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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 low.
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 this space.
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 myopic.
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 cost-effective care.
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 lives.
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.