per current regulation both insurance companies
and the TPA‘s are allowed to work with more than one players, just imagine if a
TPA is working with twenty one insurance companies, it needs to have twenty one
different SLA‘s . So, if there had been a standardized SLA, it would become much
convenient for them to measure and monitor it. The same state of affairs is with the
SLA between providers and TPA‘s. Most of the TPA‘s have their own SLA
agreement and thus it becomes extremely difficult for the providers to measure and
monitor the same. Here, the suggestion is not to standardize the SLA completely
instead the proposition is that the major component of the SLA should be
standardized leaving space for ‗schedule and annexure‘ which could be signed
based on multiple factors. These annexure would also give the required flexibility
for areas like fees, value added services etc. The benefits of standardization of SLA
and inclusion of common industry benchmarks will help bring in focus and clear
expectation from the service provider, whether it is the TPA‘s , the providers or the
insurers.

Since, SLA contains the details of services that would be offered including
criteria‘s for evaluation of service level (including penalty clause), it is important
that there is proper due diligence at the time of signing the agreement. Since, it is a
formal document signed between the provider and insurer/TPA, the value it can
create to bring in synergy cannot be underestimated.

188
 • Standard treatment guidelines: One of the common feedbacks received from the
stakeholders was that there is lack of standard treatment guideline followed by
most of the providers. It was also observed that by implementing standard
treatment guidelines there could be more transparency in the existing system. As
per WHO there is a close relationship between STGs and costing. Health systems,
particularly in developing countries are faced with burgeoning health needs on one
hand and limited resources on the other. Policy makers at various levels are
engaged in developing cost-effective health interventions that ensure accessible and
affordable quality care that concurrently serves the poor and vulnerable groups.
They are also increasingly functioning as purchasers of care. To enable evidence
based decision making, it is critical that they have information about the nature of
costs incurred for providing services as per STGs. Such information on costing of
health services would help in estimating the amount of resources required to
provide healthcare services, ensure better monitoring and decision making.
Information on range of costs of healthcare services could become a base for
negotiating with the healthcare provider on the payment mechanisms in health
insurance and any other healthcare purchasing mechanisms. In India, while several
studies have attempted to examine the issue of costing of health services there exist
inadequate information on how much it would cost to provide services as per
Standard Treatment Guidelines across different levels of care. This aspect would be
helpful in estimating standard cost of health services, which could be used for the
purpose of health insurance or any other provider payment mechanism followed in
the country47.

The problem of overconsumption may also be addressed by following standard

treatment guidelines because of availability of guidelines on diagnostics and line of
treatment to be followed for a specified aliment. The STGs also document the level
of diagnostic to be used. For example- it will require the doctor to first get the
Electrocardiogram (ECG) done in case of a heart problem and not high end
diagnostics. During our investigation, to follow standard treatment guidelines was a

47
Source: www.whoindia.org

189
 common suggestion. This can also help in bringing in transparency in the existing
system. However, it has been argued by the doctor‘s community that there are cases
which are complex and involve multiple line of treatment and one cannot have
standard guidelines for the same (for example, multiple organ failure). It is also
being thought that it will restrict the freedom of the doctors in deciding the line of
treatment. Looking from the customer and the insurer perspective, one can argue
that the providers who will start following the STGs would be able to enhance
synergy within the system and will also somewhere control cost by avoiding
overconsumption.

• Standard forms and format: In health insurance there are different types of forms
and formats used by both the insurers and the providers. These forms are used by
different parties and are used for different purpose. Here, let‘s take an example of
each and see how standardization of these will help in develop synergy among
players at the industry level. There are different kinds of forms used during the life
cycle of a health insurance contract like the proposal form, cashless request form,
reimbursement form, provider empanelment form, complaint form etc. Taking the
example of cashless request form, it was observed that it is very difficult for the
providers to keep different cashless request form of different TPAs and insurance
companies. In few cases it was observed that the name assigned to these forms are
also different. In few cases it is termed as ―pre-authorization form‖ and in others as
―cashless request form‖. Also, the contents within each form were not capturing the
same details. Here, one would like to argue that since the intent of the cashless
request from is same across providers and insurers i.e. to intimate the insurer about
possible claims and seek pre-authorization for cost of treatment, the same should be
standardized. This will help both the providers and insurers at the time of
processing the cashless claims and make it convenient for the operators to manage
such transactions and reduce errors.

During our study it was found that due to lack of standardized billing format both
the insurers and the provider‘s faces difficulty. The insurer get affected as they are
unable to take a claim decision due to unavailability of a specific data (for example-

190
 the room rent category in the bill format), due to this both the insured and the
providers also get affected, as the payment is not made. To address these issues it is
proposed that there should be a standard billing format that should be used for the
purpose of health insurance billing.

7.1.1.2 Technology and Training

The technology and training strategy at the industry level is primarily derived for handling
issues linked with training, lack of specialized training institutions and courses linked to
health insurance, current and future use of information technology, communication
between insurers and providers and with the objective to achieve efficiency and
effectiveness.

• Training issues: As the terms suggest that there are issues linked with training. It
was felt across the stakeholder‘s that there is lack of training when it comes to
health insurance. Starting from training the agents who sell the policies to the
customer, the insurance desk executives at the provider end and finally, the claim
staff who process the claim (both at the TPA‘s and the insurance companies, as the
case may be). On critical examination it was found that lack of training in the area
of health insurance is because of multiple reasons, which includes: lack of funds;
lack of trained manpower (trainers) and infrastructure; focus on just selling and not
focusing on quality of sale; health insurance being a loss making portfolio, thus any
expenses in training was never thought as an investment; Incase of providers there
is high level of attrition at the insurance desk and also due to lack of time, given the
work pressure. It was also sensed that this scenario is slowly changing and that now
the insurance companies with increased level of competition has started giving
focus to training of employees at all levels. The TPA‘s are also been forced by the
insurance company to train their staff at regular interval. The area where we are
currently lacking is that of provider training. Unfortunately, the training of
providers is not in the priority list of either the TPA‘s or the insurance companies.

191
It was a common feedback from the healthcare professionals that there is a lack of
training given to them either by the TPA‘s or the insurance companies. In case of
TPA‘s there were comments that they make visits to the provider only in two
situations. One, when they are signing the contract and the other in case of some
sort of audit. There is no extra effort made for training. Well, from a healthcare
provider perspective, they are not trained in the area of handing health insurance.
Their primary role is to provide health care services and not to manage pre-
authorization and do follow-up with the insurance companies for payments.

The question, whose responsibility is it to train the provider for processing health
insurance patients has not been addressed in the current system and it left to the
providers to learn by hit and trial method. On critically examination, it was found
that the training aspect was not give importance that it deserved by the industry
players from the beginning. Simply speaking training was not in their priority list.
The main problem with the hit and trial method is that most of the times a win-win
situation between the provider and the customer is worked without looking in to the
long term impact of the actions undertaken. For example- if the provider mis-
represent the facts at the time of hospitalization so that the customer get paid
through insurance, it‘s a win-win situation for the provider and the customer, but in
the long run, it is the customer who is going to pay extra premium. There are also
chances that the provider might lose its contract with the insurer due to such
fraudulent activity. It doesn‘t mean that hit and trial method should not be tried at
all as it has the power to create innovative solutions. What is being suggested is
that if there is an activity derived out of hit and trial method and that create value
for customers in the long run then such practices should become the part of the
training module. Then, there should be efforts to communicate such process,
protocols and procedure to a wider audience by conducting training programs. Such
training programs should also include session on technical and skill building
activities.

Specialized training institution and courses: One of the reasons discussed under
lack of training issues was lack of specialized training institution and courses

192
 designed to address the training needs of the Indian health insurance market. There
are multiple reasons for such poor development of specialized training institutions
and courses in India. First, the size of health insurance market was less than 500 Cr
in the year 2000 (please refer to Chapter 4 where we have discussed the trends in
Indian health insurance industry). Second, the number of manpower deployed for
managing health insurance business was less and most of the times, there was no
dedicated team for managing health insurance portfolio. Third, as the health
portfolio was bleeding with high claim ratio, it was not thought a good idea to
spend money in training. Fourth, with the introduction of TPA, it was thought that
they will be responsible for training, not realizing that the fee that is paid to them is
not sufficient enough to manage the exiting manpower and infrastructure
requirements. Fifth, since the TPA‘s were not adequately paid by the insurance
companies, they did not nurture the need for training.

However, this scene has changed quite drastically over the last 10 years. The pace
at which the health insurance market has grown and with increasing demand the
need for specialized training institutions and courses has increased across the
country. Currently, there is not more than couple of institutes those who have
introduced courses on health insurance. If the industry wants to sustain this growth
then it has to start investing now for development of institute of excellence in the
area of health insurance. Without good institution you cannot expect to get trained
manpower. Based on field investigation and interviews with industry specialist
there is a pressing need to develop course curriculum based on the needs of the
health insurance industry. It is though these specialized training institutions and
courses that one will be able to produce trained manpower required to sustain the
current and future growth of Indian health insurance industry.

• Use of information technology: It would not be wrong to say that information

technology has changed the way we live our lives today. The potential to use
information technology in health insurance is tremendous. The different activities
under health insurance starting from enrollment, underwriting, claims, customer
service, renewal, fund transfer, regulatory compliance and actuarial analysis could

193
 be tied together with a string called information technology. The role which
information technology can play in making these activities hassle free and efficient
is tremendous. Talking about connecting with the customer, TPA‘s , providers,
consultants, diagnostic centers etc. which at times involve a day-to-day transactions
like preauthorization, query resolution, verification and settlement of claims can be
handled well by using information technology. During our field investigation it was
found that most of the times the customer are not aware about the status of their
claim. In fact, in few cases it was told that they have lodged their claims few
months back but are not aware of the status, nor they have received any
acknowledgement of receipt. This feedback clearly states that the level of customer
satisfaction is low because they are not informed about their insurance claim. The
question is – what an insurance company (when we say insurance company it
includes the TPAs) can do to keep the customer informed about their claims? Is it
such a difficult task? Well, the answer to this came from our field investigations.
There are few insurance companies those who are using information technology to
solve this problem. What they have done is that they have installed an auto Short
Messaging Service (SMS) at the time of claim processing. The moment a claim is
received by the insurance claims team, and the policy details are entered in the
system, an auto SMS is send to the mobile number of the customer. As and when
the claim file moves from one desk to other, the customer is updated with the
status. In fact, even when a query is raised, the same is send via an SMS to the
customer. This not only save time in processing the claim but also keeps the
customer informed and satisfied. Thus, even for small activities information
technology can help improve customer satisfaction.

During field study it was observed that both providers and insurers are not satisfied
by each other services. For example- the provider is not satisfied with the payment
cycle; they feel that the TPA‘s and insurance company takes more than 21 days for
settling their dues48. The providers are also not satisfied with the turnaround time
taken for processing the pre-authorization request. In case of insurer, they are not

48
Please refer to Chapter-4 for details of our research findings.

194
 satisfied with the customer identification done by the providers at the time of
getting admission in their respective hospital. So, how can information technology
help in bringing synergy between the insurers and the providers? Well, the answer
is simple, by helping both the parties to bridge communication barrier. In the first
case, the payment cycle can be drastically reduced if the payments are done via
electronic transfer and not through cheque mode. This will not only save the cost of
issuing and couriering the cheques to the providers but will save time which is
consumed in getting the money transferred. In case of pre-authorization,
information technology can be used for processing pre-authorization on-line. As
per the current regulatory requirement, the customer and the treating doctor needs
to sign in the pre-authorization form but even that being the case, the authorization
can be processed in good faith. The physical copy of signed pre-authorization can
be retained by the provider and can be forwarded to the insurer at a later date.
Talking about the satisfaction of insurers, the providers can use web camera to
capture the photograph of the patient and can send it to the insurer digitally at the
time of processing the preauthorization request. Thus, it will make the verification
process much simpler. However, installing such devices would not be possible for
all the providers, especially those who are based in rural location but with growing
infrastructure one can well imagine that it would not take much time to make the
installation of digital technology a reality in the rural space. In fact, RSBY is a live
example to support the above argument. Thus, information technology can help
bring better and faster means to communicate between insurers and providers
resulting in developing synergy between them.

• Communication between parties: There are multiple layers of communication that

take place between the insurers and the providers. These communications can be at
the transactional level, managerial or at the strategic level. Transactional level
communication will include the day to day activity like sending and receiving the
pre-authorization, answering queries linked to a cashless claim, customer query and
complaints.

195
Figure 7.2: Communication pyramid between insurer and provider (Frequency)

The managerial level communication includes those communications which

involves the manager of both the parties and the frequency of which is either
monthly or quarterly. The strategic level communication includes those which are
made at the CEOs or Owner‘s level and take place with the objective for setting the
strategic direction of the future relationship. Depending on the frequency of
communication we can draw a communication pyramid (Figure 7.2). The
transactional level communication is at the bottom of the pyramid, followed by the
managerial and the strategic level communications (at the top).

The findings suggest that there is huge potential to use technology in both
transactional and managerial communication activities which can help bring in
synergy in the current system and efforts should be made by both the insurers and
providers in this direction.

• Efficiency & Effectiveness: Both these words go hand in hand, when looked from a
synergy perspective. On one hand efficiency refers to doing things in a right
manner. (scientifically, it is defined as the output to input ratio and focuses on
getting the maximum output with minimum resources) and on the other hand

196
 effectiveness refers to doing the right things (it constantly measures if the actual
output meets the desired output).Since efficiency is all about focusing on the
process, importance is given to the ―means‖ of doing things whereas effectiveness
focuses on achieving the ―end‖ goal. In the area of health insurance, delivery of
health services if not efficient, will not only lead to escalated cost but also to in-
efficiency. A common example for both efficiency and effectiveness would be the
area of diagnostics. If an insured is not administered the right type of injectables
(contrast- ionic and non-ionic) at the right time while undergoing a CT-Scan or
MRI, this could lead to improper results. This is an example of in-efficiency. If the
insured is asked to go for a CT-Scan instead of going through an ECG then it will
fall under the category of in-effectiveness. In both the cases the cost incurred
towards diagnostics would be one the higher side resulting in the insurer to pay
more. Here, technology can be of great help by ensuring that both efficiency and
effectiveness is maintained leading to cost saving to both the insurers and
providers. Thus, to bring in synergy it is important that an attempt is made by both
the insurers and providers to develop measures and implement processes, system
and decision making that is both efficient and effective.

7.1.1.3 Trust and Transparency

The trust and transparency strategy is nothing but to make efforts to develop trust
and transparency among different stakeholders of the health insurance industry by
coordinated efforts and planned approach.

In the social sciences, the subtleties of trust are a subject of ongoing research. The
degree to which one party trusts another is a measure of belief in the honesty,
fairness, or benevolence of another party. In psychology ‗trust‘ is to believe the
person who you trust to do what you expect. Trust is also seen as an economic
lubricant, reducing the cost of transactions, enabling new forms of cooperation and
generally furthering business activities, employment and prosperity. This

197
 observation49 created a significant interest in considering trust as a form of social
capital and has helped understand the process of creation and distribution of such
capital. It has been claimed that higher level of social trust is positively correlated
with economic development. Applying the above definition in the context of
insurance industry, what emerges is that there should be honesty in dealings,
fairness in approach and delivery of expectations by all the stakeholders in order to
assess the presence of trust among them.

The study findings suggest that there is a lack of trust between the different
stakeholders at the industry level. This conclusion is drawn by studying the above
listed three parameters i.e. honesty in dealings, fairness in approach and delivery of
expectations. During interviews with stakeholders it was found that both the
insurers and providers were questioning the honesty of each other. The insurers
were of the opinion that the providers are not honest in their dealings and charges
more for cashless cases. On the other side the providers were of the opinion that
insures are not honest at the time of selling the health insurance policies, leading to
problems at the time of making the claim. Also, the insured customer and the
TPA‘s were apprehensive about the honesty displayed by the insurers and
providers. There were also comments which highlighted that at times the parties are
not fair in their approach. This observation gets validated by one such instance
where few public sector insurers stopped cashless facility in metro cities due to
losses in their health insurance portfolio without consulting the providers. The
study also highlighted the lack of delivery of expectations. In addition to lack of
trust among different stakeholders at the industry level it was also observed that
there is lack of transparency. For example- it was found that there are providers
which have differential tariff for health insurance business that is higher than their
normal tariff.

49
Fukuyama, F. (1996) Trust: The Social Virtues and the Creation of Prosperity, Touchstone
Books.

198
 Since, both trust and transparency are the building blocks for developing synergy
it‘s being proposed that the trust and transparency strategy will help bring in
synergy not only at the insurer and provider level but at the industry level.

7.1.1.4 Regulatory and Government interventions

The regulatory and government intervention strategy is to understand the need, role
and power of the both the regulator and the government for the insurance and the
healthcare industry. Ways to fill the regulatory gap in the healthcare sector and to
balance the regulatory equation between the insurance and healthcare industry.
Also to have a policy framework for the health care industry.

In India, on one side the insurance industry is highly regulated and on the other the
healthcare industry is highly un-regulated. One of the main objectives of the
insurance regulators is to safeguard the interest of the policyholders and rightly so.
But on the provider side (health care industry) there is lack of regulations and from
a strategic perspective the regulatory equation between the insurance and healthcare
industry is highly skewed towards the insurance side. It is quite an irony that when
one deals in finance there is heavy regulation but when take about on life and
health, there is hardly any.

The role of the regulator is very critical especially when the industry is open up for
private players and there are provisions for foreign direct investments. Our desk
research highlights that the insurance regulator has taken multiple initiatives for the
orderly growth of health insurance industry. The insurance regulator has taken the
initiative to form a joint working committee to look in to the area of health
insurance. It has licensed few stand alone health insurance companies and is
looking into the recommendation of reducing the working capital requirement for
standalone health insurance companies. It is also responsible for licensing of
insurance companies and TPA‘s and approving health insurance products along
with its marketing literature. The insurance regulator has done quite a fair job in
handling customer grievances. Recently, it has opened a call center, where the

199
customer can lodge their complaints. Having said this there is a lot of additional
efforts and initiatives which should be undertaken by the insurance regulator to
bring in more synergy within the market. Some of the areas where immediate focus
is required are that of managing health insurance fraud and creating awareness and
trust among the general population regarding health insurance. During our
interview with providers, one critical comment which came was that there is no
effort by the insurance regulator to visit and meet network providers and seek their
feedback for insurance companies and TPA‘s i.e. to understand the problems faced
by the providers and then take corrective actions. Another area where the insurance
regulators is lacking is coordination with their counterparts in the healthcare
industry like the Indian Medical Association and to make a road map for the
orderly growth of the health insurance industry and take initiative to remove the
current bottlenecks and thus create synergy between the insurers and providers.

Talking about the level of regulation in healthcare industry, the current picture
looks quite poor. Even, the basic structure of licensing of hospitals is missing in our
country. There are few States which have some sort of rudimentary licensing
mechanism for registration of hospitals and nursing homes that to without
undertaking any physical inspection. In few States the hospitals are given
registration under shops and establishment act without proper verification. The
primary reason cited by industry experts is that in India, healthcare come under the
state subject and it is the responsibility of the respective State to manage the health
of its people. Also, the funding of health by the government is quite low and it
seems that it has been left up to the private players to manage the tertiary level care.
The reason for above criticism of the government is not to highlight their in-
efficiency in managing the health of its people but to identify the areas where one
should work to make health more accessible, affordable and inclusive.

One cannot question the power of the regulators to bring in drastic change in the
existing structure and to exert a so called pressure to develop synergy within the
system. For example- if both the regulators wants they can form a committee to
develop a standard treatment protocols which then would be linked to the cost of

200
 treatment (with necessary grading of providers). Such initiative can go a long way
in developing synergy among insurers and providers.

Our study suggests that there is a need for the Indian Government to intervene in a
planned manner to ensure the growth of both insurance and health care industry.
Here, one would argue that the interventions are required more at the level of
policy framework for the healthcare industry. The reasons for this argument are as
follows. First, currently there is no law on health care which speaks about quality
and patient safety. Second, there is lack of control on the private health care
providers when it comes to their registration. Third, there is a shortage of both
hospital beds and doctors in the country and the current infrastructure is not
sufficient to fill the gap. Fourth, there is no standardization of health services and
cost. Thus, it is important for the government to make necessary interventions in
the area of healthcare.

7.1.2 Strategies at the Firm level

At the firm level four different strategies are being proposed that can help bring synergy
among insurers and providers. These are existing relationship between the insurers and
providers; claims and cost; need for care and need for cover.

7.1.2.1 Existing Relationship

The existing relationship strategy is to focus on building the existing relationship at

the firm level to bring in synergy among insurers and providers. This include the
areas linked to provider payment, doctor-patient and doctor-insurer relationship,
relationship with intermediaries, discount offered by providers, frequency of rate
increase and the grievance handling mechanism.

• Provider payment: The study findings suggest that the providers do not receive
payment in time and that it is perceived as a critical factor by the providers while

201
evaluating the services of the TPAs and insurance companies. It was observed that
delays in payment to providers are at times being used as a rationalization for
charging more money from the insured patients. During our discussion with
different stakeholders it was found that if the payments to providers are made well
within the agreed timeframe then it would help built confidence in the minds of the
providers for the services promised by the insurers. This will also affect the level of
services offered to the insured patients. For example, if the payments are not
received by the provider from a specific TPA, then there are chances that the
provider will deny cashless facility to the insured customer of that TPA or may ask
the customer to make advance deposit. In fact, it was observed that in few cases the
insured patients are asked to deposit the entire amount at the time of cashless with
the promise that the same will be refunded once they received the claim amount
from the respective TPA or insurer.

The delay in provider payments could be due to multiple reasons, some within the
control of insures and providers and some outside their control. This delay
increases if there is no direct interaction between the payer and the payee. For
example, in the case of most insurers, the payment is routed through the
intermediary i.e. the TPA, which affects the payment timelines. During our study it
was observed that the insurers are not focusing on provider payments. This was
evident by the fact that in most of the cases the payments is monitored by the
finance team and there is no direct responsibility of the network relationship team.
However, in few cases it has been noted that the facilities like electronic funds
transfer are being used, which is able to reduce the payment cycle to a larger extent.

Another area linked to provider payments is the reconciliation process between the
insurers and providers. We suggest that this should become one of the core
responsibilities of the team managing provider relations at the insurers end and
should not be just left with the finance department. To move a further step in
developing relationship between insurer and providers it is important that provider
payments are taken seriously by insures and TPAs, failing which it would be
difficult to develop synergy.

202
• Doctor – Patient and Doctor - Insurer relationship: The first part i.e. the doctor-
patient relationships is well talked about. However, given the current development
in the health insurance sector and looking at the change in financing of healthcare
in India, it is important and necessary to discuss and understand the second part i.e.
the doctor and insurer relationship. If one looks at the doctor-patient relationship,
which seems to be much stronger than the provider- insurer relationship, the
physician sympathies tend to favor giving the patient the benefit of doubt where
possible. This may go to the extent to modify the diagnosis or recommended
treatment to confirm to the coverage of insurance policies. Our finding suggests
that unfortunately the second part is the most neglected one. What we want to argue
here is that to develop synergy between the insurers and providers it is critical to
harness the relationship between doctors and insurers. It is important for both the
parties to make efforts to built long term relationship and to understand each other
perspective in serving the common client who simultaneously act as a patient on
one side and as a insured on the other. To built long term relationship one needs to
first understand the priorities and expectations of each other. In addition to this
there are financial goals in mind. The problem is that they tend to achieve short
term financial goals at the cost of the other, not realizing that in the long run they
will only bear the additional cost. So, there is a need to develop an understanding of
each other expectation and invest in developing relationship. This could be possible
only when both the parties are willing to understand each other role in serving the
common client. There is also a need to appreciate each other role and not get into
the mode of blame game. It is highly probable that the insurance companies which
are going to invest in developing relationship with doctors will be able to develop
competitive advantage in the long run.

• Relationship with Intermediaries: The relationship with intermediaries can also

play an important role in bringing in synergy among insurers and providers. As
seen in case of doctor insurer relationship, the relationship with intermediaries can
also help serve the common client better. In health insurance industry it is often
said that insurance is not purchased but is sold. Here, the intermediaries like broker
and agents plays an important role. In case of healthcare these intermediaries would

203
 include referral partners. Harnessing relationship with these intermediaries will
help understand each other needs and expectations. Once the needs and
expectations are understood then one can design appropriate programs to add value
to the current service proposition and address the areas of concerns. Any such
programs that add value to the insurer and provider on-going efforts to serve the
insured will help bring in synergy.

• Availing discount for insured patients: In the current scenario, the term discount is
often used with ‗volume‘ i.e. you can expect to get discounts if you provide volume
business. The same is applicable in the health insurance industry. During field
survey it was found that most of the tertiary care hospitals above 100 beds do not
give discounts to insurance companies. This may be because the contribution of
business from insured patients is not so high and also because of other factors like
high administrative cost (incurred for processing cashless benefit), delay in
payments from the providers, etc. In the Indian market the discounts that are on
offer can be quite tricky. At the face of it, it looks that there is a cost saving but in
reality it is difficult to ascertain the real benefit (if any). More so in healthcare
where there is no standardization in terms of cost and for same treatment the cost
can vary drastically even in the same hospital. The problem is that the real value of
discounts has not been explored fully in the healthcare market and it cannot be
conclusively said that discount offered on letters are actually discount offered in
spirit. Currently, the discounts are offered to insurance companies by providers in
terms of percentage over the total hospital bills excluding the cost of
consumerables and implants. To understand this phenomenon better, let‘s take an
example- suppose the provider has agreed to give 10 percent discount in the bills so
as to get empanelled in the network list of the insurer (there have been indications
by the providers that if they full-fill the condition of giving discounts, then only
they will be included in the network list of some TPA‘s) and when a insured
customer gets admitted, the extent of stay may be increased resulting in higher
claim out-go. So, in this case even after providing discount there are opportunities

204
 available with the provider to recover the ‗earning lost‘ as discounts. Thus,
discount can help in developing synergy only when it is offered and implemented
both in letter and spirit and will be guided by the level of existing relationship
between the insurers and providers.

• Frequency of rate increase: During field survey it was found that most of the
hospitals above 100 beds increase their rates annually (for detailed analysis please
refer to chapter 6). This has a direct impact on the contract signed with the
insurance companies. It becomes extremely difficult for the TPA‘s and the
insurance companies to keep updating their records every year. Just imagine if a
TPA has 3,500 network providers and the rates of these hospitals changes
frequently, then on an average they will be only updating charges for 10 providers
each day (assuming they work on weekends). Apart from time consumption there is
additional administrative cost involved in updating the hospital charges. It was told
by the TPA and insurance company‘s officials that it becomes extremely difficult
for them to manage frequent hospital rate increase and they would prefer if the rates
are decided for a longer duration (ranging from 3 to 5 years). Another area linked to
the rate increase is the quantum and justification of rate increase i.e. what
percentage of rate is increased and with what justification. As per the current
industry practices, the providers are just intimating the TPA‘s and the insurance
companies (where there are directly dealing without the TPAs) of the rate increase
without giving any justification. Surprisingly, there are no efforts by most of the
TPA‘s to question the same apart from, but few. This could be possibly because
they are not directly incentivized by the insurance companies for undertaking this
activity. Also, it is thought to be a difficult nut to crack i.e. to go back and question
the providers for their rate increase. During field investigation we hardly found any
TPA‘s maintaining the records and statistics for frequency of rate increase by their
network providers. What they have in place is just the mechanism to upload the
revised rate list in their system. In management there is a saying that what you
can‘t measure you can‘t control and this is very much true in the given case. If, the
insurance companies and the TPA‘s does not measure the frequency of rate
increase by the providers then there is a high probability that the industry will see

205
 more and more providers increase their rate frequently. This will directly impact
the claim out-go of the insurance companies and would lead to a win-lose situation.
The provider will get benefited by frequent rate increase and the insurer will lose
by higher claim cost.

It was also found that there is lack of proactive measure by the TPA‘s and
insurance companies to manage the frequency of rate increase by the providers.
The best time to control this is at the time of signing the SLA with the service
providers. It is advisable to sign a contact with the providers clearly stating the
frequency of rate increase. This will help not only to control claim cost but will
also reduce the administrative hassles of both the parties. Here, one can argue that
this will again lead to a win-lose situation, with the only difference that now the
insurance company gains with control over cost and the provider looses as there is
no increase in the rate list. Well, what is suggested is not that there should not be
any rate increase by the provider but the rate should be so adjusted that they are not
changed frequently and that there is a justification which is shared by the providers
to the insurers and TPA‘s so that they don‘t feel that the rate increase is not
justifiable. Thus, better management of rate increase both in terms of frequency and
justification will help bring in synergy among insurers and providers.

• Grievance handling mechanism: During our investigation it was observed that all
the insurance companies are expected to build a grievance handling mechanism for
the insured customer. However, what was found missing was the same mechanism
for providers i.e. to have an independent dedicated team who can handle grievance
related to network providers. As discussed earlier that there are multiple things that
can go wrong while processing a claim, resulting into a grievance. If such
grievances are not addressed appropriately at the right time then it can hamper the
existing relationship. Thus, it is important for the insurers to ensure that there is
mechanism in place to handle provider related grievance which should be
document well so as to be used at a later date for decision making. There can be
different types of grievances that could be raised. Some of them could be financial
in nature and others could be linked to fraud and corruption. The insurers should

206
 understand such differences and develop their handling mechanism accordingly.
Satisfactory resolution of grievance will help both the insurers and providers to
built trust and in bringing synergy among themselves.

7.1.2.2 Claims and Cost

The claim and cost strategy is to manage the claims and cost in a way that it helps
develop synergy among insurers and providers. The strategy talks about managing
health insurance fraud, decision on whether to manage claims in-house or it should
be outsourced to TPAs. The impact of co-payments and deductibles on health
insurance claims. Also, the impact of selection of room rent category and outcome
based payment system.

• Health insurance fraud (prevention, detection and response): Association of

Certified Fraud Examiners (ACFE), the world largest association on Anti Fraud
defines Fraud as any intentional act or omission designed to deceive others,
resulting in the victim suffering a loss and/or the perpetrator achieving a gain. In
health insurance the source of fraud can be insured, insurer, provider,
intermediaries and any combination of them. As per industry experts some fifteen
percent of total claim cost is lost due to fraud. So, if the fraud risk is managed in a
way that from current fifteen percent, the claim cost comes down to say five
percent, the health insurance portfolio will become profitable. Unfortunately, there
is a lack of focus and coordination among the stakeholders to handle this menace.
During our field investigation it was found that all stakeholders acknowledge the
presence of fraud in the health insurance business but none have a road map to
manage the same. The different types of fraud prevalent in the Indian health
insurance market include lodging of fraudulent reimbursement claims; mis-
representation of material fact at the time of policy issuance; manipulation of claim
documents including bills and receipts; kick-back from providers and
intermediaries. There concept like ‗rent a patient‘, ‗unbundling‘, ‗up-coding‘ are
becoming visible in the area of provider fraud.

207
Management of fraud risk includes prevention, detection and response. Fraud
prevention includes activities and measures that help remove or reduce the
opportunity to commit fraud. Fraud detection includes the usage of fraud indicators
to detect suspected fraud. Fraud response is a comprehensive process including
notification, investigation, reporting and actions taken once potential fraud is
detected or suspected. Gathering and assessing evidence to determine whether the
suspicious activity detected is fraud; and resolution action taken to discipline the
perpetrator of confirmed fraud, recover amounts defrauded and address any control
weaknesses that allowed the fraud to be committed.

Since fraud is affecting the whole insurance industry, it requires coordinated efforts
from all the stakeholders and when managed properly, will help in bring synergy in
the existing system. This will also help in building an ethical and trustworthy
environment, necessary for developing synergy.

Over-consumption is another area which requires immediate attention. It means

overconsumption of healthcare services by the insured patient that is triggered
either by the treating consultant or the provider himself. However, the chances
where the providers per se prescribe for overconsumption of health care services
are less. The overconsumption could be of varying degree and nature. It includes:
diagnostic; hospital stay; medicines and consultation. The primary motive for
prescribing overconsumption is for economic gains, it can be direct or indirect,
depending on the source of service offered. For example- during our investigation it
was found that the insured patients are made to stay more than that of patients who
pay out-of-pocket. It was also noted that insured patient are prescribed for
undertaking high end diagnostic test like CT Scan and MRI, even when the same is
not linked to the treatment. In few cases it was highlighted that there is fixed
commission being paid to the prescribing doctors by the diagnostic centers. In case
of providers, it was found that since they invest lot of money buying the latest
technology, they tend to use the technology on patients for regular income flow and
decreasing the idle time of the equipment.

208
 The direct impact of overconsumption is on the insurance claims and ultimately on
the relationship between the insurers and providers. It also acts as a bottleneck in
bringing synergy among the insurers and providers. Thus, overconsumption of
healthcare services destroys synergy between insurers and providers.

• TPA Vs In-House claim processing: Another interesting phenomenon in the Indian

insurance industry is the setting up of in-house claims team by the insurance
companies and not outsourcing it to TPAs. With the introduction of standalone
insurance companies the idea to administer claims without using TPA in today‘s
time is thought to be as unique selling proposition (as displayed in one of the TV
commercials of a standalone health insurance company). During field
investigations it was found that the reasons to take such an action by the insurance
companies are multiple. Some suggested that there is no ownership by the TPA‘s (
the issue linked to lack of ownership is discussed separately), few of them pointed
out that they are not able to control cost, are just profit making agency without
focusing on service, have poor quality of manpower and are involved in fraudulent
practices and sharing data with competitors.

It will be too early to comment as to which of them is more effective but as per
current customer and provider perception they feel that if they directly deal with
insurance companies then it would be more beneficial for them. Thus, the decision
to go for TPA or in-house will have an impact on the level of synergy between
insurer and the providers. However, at this stage it is difficult to comment whether
it will develop or destroy synergy but certainly affect the level of synergy among
insurers and providers.

• Co-payment and deductibles: These are measures to control moral hazard and can
either develop or destroy synergy. It can develop synergy if coupled with
awareness and can destroy synergy if not imbibed properly in the claim processing
chain. Co-payment and deductibles are included in the policy terms and act as a
cost sharing mechanism between the insurers and insured. Our field investigation
suggest that if the insured patient does not pay out of pocket, he is hardly bothered

209
about the cost of treatment and once the insured is expected to pay out-of-pocket
(even a small percentage) then he or she is concern about the cost of treatment and
there are chances that the insured will evaluate the cost of treatment much closely.
Thus, if there is a twenty percent co-payment clause in the health insurance policy,
then the insured is expected to pay twenty percent of the total cost of treatment (
subject to treatment being covered under the policy) and the remaining eighty
percent is paid by the insurance company. Now, this clause definitely helps the
insurance company to save cost and reduce moral hazard but unfortunately it does
not have the same affect for the providers or the insured patients. There are chances
that the provider and the patient joins hands and manage the treatment cost in a way
that 80 percent of reimbursement by the insurance companies is equivalent to either
100 percent or even more of the actual treatment cost. Well, keeping such types of
cases aside, the challenge is how to make co-payment and deductibles works for
both providers and insured as well. One possible way would be to create awareness
about this clause and give some sort of premium discount to the customers. Instead
of forcing this clause in the policy, it should be given as an option. So, the customer
at the time of buying the policy will choose the option of co-payment and shall pay
discounted premiums. At this stage an answer as to how the providers should be
benefited by these claim cost control tools is not evident but appropriate provider
incentives structure may be developed around these tools to make them more
inclusive.

However, the clauses of co-payment and deductible can destroy synergy if not
imbibed in the claim processing chain. For example- what if at the time of given
authorization to the provider the co-payment clause is not mentioned and the same
is realized at the time of processing the physical claim file. Who will bear the cost?
As per the current practices the TPA will deduct the co-payment amount from final
bill and will reimburse the balance amount to the provider. If not, the insurer will
recover the co-payment amount from the TPA. So, in this case without any fault of
the provider, they are getting financially penalized. Thus, co-payment and
deductibles can either develop or destroy synergy.

210
• Developing package rates: One of the key findings of our field survey was that of
selection of room category. The findings suggest that the patients who are covered
under health insurance tend to stay in higher category rooms when compared to
patients who pay out-of-pocket. This has a direct impact on the total cost of
treatment. As most of the hospital charges like doctor‘s fee, surgery charges,
anesthetics fee etc. are linked with the room rent category. The moment the insured
customer decides to stay in the higher category room, the final bill will be far
higher than just the room rent differential. Let‘s take an example to understand this
better. In normal delivery (child birth), if the insured selects a twin sharing room
the room rent would be somewhere around Rs 2,500 (assuming it‘s a hospital with
more than 100 beds) and for deluxe room the room rent per day would be Rs
5,000. Suppose the insured stay in the hospital for 3 days for a normal delivery.
The price difference of staying in deluxe room with that of a twin sharing would
be just Rs 7,500 (each day difference is Rs 2,500, thus total difference = No. of
day stayed X Rs 2,500). But the actual difference in the total bill will be much
higher than Rs 7,500.

Here, the critical point for an experienced researcher is to know who actually select
the room category for the insured patients. From outside it seems that it is the
patient, who decided the same but is that the case? Is it the insured patients or the
providers who decide the room category? Our findings suggest, it a joint decision
dominated by the actions of the providers. Before discussing this further, let‘s go
back in the history of healthcare in India and examine the reasons for structuring a
hospital bill in a way that those who stay in higher category rooms pays much more
than those who stay in a general ward or lower room categories. As per the industry
specialists, the hospital billing format was primarily developed to subsidize the
hospital rates for those who can‘t afford to pay by charging more from those who
have capacity to pay. Unfortunately, insurance falls under the second category. But
the problem with insurance is that it is a risk pooling mechanism and if the claims
out-go is more, there is increase in the contribution by the members in the pool.
Coming back to the problem, the finding suggests that it is the provider who
declares the availability of room to the insured patients. The patient is neither aware

211
 about the availability or have any means to find the same and thus falls into the
category of an un-informed customer. Moreover, since there is a lack of prior
experience (assuming the insured is getting admitted for the first time) about the
different categories of rooms, the insured would not be able to make out the
difference between say a deluxe and a super deluxe room. In few cases it was
reported by the insured patient (those who have availed the cashless services) that
the provider first ask them if they have an insurance card or not? If the answer is
yes, then they prefer allotting higher category rooms. However, in few cases it was
observed that it is the patient who demands higher level of service because he is
covered by a health insurance policy. In both the cases since a higher category
room is selected, the cost of final treatment is higher than that from patients who
pay out-of-pocket. Here, the argument of the patient is that since he has paid the
premium he is eligible for best of services from the network providers. The
problem with this situation is that it‘s again a win-lose situation.

So, looking at the situation, one will get tempted to suggest that the current method
of calculating the final bill, in which the room rent decides the final bill amount,
should be changed with a new one. But this suggestion will not be a practical
enough to get implemented. Instead, there should be a mechanism whereby the
room category is decided beforehand and there should be effort from the insurers
and providers to inform the customer both at the time of selling the policy and at
the time of pre-authorization. The room category could be decided beforehand
either by agreeing for package rate at the time of signing the SLA or by putting a
room restriction clause in the policy document issued to the customer. Thus, by
undertaking such activity there would be better coordination among the insurers
and the providers which would then lead to synergy.

• Develop outcome based payment system: While interviewing doctors, it was found
that the entire medical practice is based on outcomes. It is because of this reason
that a medical profession is what it is today. But unfortunately, in the current
situation there is no linkage between the cost and outcome. The cost of treatment is
determined by the activities performed and the service consumed. The patient is

212
 required to make the payment at the time of discharge irrespective whether he or
she has recovered from the illness or not. In fact many times the patients acquire
additional infection and illness due to poor hygiene conditions at the hospitals (this
is primarily termed as ‗nosocomial infection‘ in the medical parlance). As a result
of which he is require additional treatment and is expected to pay more. Thus, there
is clear value depreciation for the customers as well as for the insurance companies.
To implement an outcome based payment system is easier said than done. It is
proposed that there should be effort by both the providers and the insurers to at
least start measuring the treatment outcome and once there is sufficient experience
in fairly documenting the outcomes, then initiative should be taken to link these
outcome variables with cost of treatment. For example- providers those who are
able to achieve better health outcomes for their patients should be brought in to the
panel of network providers by the insurance companies and should be paid fairly
high for their services. This will not only encourage providers to focus on outcomes
but will also help in bringing synergy among insurers and providers.

7.1.2.3 Need for Care

The need for care strategy in simple words is the strategy to understand the insured
need for care and deliver it in a way that it helps bring in synergy among insurers
and providers. This could be achieved by developing a framework for patient‘s
referrals and developing existing private health care infrastructures. This strategy
is primarily applicable for the healthcare providers.

• Referral system: The purpose of referral system is to control the flow of patients to
tertiary care, when the case could be handled at a primary or secondary level. It is a
mechanism by which a patient is referred by the treating doctor to a medical
facility, when there is a need for hospitalization and or treatment. In the Indian
health insurance industry there is a lack of referral system to an extent that even for
a normal cold and fever the insured visits a super specialty hospital and get

213
 consultation from a super specialist. Here, one can argue that what is wrong in it? If
the insured has paid the premium then he should be free to decide with whom he
wants to get treated? However, the answer is quite simple and available in our day
to day management experiences. What is the problem if the sales representative
directly interacts with the sales director for resolving his day to day issues and or
problems? What is wrong if the chief executive officer is responsible for managing
the courier desk of the company? Well, the answer to these management questions
would be that there is a defined line of authority in any organization for dealing
with day today issues. The sales manager is responsible and expected to resolve the
day to day issues of the sales representative and the CEO is expected to deliver on
the strategic front than that of transaction job like managing the courier desk.
Similarly, in healthcare the referral system act as a gatekeeper and helps is
optimally utilizing the limited medical resources. It also acts a source for driving
patient traffic and can act as a means to control cost. Thus, with better referral
system, there could be better movement in the system leading to synergy.

• Existing Infrastructure: to sustain growth one needs to have adequate

infrastructure. With the introduction of cashless services there was in immediate
demand for empanelling network providers across the country. To develop
necessary infrastructure to cater to the needs of the insured community towards
providing cashless and claim services. During our investigation two things came
out quite clearly regarding infrastructure. As per the industry experts the existing
level of infrastructure of providers is not sufficient to handle the current growth in
the numbers of people getting insured. As per the government and regulatory
bodies the level of medical infrastructure is very poor in our country and in most of
the rural areas the private facility is almost negligible. If, both these issues are
addressed then the chances of development of synergy between the insurers and
providers would be higher. For example- In the rural space there is a lack of
medical infrastructure and it becomes extremely difficult for the insured population
to avail medical benefits. The justification given by the private health care
providers for not investing in infrastructure is that they don‘t see that the rural
population has the capacity to pay. But once the rural population gets covered

214
 through health insurance the financial risk of ill health is transferred to the
insurance company and they have the capacity to pay through insurance. Since,
health insurance apart from creating demand for medical care in the rural space also
helps to provide capacity to pay. Thus, this will motivate the private players to built
necessary infrastructure in the rural space. Once, the providers have existing
infrastructure, both the insurance companies and the insured customer will get
benefitted, thus helping in developing synergy.

7.1.2.4 Need for Cover

The need for cover strategy is same as that of need for care with the only difference
that it is primarily applicable for the insurance firms and talks about the insured
need for cover and it‘s understanding that will help bring in synergy among
insurers and providers. It includes activities like underwriting and enrollment,
inadequate cover and product innovation, and over and under insurance.

• Prudent underwriting and correct enrollment: These are the activities that are
undertaken by the insurance companies. Both these activities are linked as one
leads to the other, most of the times enrollment is followed by underwriting.
However, there are instances (like in mass policies, where the policy is
underwritten first, which is then followed by enrolling the individual members and
their families e.g. the RSBY policy) when the reverse is true. During the field
investigation it was observed that both these activities are very critical not only for
the insurer but also for the providers. Enrollment is a process where the proposal
form is filled by the customer, the same is verified and underwritten and then
membership card are issued. Now, if the membership card has not reached the
members then it becomes extremely difficult for the providers to first identify the
person, know his insurance company and TPA details and then to process the
cashless hospitalization request. In fact, there are providers those who don‘t

215
 entertain customers who don‘t carry their membership cards for cashless
hospitalization.

Underwriting is the process of selection of risk, taking a decision to either accept or

reject the risk and determining the terms and conditions of the policy. During our
interview with the intermediaries it was told that it becomes extremely difficult for
them to understand few conditions in the policy which is incorporated at the time of
underwriting. For example- if the policy document simply says that there is a room
rent capping of say 10 percent. Then, it is not clear if the hospital should ask the
insured patient to pay 10 percent of the room rent charge or all the charges which is
associated with room rent. So, at the time of underwriting adequate care should be
taken while writing any special conditions so that it is clearly understood by the
providers. Once these conditions are listed in the policy document, they should be
proactively communicated to the providers, one can use technology for the same
(the use of information technology has been discussed separately).

• Inadequate cover and product innovation: In a health insurance policy, cover is

primarily for all disease and ailment which are not specifically excluded in the
policy. The extent of cover is defined by the list of exclusion and the type of
endorsements. The more exclusion you have in the policy, the less is the cover. An
endorsement is a part of the policy which is introduced after the policy has been
issued. Traditionally, endorsements are used to change material facts in the policy
like name, address etc and for changing terms and conditions of the policy. In
health insurance there are different types of endorsements linked to the policy
cover. It includes: maternity benefit; inclusion of pre-existing diseases; baby day
one cover and domiciliary cover. In most of the existing health insurance policy
there is an age limit i.e. beyond a given age you cannot get a health insurance
policy. This is quite ironical that at an age when you need the medical treatment the
most you don‘t have the option to buy health insurance. During the field study it
was found that there is a perception among the insured population that insurance
companies want to cover only young and healthy people so that they can make

216
 heavy profits. This gets fuelled by the fact that most of the insurance companies do
not extend cover if you are more than 80 yrs old. However, there are standalone
companies which are offering cover irrespective of age and it is a welcome step
towards providing wider cover.

The problem with limited cover is that it restricts the provider to offer services and
make it troublesome for the insured (as well as the provider) to understand the in-
built intricacies of the policy. It is because of intricacies that most of the claims are
repudiated. At times when the sum insured is less; it can also delay or defer the
treatment part. Somewhere, it also creates a level of mistrust among the different
stakeholders and they tend to believe that the only objective of the insurance
company is to make money. Thus, if an insurer provides comprehensive cover,
apart from building confidence in the minds of the stakeholders, the chances of
repudiating a claim will be less and would help bring in synergy within the cashless
system.

• Avoid over and under insurance: Health insurance is primarily taken for covering
the financial risk in case of ill-health. Sum insured is the maximum annual financial
limit which can be consumed by the insured. For example- if the health insurance
policy has a sum insured of Rs 3 lac, it means that up to Rs 3 lac can be used by the
insured for any treatment covered under the policy during the policy period. There
could be a situation when the sum insured is either less than required or more than
can be consumed towards treatment. For example- if the sum insured is Rs 50,000
and the person is living in an urban area. This sum insured would not be sufficient
in case the customer gets hospitalized. On the other hand if the sum insured is say
Rs 25 lac, then this would be hardly consumed by the insured customer during the
policy period. Since the sum insured is directly linked with the premium paid by
the customer, the argument put forward by the insurance companies is that the sum
insured is determined by the amount of premium paid by the customer, but is this
right? The answer is not simple. It is the responsibility of the insurance company to
access the risk and then provide sufficient cover for that risk. If, they just talk about

217
 the premium and does not make an effort to truly examine the risk and as a result
either land up in over or under insurance then in the long run they are also the
sufferers. The person who is underinsured might not avail the services like a
surgery even if it is medically required, which is actually a loss to the providers. In
case of sufficient cover, the provider would have earned by providing the medical
services, which is a missed opportunity for the providers. So, it is not only loss of
earning to the provider but also an unsatisfied customer. Similarly, in case of over
insurance, there are chances that the provider will overcharge and at the end of the
policy period the insured have to pay extra premium for higher sum insured. Thus,
under and over insurance destroy synergy. It should be the effort of the insurance
company to correctly access the risk of the insured and find out ways to extend
appropriate coverage in terms of sum insured. One possible way could be to add
critical illness cover along with a normal health insurance policy. The sum insured
under critical illness is normally high given the type of policy purchased and the
premium quite low when compared to a standard health insurance policy.

The strategies at the firm level could also be depicted by a 2X2 box (please refer to Table
7.1).

Table 7.1: Strategies for synergy at the firm level (Insurer and Provider)

INSURER PROVIDER

INSURER Need for Cover Existing Relationship

PROVIDER Claim and Cost Need for Care

218
7.1.2 Strategies at the Insured level

At the insured and or customer level three different strategies are being prposed that can
help bring synergy among insurers and providers. These are awareness; access and
ownership and value creation.

7.1.3.1 Awareness
The awareness strategy as the name suggest is to create awareness among
customers and policy holders so as to enhance synergy within the health insurance
system. In health insurance market the insured is not always aware about the policy
terms and conditions, leading to lot of pandemonium at the time of making a claim.
The lack of awareness can be about the policy terms and conditions, level of
benefits, list of preferred provider networks, cashless and re-imbursement process
flow. For instance, if the insured patient is not aware about his policy exclusions
and at time of hospitalization the pre-authorization gets declined due to that
exclusion then the insured would feel cheated and the blame game will start. Here,
there could be chances that the provider will try to help the insured by
misrepresentation of past medical history so that the exclusion clause is not
applicable. This destroys the level of synergy between the insurers and providers.
During the series of interviews with the providers, we were informed that if the
insured patients were well aware about their policy benefits and the claim process
then it becomes easier for them to manage the cashless hospitalization and they also
save valuable time, which otherwise gets wasted in explaining the same. The
providers were of the view that the responsibility for creating awareness should be
that of the insurance companies and rightly so. There is also need to develop
awareness about preventive healthcare. The notion that prevention is better than
cure is very much applicable in the area of health care. Prevention will not help the
insured live healthier life but will also reduce the chances of hospitalization. The
study findings suggest that not much had been done in the area of promoting
preventive healthcare by the insurance companies.

219
 Thus, one can argue that those insurers who are willing to invest in creating
awareness among the policy holders would be able to create a win-win situation
with customers, regulator and providers. The starting point shall be the change in
mindset of the insurers that creating awareness is not an expense but an investment.

7.1.3.2 Access and Ownership

The access and ownership strategy is how to bring in synergy among insurers and
providers by creating access for the insured customers at the time of cashless
hospitalization and by owing the customer at the time of urgency.

• Access: The study findings suggest that there is lack of access for the insured
customer when it comes to accessing cashless benefit at hospitals. If health
insurance fails to provide access to hospital care for treatment of illness covered
under health insurance then one of its key utility will be lost. The reasons which
could lead to lack of access are: unavailability of hospitals in a given geography, no
network tie-up by the insurance company in a given geography, Unavailability of
health insurance card at the time of admission, the condition of the patient is such
that he/she cannot be moved to a hospital, unavailability of hospital beds in the
given hospital, denial of admission or non-acceptance of health insurance card by
the provider, etc. Out of the given reasons there are many which can be resolved
by better synergy between the insurance company and the providers. For example,
to have tie-up with providers in geographies where they don‘t have network, to
built a mechanism wherein even if the health insurance card is not available with
the insured patient there could be alternate ways to get cashless treatment, to have
provisions for domiciliary treatment and coverage in the policy where the insured
could get treatment at home in case he/she is unable to move to a hospital.

By increasing access for the insured patients both the insurer and the providers get
benefited by servicing more customers. Also, in the social context the synergy
between providers and insurers helps create access for the insured patients ( one of

220
 such example is the RSBY project wherein, the below poverty line population are
getting access to private hospitals those who are in the panel of the insurance
companies responsible for issuing health insurance cards).

• Lack of Ownership: The current health insurance market in India is plagued by lack
of ownership. The findings of the study suggest that in the entire value chain
comprising of providers, insurers and intermediaries (including TPA‘s) there is a
lack of ownership for the services offered to the insured customer. The problem of
lack of ownership is not only associated with the health insurance sector alone, but
the healthcare sector too. In our neighboring countries, researchers have studied the
impact of lack of ownership. One such study was undertaken in Bangladesh, where
it was concluded that lack of ownership affects implementation of a gigantic health
sector programme. The findings also highlighted that due to a lack of ownership of
vision, the level of understanding or conceptualization among the implementers
was also very low, which contributed significantly to the poor implementation of
the programme50.

During our interaction with the healthcare professionals it was informed that both
the insurers and the TPA‘s do not own the patient at the time of need. There are
situations where the patient is asked to speak to different parties to get the cashless
claim processed. Such perception of lack of ownership is detrimental to the health
insurance industry growth and it is advisable to examine this further and help
develop the level of ownership.

7.1.3.3 Value Creation

The study findings suggest that there is lack of value creation in multiple areas.
These include activities like the health insurance product development, cashless

50
Osman, Ferdous Arfina. ―Implementation Constrained by a Lack of Policy Ownership: Evidence
from Bangladesh‖ The Asia Pacific Journal of Public Administration Vol. 27, NO 1 (JUNE 2005)
19-36

221
processing and customer service (both at insurer and provider). All these activities
have the potential to create value for the insured customer and affect the synergy
between insurer and providers. In product development there is lack of product
innovation wherein there could be addition of benefits which are currently not
covered like outpatient and dental treatment (however, there are few insurance
companies like ICICI Lombard, Apollo Munich, Star Health that have started
giving such coverage).

In the area of cashless processing the major channel used for communicating
between the insurer and provider is that of fax, the use of internet for such
transaction has still to see the light of the day. The customer service department has
the primary responsibility for serving the insured customer but they also play an
important role in acting as a bridge between the insurer, customer and the provider.
In case of providers one doesn‘t see a dedicated customer relationship department
and this activity are partly carried out by the nursing and other paramedical staff.

In all the above discussed activity there is a potential to create value for the insured
and both the insurer and provider can join hands for such activities. For example- in
case of customer service there could be a common desk at the hospital with shared
resources. Such, initiatives by the insurer and the provider to create value for the
common customer can not only help them gain competitive advantage but also help
in bringing synergy among them. However, it is suggested to undertake the cost
and benefiting analysis before initiating any such initiatives.

As per Robert S. Kaplan and Michael E. Porter (2011) value in health care is
measured in terms of the patient outcomes achieved per dollar expended. It is not
the number of different services provided or the volume of services delivered that
matters but the value. More care and more expensive care is not necessarily better
care. Thus, in the health insurance domain value should be measured not only in
terms of patient outcomes achieved per rupee expended but also in terms of level of
customer satisfaction achieved.

222
Table 7.2: Strategies for Synergy (Implementer, Actions and Indicators)

* Illustrations Only.

223
Goold and Campbell (1998) in their article titled ―Desperately Seeking Synergy‖ have
argued that corporate executives have strong biases in favor of synergy and these biases
take four forms. First is the synergy bias, which leads executives to overestimate the
benefits and underestimate the cost of synergy. Then comes the parenting bias, a belief that
synergy will be captured only by cajoling or compelling business unit to cooperate. Third,
the skill bias- the assumption that whatever know-how is required to achieve synergy will
be available within the organization. Finally, executives fall victim to the upside bias,
which causes them to concentrate so hard on the potential benefits of synergy that they
overlook the possible downside risks.

In an interesting article titled ―Why focused Strategies May Be Wrong for Emerging
Markets‖ by Khanna and Palepu (1997), the authors say that focus is a good advice in
New York or London, but something important gets lost in translation when that advice is
given to groups in emerging markets. Western company‘s takes for granted a range of
institutions that support their business activities, but many of those institutions are absent
in other regions of the world. Companies must adopt their strategies to fit their institutional
context: a country‘s product, capital, and labor markets; its regulatory system; and its
mechanism for enforcing contracts. Successful groups effectively mediate between their
member companies and the rest of the economy. Thus, while developing the above
strategies for synergy the so called institutional context had been kept in mind. The
summary of different strategies at different levels, the proposed implementer of the
specific strategy, the list of actions to be taken and the indicators are summarized in Table
7.2.

7.2 The INSECT Framework

After identifying and discussing strategies for synergy among insurers and providers at
different levels an attempt had been made to evolve a sector specific framework that details
different factors and strategy buckets that will not only help bring synergy among insurers
and providers but also help in implementing and evaluating different strategies. In today‘s
dynamic business environment, strategy too must become dynamic. Competition is a ―war

224
of movement‖ in which success depends on anticipation of market trends and quick
response to changing customer needs. In such an environment, the essence of strategy is
not the structure of a company‘s product and markets but the dynamics of its behavior. To
succeed, a company must weave its key business processes into hard-to-imitate strategic
capabilities that distinguish it from its competitors in the eyes of customers. Here, it is up
to the CEO‘s of the insurance companies and the providers to decide which of the factors
are strategically important to them given their growth and profitability objectives.

Going back to the definition of strategy discussed in the previous section, the first part is
clear that the long term goal and objective is to bring in synergy. The question is then how
to decide about the adoption of course and allocation of resources to achieve synergy
goals. To decide about the adoption of course and allocation of resources it is important
first to understand the different factors which affects synergy between the actors in the
given phenomenon (for the purpose of current study the actors are the insurers and the
providers and the phenomenon is health insurance).

Figure 7.3: The Strategy Buckets

225
Thus, an attempt had been made in the current study to identify different factors that have
the potential to affects synergy, also to develop strategies for synergy among insurers and
providers. This framework will also help to implement and evaluate these strategies. The
framework is functional and linked to activities like planning; coordinating and appraisal
(please refer to Figure 7.3). The framework also takes into account the opportunities and
pressures existing in the current system and makes it more dynamic in nature.

The different strategic buckets in the INSECT framework are the Insured; Need for care
and cover; Standardization; Existing relationship; Claims and cost and Trust &
technology. Before moving further it is important to answer the question as to how the
synergy between the insurers and the providers can be measured. Well, the answer is
simple; there are different ways and indicators by which one can measure synergy. Let‘s
examine few of them:

First, one possible way is to see if there is a creation of value for the customer or not. This
value can be either in terms of customer service and satisfaction, increase in policy benefit
or reduction of health insurance premium. If there is value creation for the insured then one
can argue that there is synergy. However, the value created should be seen in a holistic
manner and not something which is case specific or short lived. For example, if the
provider hides the actual fact say pre-existing condition at the time of cashless
hospitalization in connivance with the insured patient and make the insurer pays for the
cost of treatment. Then, in this case one can argue that the customer has gained by availing
free treatment for which he was not authorized. But this gain cannot be termed as creating
value for customers because at the end it‘s the customer who will be required to pay higher
premium due to such fraudulent activity.

Second, another indicator could be to check the claim cost. If, the claim cost for the same
treatment in the same hospital is less in case of cashless hospitalization than that of
reimbursement claim, then one can say that there is synergy between the insurers and the
providers. This can be proved by reversing the statement and then arguing that if the cost
of claim in cashless is more than that of reimbursement claim, which means that the
providers are charging more when they have a relationship with the insurer (assuming TPA
to be a part of insurance company), then definitely the result is not greater than the sum of

226
the its parts, in other words the synergy is destroyed. However, here one can again argue
that there are other factors which influence claim cost when the person is insured, like
moral hazard, utilizing higher category room (in fact, this is one of our research findings),
etc. But one can develop strategies to control claim cost and create a win-win situation for
the insured, insurer and the provider.

Figure 7.4: The INSECT Framework (Diagrammatic representation)

Third, by studying the perception of either the provider or the insurer one can measure if
there is synergy or not. A negative perception will indicate that the synergy is getting
destroyed and a positive perception will indicate that synergy is being developed.

Fourthly, by studying the different strategies adopted by the insurer and the provider could
give a good estimate about the level of synergy between the two. For example, if either

227
party develops or adopt a strategy which has a ‗zero-sum‘ game, then definitely the
synergy will get destroyed as the gain for one party means loss to the other party. Thus,
there are multiple indicators and ways by which one can measure synergy. Also, the
metrics listed out in the strategy for synergy table can help measure the actions and level of
synergy among insurers and providers.

The different components of the INSECT framework are listed out in the Table 7.3. As
could be seen these are the different factors identified during the course of the current
study that can affect the level of synergy among insurers and providers. The framework
also includes pressures that are existent and the opportunities that could be exploited. The
details of the same are presented below:

PRESSURES

• Competitive pressure: In the seminal book on ―Competitive Strategy‖, Potter

(1980) argues that the intensity of competition in an industry is neither a matter of
coincidence nor bad luck. Rather, competition in an industry is rooted in its
underlying economic structure and goes well beyond the behavior of current
competitors. The state of competition in an industry depends on five basic
competitive forces i.e. rivalry among existing firms, bargaining power of buyers,
bargaining power of suppliers, threat of new entrants and threat of substitute
products or services. He then argues that the collective strength of these forces
determines the ultimate profit potential in the industry.

The investigation suggest that in the current Indian health insurance industry these
five forces are playing their role in a manner that it will exert pressure on both the
insurers and providers to bring in synergy among themselves so as to enhance the
profit potential within the industry. First, the rivalry among existing firms is not
that prominent, given the poor penetration of health insurance in India. The market
is not completely tapped and there is enough space for existing players to do
business. In case of providers also, the same is applicable.

228
Table 7.3: Components of the INSECT Framework

INSURED NEED (Care & Cover)

• Lack of Awareness • Referral system

• Lack of Ownership • Existing Infrastructure
• Value creation • Underwriting and enrollment
• Access • Inadequate cover & product innovation
• Over and Under insurance

STANDARDIZATION EXISTING RELATIONSHIP

• Selection of providers • Provider Tariffs and business volume

• Service Level Agreement • Provider payment
• Standard treatment guidelines • Doctor – Patient and Doctor - Insurer
• Standard forms and format relationship
• Relationship with Intermediaries
• Grievance handling mechanism
• Trust and Transparency

CLAIM & COST TECHNOLOGY & TRAINING

• Co-payment and deductibles • Training issues

• Health insurance fraud and misuse • Specialized training institution and
• Selection of room category courses
• Outcome based payment system • Use of information technology
• TPA Vs In-house claim processing • Efficiency & Effectiveness
• Communication between parties

OPPORTUNITY PRESSURE

• Growth • Competitive pressure

• Profitability • Regulation and regulatory body
• Market share • Government intervention
• Industry bodies and customer group

229
 However, there could be regional differences. Second, the bargaining powers of
buyers are not that high in the current environment. In health insurance the insurers
act as buyers of health care from the providers for the insured patients. Since, the
overall income generated by the providers through health insurance is still low, the
insurers don‘t have high bargaining power. However, this scene is going to change
with the introduction of mega health insurance schemes like RSBY. Third, since
the bargaining power of the buyers is low, the bargaining power of the suppliers is
high (when, treating insurers as buyers and providers as suppliers). Our
investigations suggest that especially those hospitals wherein the bed occupancy
rate is high are able to dictate there terms to the insurance company. Also, given the
high demand for these providers and due to shortage in supply, the supplier i.e. the
providers have high bargaining power. Fourth, there is high threat of new entrants
as could be seen by the entry of new players and the line-up with the regulators.
There are chances that once new regulations are rolled out for standalone health
insurance company, the threat will also increase (with the decrease in the capital
requirement from current hundred crore to fifty crore). Fifth, the threat of substitute
for insurance is low in the current market. However, the treat of substitute in the
healthcare is high (especially the quacks). All the above listed forces will exert
pressure on the insurers and providers to bring in synergy among them and will
also affect the way they handle and priorities the different synergy buckets i.e. the
insured, need for care and cover, standardization, existing relationship, claim and
cost and technology and training.

• Industry bodies and customer group: The findings suggest that both the industry
bodies and the customer group have high potential to bring in positive change in
the current relationship between insurers and providers and help in developing
synergy among them. It was found that the industry bodies like the Confederation
of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and
Industry (FICCI) are already playing an important role in the development of the
health insurance sector. They are working in close association with the industry, the
customer group and the regulators to improve the current service proposition by
improving quality of healthcare and also by bringing in standardization of

230
 healthcare services. Different working groups has been identified in consultation
with IRDA with the focus on identifying and developing possible framework for
providing high quality healthcare through insurance and standardization of certain
processes to facilitates smooth and transparent claim processing. The FICCI
―Health Report‖, 2010 talks about promoting quality in healthcare through health
insurance, standardization of billing procedures in hospitals and contents of
discharge summary format, standardization of TPA/Insurer and TPA/Hospital
Contracts. The framework and methodology for standardization of provider billing
is under development by the industry bodies. However, it is only few of the factors
which are currently being looked by the industry bodies and customer group and
there is a whole lot more to be thought and implemented.

OPPORTUNITY

Growth: the trend analysis clearly shows that the health insurance industry is in the
growth trajectory and will be growing much faster than any other lines of general
insurance business. This growth is both for the insurers as well as the providers.
The investigation findings suggest that there is a huge opportunity for growth if the
factors within the synergy buckets are explored and implemented. For example- if
the insurers and the providers start creating awareness about the benefits of health
insurance products and services then they will attract customers to buy health
insurance and ultimately use healthcare services, leading to growth in business for
both insurers and providers. Similarly, by creating value for the customers they will
be able to rationalize the price paid as premium and will help in increasing the
penetration of health insurance in the Indian market. This is also supported by the
fact that most of the lower and middle class families are not financially equipped to
handle the escalating cost of healthcare and the only possible solution is to transfer
this risk to the insurers by buying health insurance policy for self and family.
Similarly, the other factors identified under different synergy buckets have the
potential to create opportunity for growth for both the insurers and provider.

231
• Profitability: linked with growth is profitability. It is at times said that it is better to
be profitable then to just grow. Well, every business entity has its own strategy to
balance the two. For example- in the insurance sector, ICICI Lombard general
insurance company is known to take the growth path and to achieve it, has
compromised on profitability. On the other side companies like TATA AIG general
insurance company, those who have followed the mantra of profitability over
growth. The above statement could be verified by analyzing the profitability and
the number of lives covered under health insurance by both the companies. As per
the INSECT framework, the factors identified under different synergy buckets can
directly and in-directly affect the profitability of the insurers as well as the
providers. To support this argument, let‘s take two examples.

First example- under the synergy bucket on ‗claim and cost‘ factors like health
insurance fraud and outcome based payments are identified. If, the insurers are able
to minimize the level of fraud in the health insurance industry by getting support
from the providers, then this will directly impact the claims out-go and profitability
of the insurance companies. If the insurance companies are able to built profitable
health insurance business the benefits would be then transferred to both the
customers and the providers. Thus, creating a win-win situation for all the three
parties involved. Similarly, if outcome based payment is brought into the Indian
healthcare scene then this will lead to justification of healthcare cost and will
increase the level of transparency.

Second example could be picked from the synergy bucket on ‗technology and
training‘ i.e. the factor on use of information technology. If, the insurers and
providers are able to harvest the benefits of the current information technology
advancements by developing an IT framework that will reduce the current paper
work and delay in processing of health insurance claims and payments. This will
then help to achieve better cost effectiveness and thus enhancing profitability.

232
 • Market share: In addition to opportunity of growth and profitability, there exist an
opportunity to capture the market share. The factors identified as synergy buckets
has the potential to become drivers for capturing market share. For example- if the
insurers and the providers focus on the insured, their need (for care and cover),
built strong relationship through trust and transparency, manage their claim and
cost by managing health insurance fraud and by using technology and training to
improve efficiency and effectiveness, then they would be able to create competitive
advantages and thus increase their market share. Simultaneously, those who will
not focus on the above listed synergy buckets would not be able to develop synergy
and will stay behind in the race of capturing the market share.

7.3 Validation of Study Findings and INSECT Framework

The study got validated and re-validated by undertaking expert interviews and using the
developed INSECT framework in the form of an expert-questionnaire. The findings of the
expert interview is summarized and presented in a form of a video CD (see Annexure IV).
It was not possible to include all the interviews and the detailed discussions held with the
experts in the industry due to size and video time limits.

The findings of the expert questionnaire suggest that all the factors identified under
different synergy buckets in the INSECT framework has the ability to either develop or
destroy synergy among insurers and network hospitals. Please refer to Annexure IX for
average scores and the ranking.

233
7.4 Conclusion

The Indian health insurance industry is growing at a fast pace and so are the issues and
challenges linked to bringing in synergy within the system. With the rising health care
cost, increase in disposable income and high out-of pocket expenditure for funding
healthcare, the only way forward for financing healthcare in a country like India is through
health insurance mechanism. The two most important players in providing health insurance
benefits and services to the insured customer are the insurers and providers. It is the
relationship between the insurers and providers that governs the service delivery model and
its study is very critical for the current and future growth of the industry. In the Indian
context not much had been studied in the area of insurer-provider relationship, it is thus
prudent to understand this relationship in a holistic manner by also studying the
stakeholders involved.

This study has tried to understand this important relationship by examining quite
comprehensively the trends in the Indian health insurance market, by studying the provider
perception, understanding the relationship between claim cost paid by insurer, components
of hospitalization cost and the risk covered by them. Also, by undertaking stakeholder
analysis and finally synthesizing all of it to develop strategies for synergy among insurers
and providers. Synergy among insurers and providers get affected by multiple factors. It is
these multiple factors that help in developing strategies for synergy at the insured, firm and
industry level. The INSECT framework not only reflects the different synergy buckets and
its components but would also help both practitioners and policymakers in understanding
the complex inter-relationship of multiple factors that has the potential to either develop of
destroy synergy among insurers and providers.

The first section summarizes findings of the study by dividing them into three parts. The
second section summarizes the contributions of this study. Here, both conceptual and
sectoral methodological contributions are presented. Next section elaborates implications
for both practitioners and policy makers. In the final section some limitations of the study
and agendas for extension of this work for future research have been explained.

234
7.4.1 Summary of Findings

In this section a summary of the important findings of the study has been provided. First
the summary of desk research findings are presented wherein the trends in the Indian
health insurance market and the business environment was studied.

7.4.1.1 India occupies a second and seventh rank in the emerging markets in terms of
market share in the life and non life insurance respectively. In life insurance India‘s
market share (23 percent) is just behind China‘s (26.4 percent).In non-life
insurance India‘s share is 3.7 percent and that of China is 17 percent.

7.4.1.2 There are multiple determinants on one‘s health like genetic, environmental, socio-
cultural, economic, health services, political system and technological
advancements. Each determinant has its own influence in the health insurance
industry.

7.4.1.3 The health care system in India is characterized by multiple systems of medicine,
mixed ownership patterns and different kinds of delivery structures. Public sector
ownership is divided between central and state governments, municipal and
Panchayat local governments. The private sector (for profit and not for profit) is the
dominant sector with 50 percent of people seeking indoor care and around 60 to 70
percent of those seeking ambulatory care (or outpatient care) from private health
facilities.

7.4.1.4 The development in the health insurance industry before privatization (1912 to
2000) was slow and it was only after privatization (2001 to 2009) that continuous
growth in terms of gross written premium on an year to year basis was observed.

7.4.1.5 The major share of the health insurance market is captured by the public sector
insurance companies. However, the private players are catching up fast. With the
entry of standalone insurance companies, the level of competition is slowly picking

235
 up pace. Health insurance business is only next to motor insurance in premium size
when it comes to general insurance industry.

7.4.1.6 The incurred claim ratio in the health insurance industry is more than 100 percent.
Which means that overall the health insurance industry is not profitable. However,
there are company specific differences. Also, the private players perform better
than their counterparts (public sector insurance companies).

Second, the findings of the research problem linked to provider perceptions and
relationship between dependent (claim paid amount) and independent variables (sum
insured, age, ALOS and components of hospitalization cost) that were analyzed using
quantitative methods are summarized.

7.4.1.7 The TPA model is perceived to be a successful model by the providers. However,
the payments to the network providers are not done within 21 days leading to
dissatisfaction among the providers and rationalization for charging more from the
insured customer. To achieve provider satisfaction and bring in synergy it is
important to ensure that the payments to the providers are done well within the
defined timelines.

7.4.1.8 The insured patients do not care for the cost of treatment as they are not making
payment through out of pocket and they are more demanding when it comes to
services. There is an opportunity for the providers to charge more incase the patient
is covered under any health insurance policy. This opportunity can be exploited
either by following a differential rate list or by trying to push the patients to take
higher category rooms, which finally result in increased final bill.

7.4.1.9 The room rent category is directly linked with the cost of treatments and patients
with health insurance cover prefer staying in a higher category room.

7.4.1.10 There is lack of awareness among the insured customer regarding the policy terms
and conditions. This could lead towards exploitation by both the insurers and

236
 providers at the time of cashless authorization. Also, there is a frequent increase in
the hospital chargers especially by those who have more than 100 beds.

7.4.1.11 The buying power of the TPA‘s and insurers are less and so are the discounts
offered to them by the providers. Also, all categories of hospitals prefer middle
income group population for extending cashless benefits. The findings suggest that
the preference for both lower and higher income group is quite less as compared to
the middle income group.

7.4.1.12 There exist a huge opportunity for the insurance companies to built relationship
with providers as most of the providers don‘t have any preference for any specific
insurance companies.

7.4.1.13 There is a positive association between the dependent variable (claim paid
amount) and overall independent variables i.e., sum-insured, age, ALOS, room-
rent, surgeon fee, consultation, investigation, medicine and miscellaneous charges.
Also, each of these independent variables is positively associated with the
dependent variable.

Finally, the findings of the research problem linked to stakeholder analysis that was
analyzed using qualitative methods along with the overall summary of findings to develop
strategy for synergy are summarized below.

7.4.1.14 Each stakeholder group has different perception towards the provider and insurer
relationship. There are different factors that have the potential to either develop or
destroy synergy among insurers and providers. There were certain issues and
concerns those were found to be common across the groups.

7.4.1.15 Contents analysis suggests that maximum articles on health insurance (over three
years from 2007 to 2009) got reported either from the States where there are
corporate offices of insurance companies or States in which some form of social
health insurance policies are running. There are different issues and concern raised
by different stakeholder in these articles.

237
7.4.1.16 To bring in synergy among insurers and providers it is important to focus on
different factors linked to the insured customers like awareness, access, value
creation and ownership. The findings suggest that there is lack of awareness when
it comes to the process to be followed at the time of claim and also on the health
insurance policy terms and conditions.

7.4.1.17 Standardization is another area which has the potential to bring in synergy among
insurers and providers. The factors identified under standardizations were
selections of providers; service level agreement; standard treatment guidelines and
forms and formats used during process of pre-authorization and claim settlement.

7.4.1.18 The level of trust and transparency among the insured, insurer and provider is
poor and adversely affect the synergy between insurers and providers. There is a
need to improve trust and transparency to help develop synergy among insurers and
providers. The relationship with intermediary plays an important role in serving the
customer and a good grievance handling mechanism is required not only for the
customers but also for the providers.

7.4.1.19 Co-payment and deductibles are being used as a mechanism to control claim and
cost. The health insurance industry is prone to fraud risk and there is need to have a
coordinated approach by all the stakeholders. Most of the private insurers prefer to
have their in-house claim processing team instead of TPAs.

7.4.1.20 There is severe shortage of specialized training institutions in our country to teach
and train on health insurance. There are very few institutes which run specialized
training courses on health insurance. If, the training needs of the health insurance
industry are not fulfilled then it would be quite challenging to built synergy among
insurers and providers.

7.4.1.21 Information technology can play an important role in reducing the transaction
time and built effectiveness and efficiency around processes. The current mode of

238
 communication between insurers and providers are primarily paper based and prone
to errors. There are attempt being made to move this to paperless processing.

7.4.1.22 There are both opportunity and pressures affecting synergy among insurers and
providers. The opportunities are in the area of health insurance growth, profitability
and market share. The pressure exerted to bring in synergy among insurer and
providers are from regulatory body, government, industry body, customer group
and due to competition. The summary of factors identified and the research method
used is provided in Annexure V.

239
 7.4.2 Contributions of Study

The Table- 30 summarizes contributions of this study in a concise manner:

Table- 30: Contribution of the Study

Conceptual Contribution Chapter Method

`
1. This is a one of its kind study where the developments and trends in Chapter 4 Desk
the Indian health insurance market are studied since year 1912 to Research
2011. It also involves the study of major players and performance,
current opportunities and threats and the legal aspects of health
insurance.

2. First study to empirically measure provider perceptions with the Chapter 6 Quantitative
focus on insured, insurer, TPA and provider relationships to gain
better insights about service, process and synergy. This includes the
development of provider perception mapping.

3. Identified factors affecting synergy among insurers and providers in Chapter Quantitative
the Indian health insurance market for the first time. All stakeholders 4,5 and 6 and
of health insurance industry were involved in the process. qualitative

4. Development of an INSECT framework through systematic Chapter 7 Qualitative

qualitative and quantitative study has been done for the first time. and
This framework includes different strategic buckets that can help quantitative
policy makers and managers to develop appropriate strategies for
synergy among insurers and providers.

Sectoral Methodological Contributions

5. Use of the ―Stakeholder Approach‖ as listed out by R. Edward Chapter 5 Qualitative

Freeman to first define the stakeholders and then study them to
identify factors affecting synergy among insurers and providers has
been done for the first time. This approach takes the stakeholder
view of the firm.

6. Use of secondary data (print media) of three consecutive years i.e.

Chapter 5 Desk
2007, 2008 and 2009 on health insurance, mediclaim and cashless
Research
from one of the leading national news paper to undertake contents
analysis has been done for the first time.
Quantitative
7. Use of ‗Expert Questionnaire‘ and ‗Video Recordings‘ for validation
Chapter 7 and
and re-validations of the study findings.
Qualitative

240
7.4.3 Implications for policy makers and Managers

7.4.3.1 Implications for policy makers

Currently, there is a lack of specialized regulations for standalone health insurance

companies in India. It is not fair to have similar regulatory yard stick for both the general
insurance companies and a standalone health insurance company. The IRDA should come-
up with separate regulations for standalone health insurance companies clearly listing the
licensing requirements and their interactions with the providers. The standalone health
insurance companies should be given additional regulatory benefits with the condition
linked to serving the marginalized.

There is a lack of standardization both at the insurer and provider level. The healthcare and
insurance regulatory bodies should come together and work with the industry and the
consumer group towards standardization of processes (cashless and reimbursement) and
delivery of healthcare services (e.g. developing STGs). Here, they should also ensure that
sufficient flexibility is maintained so as to harness innovation, competition and quality
improvements.

The current healthcare infrastructure (especially the hospital beds and number of doctors)
in our county is not sufficient to handle the country‘s disease burden and there are no
guidelines for managing referrals and linked commissions in the healthcare sector. It is
important for the government to examine the infrastructure gap and take necessary action
to fill this gap. Also, to come-up with guidelines on referrals and linked commissions to be
followed in the healthcare sector (both public and private). The findings of the research
suggest that the health insurance industry is prone to high degree of fraud and currently
there is a lack of coordinated efforts among different stakeholders to manage fraud risk
related to health insurance. As the health insurance market grows in India, the opportunity
of committing health insurance fraud will also grow. Thus, it requires a different and
specialized treatment. As the cost of fraud is ultimately born by the insured customer and
directly affects the growth of health insurance business in India, it is important for General

241
Council of India and the regulator to develop framework and a platform to fight against
health insurance fraud. The IRDA along with GIC should take the initiative to form a
dedicated association or a forum for tackling the issue of health insurance fraud at a
National Level. The findings also suggest that there is a severe shortage of training
institution and specialized course on health insurance. The policy makers across
government, educational and business enterprise should prioritize and facilitate the
opening up of specialized training institutions and courses on health insurance. There
should be initiatives to open institute of excellence in the area of health insurance. This
will help to bridge the knowledge gap and produce trained manpower to fuel and sustain
the growth of health insurance in India.

As health is a state subject in India, there is a pressing need for the state government to
develop and implement regulations around quality of patient care and patient safety. There
are some States wherein the registration of nursing homes and hospitals are mandatory but
such regulations are either not revised since decades or does not cover the quality and
safety aspects of health care delivery.

7.4.3.2 Implications for the Managers:

The payments to the providers should be done well within the defined timelines by the
insurers and TPAs. The possibility of allocation of float (advance payment) to the
providers by the insurers should be improved failing which the level of provider
dissatisfaction would increase.

There should be efforts made by both the insurers and providers to develop package rates
for major ailments. This would help address the issue of overutilization and over
consumption of healthcare services by the insured customers. Efforts should be made by
both the insurers and providers to develop mechanism for grievance handling that should
focus on timely addressing of issues linked to transactions of health insurance business.
The designated representatives from both insurers and providers should meet at regular

242
intervals (preferably monthly but not exceeding six months). This feature is currently
lacking in the system. However, there is willingness by both the parties to initiate it.

Special emphasis should be given by the insurers towards developing awareness in the
minds of the customer regarding policy terms and conditions, cashless hospitalization and
claim reimbursement process and also about the benefits of preventive healthcare. Access
and ownership needs to be developed by the provider for the insured customers without
which it would be difficult to bring in synergy within the existing system. This could be
measured by looking into the comparison of cashless vs. reimbursement cases and also by
measuring the number of complaints received from the insured customers.

The focus of both the insurers and providers should be towards creating value for the
customer first. One possible way to achieve this would be by exploring the opportunity of
developing and leveraging the relationship with the intermediaries (e.g. TPAs, Agents and
Brokers) pharmaceutical and medical equipment industry. Looking into the value chain of
health insurance in India, the engagement with the providers could be initiated much
before the health insurance product is launched in the market. This will help not only in
better pricing but also in developing innovative health insurance products. The managers
of both the insurers and providers should explore the possibility of developing outcome
based payment system. A possible first step would be to start measuring the morbidity and
nosocomial infection rates at the providers end. The providers those who score well in the
outcomes should be incentivize accordingly.

There should be efforts to develop doctor-insurer relationship by both the insurers and
providers (primarily for visiting consultants). The basis intent to initiate this relationship
should be to extend benefit to the customers and not financial gains. One live example is
the success of cashless OPD benefits offered by one of the largest private health insurance
player. This effort could be measured by looking into the list of consultant networks.

Strategies for synergy should be developed keeping in mind the different synergy buckets
identified during the course of our study (the INSECT framework). The manager should

243
first access where they stand in the synergy spectrum, identify the gap and then plan and
coordinate accordingly.

7.4.4 Limitations of the Study

This study has identified factors affecting synergy among insurers and providers in the
Indian health insurance market for the first time. The final outcome of this study is the
formation of different strategies that could be adopted for bringing synergy among insurers
and providers. The limitation of the study is listed as under:

7.4.4.1 As the study is exploratory in nature, methods like field survey, interviewing and
desk research had been used to identify factors affecting synergy. In few studies,
experiments have been used to identify such linkages. If sufficient funds are
allocated, then experiments and extensive quantitative analysis could be conducted
to test the INSECT framework.

7.4.4.2 Survey data is used for measuring the provider perceptions. If one can get a bigger
sample size then the study could be done in a more systematic manner. Also the
samples were taken from Delhi and NCR region only. If data from all over the
country could be taken, then the generalisability of the study will be much higher
and results will be more robust.

7.4.4.3 If the data could have been collected or obtained over a period of time on claims for
both reimbursement and cashless, linked with cost and aliment then a time series
analysis could be undertaken to establish the exact relationship between claims and
cost in case of cashless hospitalization (wherein there is a direct relationship
between the insurer and provider) but that could not be done due to unavailability
of said data on health insurance.

7.4.4.4 In the qualitative study one could have interviewed more people and visited few
more locations but that could not be done because of limitation of resources. Also,

244
 the current study does not examine and cover the schemes like Central Government
Health Insurance Scheme (CGHS) and Employee State Insurance (ESI).

The Indian health insurance industry has started to grow with the opening of the insurance
sector for private players. To sustain this growth it is important to bring in synergy among
insurers and providers. The current study is an attempt to understand the future
implications for managers and policy makers, so as to develop synergy within the system.
However, there are a couple of areas that needs further considerations. Further research
could be undertaken in the areas of testing of strategies and choosing the best alternative to
bring in synergy among insurers and providers. The INSECT framework developed during
the course of current study can also be re-validated so as to make the framework more
robust.

In future, if reliable data regarding health insurance claims and cost can be obtained for
both cashless and reimbursements over a longer period of time then it would be interesting
to see how over time, factors like claims and cost are inter related in case of cashless and
affects synergy among insurers and providers. The strategies developed using the INSECT
framework by either the providers or the insurers or both could be studied in the form of
case studies and one can see the impact it has on the profitability of the firm. Study related
to provider perception in order to gain better insight to develop synergy among insurers
and providers can be done at a national level and results can be compared with that of
current study.

With the current growth of government schemes like RSBY, one can study the impact of
synergy among insurers and providers on the health outcomes of the population and the
insurance premium. The need for quantitative analysis will only increase in the years to
come and so would be the use of structural equation models. As more and more health
insurance data become available (on more and more products, from more and more
competitors, in more and more markets) it would be possible to use the INSECT
framework to undertake such quantitative analysis.

245