I was very optimistic when the health insurance industry was
privatized in India . In the past , only the public sector insurance
companies could offer health policies called MediClaim. These were of
poor quality , because they were based on inadequate actuarial data ,
and were treated as loss leaders , since medical costs used to be very
My hope was that the introduction of competition would prompt
health insurers to improve the quality of their coverage because it
would be in their best interests to make sure that their customers
remained healthy , and got the right medical care when they fell ill.
I've been disappointed. Part of the problem is that most health
insurers are still bleeding money , as a result of which they haven't
been able to do anything innovative. The bulk of their income comes from
providing health coverage to corporate employees. This is a cut-throat
market, and corporates squeeze the health insurers, as a result of which
the claims loss ratio is more than 100% for most health insurers in
When you don't have enough cash flow , it's hard to be creative .
This is why they are trying to copy and paste US models , and are ending
up making the same mistakes which US healthcare insurers have
done. This is doomed to fail, and it worries me that they're being so
The payer versus provider conflict which plagues US healthcare has
infected the Indian healthcare system as well. Health insurers are
refusing to make timely payments for the medical care provided by
hospitals. They use all kind of clerical excuses and pretexts to defer
paying out legitimate claims. This leaves a bad taste in everyone's
mouth. The customer who has paid his premiums on time and expects his
health insurance policy to cover his medical costs is upset and angry;
and as a defensive measure, the hospitals which are fed up of chasing
the insurers for their payments are now refusing to honour the cashless
policies issued by the health insurers.
Health insurance companies have started to acquire a bad reputation
because they seem to be burdened by layers of bureaucracy. Rather than
focusing on what they can do to delight their customers, they seem to be
thinking only about how they can become profitable. It is this kind of
short-term thinking which is going to end up hurting them in the long
run , because no one trusts them anymore.
Hospitals were hopeful that these cashless policies would help them
to get more patients and increase their throughput . However, they are
finding out that they're actually losing money when they accept insured
patients. They don't get paid on time; they have to employ an army of
clerks to fill in the paper work the health insurance companies demand;
and even when they do get paid, it's often only a fraction of what the
original bill was. This is not sustainable , and while the larger
corporate hospitals have deep pockets and can fight back, the smaller
nursing homes are now refusing to accept the policies of many health
insurers who are notorious for not making timely payments .
Even worse, it doesn't seem like health insurance companies are
doing much in order to put their customer's interests first. Ideally,
their focus should be on making sure that their customers have access to
the best possible doctors. In fact, insurance companies are very well
positioned to do this, because they know a lot about the actual medical
outcomes of the hospitals their customers visit. They could share this
medical performance data with their customers, who could use this to go
to the hospitals and nursing homes which provide the safest and most
Unfortunately, while they realize that this data is very valuable,
they're not willing to share it , as a result of which they are not able
to make good use of this . They are being short-sighted and are
concentrating on increasing their market share. They focus is on getting
more customers to sign up for their health insurance policies by
offering freebies such as discounted gym memberships, or discounts for
customers who use wearables in order to prove that they're walking more .
This is a great way of attracting healthy young new customers ( thus
selecting those people who are not likely to have health problems in the
future ) . This shady practice is called cream skimming, and helps the
company to keep their claims loss ratios low . It is also a clever
marketing gimmick which attracts PR.
However, it's really not going to help them take better care
of their customers who have medical problems. These are the ones who end
up costing the health insurer a significant amount of money - the older
ones with chronic illnesses, such as hypertension, COPD, arthritis
and diabetes . These are about 20% of their total population , and are
responsible for about 80% of the total healthcare costs, and this is the
group they should be focussing on.
Health insurance companies need to help these customers manage
their diseases better , so that they live longer and healthier lives ,
and do not end up requiring expensive medical intervention. They need to
establish long-term relationships with these patients, and can motivate
them to change their behavior , so that they lead more productive
The problem is that this is a long-term play , which doesn't have a
short-term payoff. It requires considerable investment upfront, in
resources such as health coaches and population health management tools.
Until they start doing this, health insurance companies in India are
going to find it hard to improve their reputation.
Health insurers need to step back, see where they are, and think
about who they want to be in the long run. They need to stay committed
to reaching that goal, so that they will be able to reap the rewards of
their patience . They need to follow the same advice they give to their
customers - the right time to invest in your long-term health is now !
My next post
will consider a cost effective solution which health insurers can deploy in order to delight their customers.