Insurance Regulatory and Development Authority’s (IRDA) guidelines on standardization in health insurance defined hospital with at least 10 in-patient beds, in those towns having a population of less than 10 lakh and with 15 in-patient beds at other places. It was becoming a big issue for small nursing homes as mediclaim policyholders would not been covered there. Nursing home owners had termed the move as ‘unreasonable’.

In Mumbai, 684 out of 1,200 nursing homes have less than 15 beds. The Association of Medical Consultants (AMC), a body of over 7,500 doctors in the city, had also filed a petition challenging IRDA’s circular on bed restriction for mediclaim cover.

On 5th July, IRDA told the Bombay High Court that it has withdrawn the bed restriction clause. The hospitals will need to be registered with the local authorities under the Clinical Establishments (Registration and Regulation) Act, 2010, or under the enactments specified under the Schedule of Section 56(1) of the said Act.

IRDA’s diktat on bed restriction in the guidelines was seen as not just against smaller healthcare providers but also against the public. Policyholders would have been pushed to undergo treatment at bigger hospitals which in most cases charge more than smaller nursing homes. As such, policyholders feel harassed with partial claims settlement and it will only increase with higher bill amounts from bigger hospitals.

In India, the category of room (private a/c, private non a/c, twin sharing, etc) also determines all the other incremental charges associated with it. The better the room, higher the associated charges even including doctor’s fees. Mediclaim policyholders having high coverage may not negotiate with the hospital on the amount being charged and will avail better facilities even for ordinary hospitalization just to reap the benefit of paying premium to the insurance company over the years.

When a mediclaim policy offers ‘cashless’ at high-end hospitals like Hinduja and Lilavati in Mumbai, it is tempting for the insured to indulge in the best of medical treatment even for non-life-threatening procedures. There can be a huge variation in costs among different hospitals for the same procedure. The insured may not worry, as making a claim is looked at as “payback time” for getting the benefit of premium payment over a period of time. The insurer pays the claim but, ultimately, the insured pays with possible increase in the premium.

Even in the case of Moneylife’s group insurance claim for kidney stone removal, we had excellent small nursing home option nearby which would have provided good, clean and cost-effective treatment. However, the employee had to go for expensive alternative due to lack of cashless facility with these small nursing homes. Imagine, what happens if the nursing home is not even covered under mediclaim. Those who are willing to go even for reimbursement claim would have been ineligible. IRDA has taken right step in backing out of the bed restriction clause.

One of the main reasons that would have prompted IRDA to include the bed restriction in the new health insurance guidelines is the possibility of mediclaim fraud from smaller nursing homes with or without TPA support. But, inflated bills can come from any size hospital. The bigger the hospital, the higher are the charges that are levied. Unnecessary tests can be done by any hospital once you declare that you have mediclaim cover.

Last year, a leading Mumbai-based surgeon (who prefers to remain anonymous) gave insights into working of high-end hospitals. He said, “Insurance companies find it difficult to determine the opaque cost of the implant charged by big hospitals. These hospitals can buy implants as bulk purchases and are also sourced from different places to save on taxes; Maharashtra has 10.5% sales tax plus octroi, Hyderabad has 4.5% while Chennai does not have any tax. Bigger hospitals also sell implants to smaller hospitals at different rates. The MRP (maximum retail price) on the box has no relevance to the actual cost to the hospital. Medicines are purchased by bigger hospitals at an unfathomable discount. Hospitals makes money only from pharma items (implants, medicines), nothing else; otherwise it is a white elephant.”