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IC38 Chapter 17 to 21 Notes

CHAPTER 17 – 21


Health :

Health is a state of complete physical, mental and social wellbeing and notmerely the absence of disease.

Health is the Word Derived from the “Hoelth”. Which means the soundness of the body.

Determinants of health:

  1. Life Style factors : Lifestyle factors are those which are mostly in the control of the individual concerned. Eg : Smoking, abusing drugs.
  1. Environmental factors: Certain diseases caused due to environmental factors .Eg. Safe Drinking water, sanitation and nutrition. Etc..
  1. Genetic factors: Diseases may be passed on from parents to children through genes.

Types of healthcare:

  1. Primary Health Care 

Primary health care refers to the services offered by the doctors, nurses and other small clinics which are contacted first by the patient for any sickness, that is to say that primary healthcare provider is the first point of contact for all patients within a health system.

Primary Health care centres are set up both by Government and private players.

Government primary health care centres are established depending upon the population size and are present right up to the village level in some form or the other.

  1. Secondary healthcare:

Secondary health care refers to the healthcare services provided by medical specialists and other health professionals who generally do not have first contact with patient.

Most of the times, the patients are referred to the secondary care by primary health care providers/ primary physician.

C.Tertiary healthcare :

Tertiary Health care is specialized consultative healthcare, usually for inpatients and on referralfrom primary/secondary care providers.

e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk pregnancy specialists etc.

Factors affecting the health systems in India:

  • Demographic or Population related trends
  • Social trends
  • Life expectancy

Evolution of Health Insurance in India

a) Employees‟ State Insurance Scheme :

Introduced by ESI Act,1948.

All workers earning wages up to Rs. 15,000 are covered under the contributory scheme wherein employee and employer contribute 1.75% and 4.75% of pay roll respectively; state governments contribute 12.5% of the medical expenses.

The benefits covered include:

a)Free comprehensive healthcare at ESIS facilities

b)Maternity benefit

c)Disability benefit

d)Cash compensation for loss of wages due to sickness and survivorship

e)Funeral expenses in case of death of worker

b) Central Government Health Scheme :

Introduced in the year 1954.This scheme is for central government employees including pensioners and their family members working in civilian job.

The contribution from employees is quite nominal though progressively linked to salary scale –Rs.15 per month to Rs.150 per month

It covers all systems of medicine, emergency services in allopathic system, free drugs, pathology and radiology, domiciliary visits to seriously ill patients, specialist consultations etc

C) Commercial health insurance :

In 1986, Mediclaim Policy was introduced to provide coverage for the hospitalization expenses up to a certain annual limit of indemnity with certain exclusions such as maternity,pre-existing diseases etc.

Private players are introduced into the market in year 2001.

Today, more than 300 health insurance products are available in the Indian market.

Health Insurance Market :

  2. Public Health Centre : (PHC)
  3. It operates in National level, State level , District level and Village Level.
  4. Anganwadi Workers : (1 of Every 1000 population) For Nutrition supplementation programme and Integrated Child Development Service Scheme.
  5. The Trained BirthAttendants(TBA) and the Village Health guides(an earlier scheme of health departments in states).

D) ASHA(Accredited Social Health Activist) volunteers, selected by the community under the NRHM (National Rural Health Mission) programme.

Sub-centres :

Established : 5000 population ( Rural), 3000 population ( Hilly, Tribal and backward areas).

One female worker and one male worker.

Primary Health Centres :

Referral units for about six sub-centres

30,000 Population ( rural), 20000 population ( Hilly, Tribal,backward) Provides Outpatient services

4-6 beds

14 para medical workers

One medical officer.

Community Health Centres :

Referral units for 4 Primary health centres.

For 1 Lakh population 30 beds

One operation theatre, X ray machine, Labour room and labouratory.

Four specialists : One surgeon, Physician, Gynacologist, a paediatrician.

Rural hospitals have also been set up andthese includes the sub-district hospitals called as the sub-divisional / Talukhospitals / specialty hospitals (estimated to be about 2000 in the country)

Speciality and teaching hospitals are fewer and these include the medical colleges (about 300 in number presently) and other tertiary referral centres. These are mostly in district towns and urban areas but some of them provide very specialized and advanced medical services.

Private sector providers :

India has a very large private health sector providing all three types of healthcare services -primary, secondary as well as tertiary.

In India nearly77% of the allopathic (MBBS and above) doctors are practicing in the private sector.

Private health expenditure accounts for more than 75% of all health spending in India.

The private sector accounts for 82% of all outpatient visits and 52% of hospitalization at the all India level.

Pharmaceutical industry :

India has a large pharmaceutical industry, which has grown from a Rs10 crore industry in 1950 to a Rs 55,000 crore business today (including exports). It employs about 5 million people, with manufacturing taking place in over 6000  units.

National Pharmaceuticals Pricing Authority (NPPA) – Regulator for the Pharmaceutical Industry


Insurance Companies especially in the general insurance sector provide the bulk of the health insurance services.


  1. Insurance Brokers :who may be individuals or corporates and work independently of insurance companies. Brokers represents the customers. Work for one or more insurance companies.
  2. Insurance Agents are usually individuals but some can be corporate agents too. Agents represent the insurance company.( one Life, One General or One Health Insurance company.)
  3. ThirdParty Administrators :TPAs are funded by the insurance companies for their respective claims and are remunerated by them by way of fees which are a percentage of the premium.


  1. Insurance Web Aggregators :Through their web site and/or telemarketing, they can solicit insurance business through distance marketing without coming face to face with the prospect and generate leads of interested prospects to insurers with whom they have an agreement. They also display products of such insurance companies for comparison.
  1. Insurance Marketing Firms:They can perform the following activities by employing individuals licensed to market, distribute and service such products.

Insurance Regulatory and Development Authority of India (IRDAI)

General Insurance and Life Insurance Councils

Insurance Information Bureau of India.

A.Classification of health insurance products:

 “Health insurance business” or “health cover” means the effecting of insurance contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, including assured benefits and long-term care, travel insurance and personal accident cover.

Health insurance products can be broadly classified into 3 categories:

a) Indemnity covers : These products constitute the bulk of the health insurance market and pay for actual medical expenses incurred due to hospitalization.

b) Fixed benefit covers : lso called as „hospital cash‟, these products pay for a fixed sum per day for the period of hospitalization. Some productsalso have a fixed graded surgery benefit incorporated in the product.

c) Critical illness covers :

This is a fixed benefit plan for pay outon occurrence of a pre-defined critical illness like heart attack, stroke, cancer etc.

Classification based on Customer Segment :

a)Individual cover offered to retail customers and their family members

b)Group cover offered to corporate clients, covering employees and groups, covering their members

c)Mass policies for government schemes like RSBY covering very poor sections of the population

B. IRDA Guidelines on Standardization in health insurance :

The guidelines now provide for standardization of:

1.definitions of commonly used insurance terms

2.definitions of critical illnesses

3.list of excluded items of expenses in hospitalization indemnity policies

4.claim forms and pre-authorization forms

5.billing formats

6.discharge summary of hospitals

7.standard contracts between TPAs, insurers and hospitals

8.standard File and Use format for getting IRDAI for new policies

C.Hospitalization indemnity product :

Basic Health insurance Policy – Mediclaim policy.

Mediclaim continues to be the largest selling health insurance in the country.

Hospitalization indemnity products protect individuals from the expenditure they may need to incur in the event of hospitalisation.

 Main features of Mediclaim policy :

  1. Inpatient hospitalization expenses :

All expenses may not be payable and most products define the expenses covered which normally include:

i.Room, boarding and nursing expenses as provided by the hospital / nursing home. This includes nursing care, RMO charges, IV fluids / blood transfusion / injection administration charges and similar expenses

ii.Intensive Care Unit (ICU) expenses

iii.Surgeon, anesthetist, medical practitioner, consultants, specialists fees

iv.Anesthetic, blood, oxygen, operation theatre charges, surgical appliances,

v.Medicines and drugs,

vi.Dialysis, chemotherapy, radiotherapy

vii.Cost of prosthetic devices implanted during surgical procedure like pacemaker, orthopedic implants, infra cardiac valve replacements, vascular stents .

viii. Relevant labouratory and medical test.

ix.Hospitalization expenses (excluding cost of organ) incurred on donor in respect of organ transplant to the insured

  1. Daycare procedures ( within 24 hrs of hospitalisation) – Eye surgery, Chemothreaphy, dialysis.
  2. Pre and post hospitalization expenses :
  3. Pre hospitalization expenses : Pre hospitalization expenses could be in the form of tests, medicines, doctors‟fees etc. Such expensesrelevant and pertaining to the hospitalization are covered under the health policies.
  4. Post hospitalization expenses :After stay in the hospital, in most cases there would be expenses related to recovery and follow-up.


This benefit is not commonly used by policyholders, an individual health policy also has a provision to take care of expenses incurred for medical treatment taken at home without being admitted to a hospital.

This cover usually carries an excess clause of three to five daysmeaning that treatment costs for the first three to five days have to be borne by the insured.

The cover also excludes domiciliary treatments for certain chronic or common oilments such as Asthma, Bronchitis, Chronic Nephritis and Nephritic Syndrome, Diarrhoea and all type of Dysenteries including Gastroenteritis, Diabetes, Mellitus, Epilepsy, Hypertension, Influenza, Cough and Cold, fevers.


  1. Pre-existing diseases:

“Any condition, ailment or injury or related condition(s) for which you had signs or symptoms, and/or were diagnosed, and/or received medical advice/treatment within 48 months prior to the first policy issued by the insurer.”

Exclusions for Pre-existing disease – 48 months from the day of Inception of the policy.

Waiting periods : Depending on the product, waiting periods of one / two / four years apply for diseases such as Cataract, Benign Prostatic Hypertrophy, Hysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele, Congenital internal disease, Fistula in anus, piles, Sinusitis and related disorders, Gall Bladder Stone removal, Gout and Rheumatism, Calculus Diseases, gout and rheumatism, age related osteoarthritis, osteoporosis.


Individual Coverage

Family Floater

 Top-up covers or high deductible insurance plans :

The maximum amount of cover under a health policy remained at Rs 5,00,000 for a very long time.

Anyone wanting a higher cover was forced to buy two policies paying double the premium. This led to the development of the Top-Up policies by insurers, which offers cover for high sums insured over and above a specified amount (called threshold).

  Senior citizen policy :

Coverage :People over 60 years of age.

Sum Assured :Rs.50,000 to Rs.5,00,000.

Entry age is mostly after 60 years and renewable lifelong.

  Fixed benefit covers -Hospital cash, critical illness :


Per day amount limit – Rs.1500 – 5000 per day.

Number of payment days linked to the disease for which treatment is being taken.

The hospital daily cash policy is available as a standalone policy as offered by some insurers.


Critical illness policy is a benefit policy with a provision to pay a lump sum amount on diagnosis of certain named critical illness.

It is sold:

As a standalone policy or

As an add-on cover to a few health policies or

As an add-on cover in some life insurance policies

The critical illnesses covered vary across insurers and products, but the

common ones include:

Cancers of specified severity

Acute myocardial infarction

Coronary artery surgery

Heart valve replacement

Coma of specified severity

Renal failure

Stroke resulting in permanent symptoms

Major organ / bone marrow transplant

Multiple sclerosis

Motor Neuron disease

Permanent paralysis of limbs

Permanent disability due to major accidents

Age Group : 21 years to 65 years.

Waiting period : 90 days from the inception of the policy.

Survival Clause : 30 days after diagnosis of the illness.

Rigorous medical examination will be done for age of more than 45 years.

Long term care insurance :

Long termcare means all forms of continuing personal or nursing care for people who are unable to look after themselves without a degree of support and whose health is not going to get better in future. There are two types of plans for long term care:

a)Pre-funded plans which are purchased by healthy insured to take care of their future medical expenses and

b)Immediate need plans which are purchased by a lump sum premium when the insured is requiring long term care.

 Bhavishya Arogyapolicy :

Introduced in the year 1990.

Age : 25 years to 55 years.

This scheme provides assignment.

This policy does not have the exclusions of pre- existing diseases.

Micro insurance and health insurance for poorer sections:

  1. Jan ArogyaBima Policy :

Following are the features of Jan ArogyaBima Policy:

a.This policy is designed to provide cheap medical insurance to poorer sections of the society.

b.The coverage is along the lines of the individual Mediclaim policy. Cumulative bonus and medical check-up benefits are not included.

  1. The policy is available to individuals and family members.

d.The age limit is five to 70 years.

e.Children between the age of three months and five years can be covered provided one or both parents are covered concurrently.

f.The sum insured per insured person is restricted to Rs.5,000 and the premium payable as per the following table.

  1. Universal Health Insurance Scheme (UHIS) :

This policy is available to groups of 100 or more families. In recenttimes evenindividual UHISPolicies were made available to the public. Benefits under this policy are Medical Reimbursement, Personal accident cover, Disability cover,


  1. RashtriyaSwasthyaBimaYojana(RSBY):

a.Total sum insured of Rs. 30,000 per BPL family on a family floater basis.

b.Pre-existing diseases to be covered.

c.Coverage of health services related to hospitalization and services of surgical nature which can be provided on a day-care basis.

d.Cashless coverage of all eligible health services.

e.Provision of smart card.

f.Provision of pre and post hospitalization expenses.

g.Transport allowance of Rs.100/-per visit.

h.The Central and State Government pays the premium to the insurer.

i.Insurers are selected by the State Government on the basis of a competitive bidding.

j.Choice to the beneficiary between public and private hospitals.

k.Premium to be borne by the Central and State governments in the proportion of 3:1.

Central Government to contribute a maximum amount of Rs. 565/-per family.

l.Contribution by the State Governments: 25 percentof the annual premium and any additional premium beyond Rs 750.

m.Beneficiary to pay Rs. 30/- per annum as registration fee/ renewal fee.

n.Administrative cost to be borne by the State Government.

o.Costof smart card additional amount of Rs. 60/-perbeneficiary would be available for this purpose. Claim settlement to be done through TPA‟s mentioned in the schedule or by the insurance company.

  1. PradhanMantriSurakshaBimaYojana (PMSBY).

Covering personal accident death and disability cover insurance.

Age : 18 yrs to 70 years

Sum assured : Rs.2,00,000

Premium : Rs.12 per annum.

The cover shall be for the one year period from 1st June to 31st May.

    5. PradhanMantri Jan DhanYojana (RMJDY)

1.Interest on deposit.

2.Accidental insurance cover of Rs.1.00 lac

3.No minimum balance required.

4.Life insurance cover of Rs.30,000/-

5.Easy Transfer of money across India

6.Beneficiaries of Government Schemes will get Direct Benefit Transfer in these accounts.

7.After satisfactory operation of the account for 6 months, an overdraft facility will be permitted

8.Access to Pension, insurance products.

9.Accidental Insurance Cover

10.RuPay Debit Card which must be used at least once in 45 days.

11.Overdraft facility upto Rs.5000/-is available in only one account per household, preferably lady of the household

  1. Personal Accident and disability cover


Types of disability which are normally covered under the policy are:

i.Permanent total disability (PTD):means becoming totally disabled for lifetime

  1. Permanent partial disability (PPD): means becoming partially disabled for lifetime viz. loss of fingers, toes, phalanges etc.

iii.Temporary total disability (TTD): means becoming totally disabled for a temporary

period of time. This section of cover is intended to cover the loss of income during

the disability period.


Underwriting is a process of risk selection and risk pricing.

Underwriting is the process of assessing the risk appropriately and deciding the terms on which the insurance cover is to be granted.

The job of the underwriter is to classify the risk and decide the terms of acceptance at a proper price. It is important tonote that acceptance of risk is like giving a promise of future claim settlement to the insured.

Factors which affect chance of illness :Age, Gender, Habits, Occupation, Family history, Past illness or surgery, current health status.

Underwriting purpose :

i.To prevent anti-selection that is selection against the insurer

ii.To classify risks and ensure equity among risks

The term selection of risks refers to the process of evaluating each proposal for health insurance in terms of the degree of risk it represents and then deciding whether or not to grant insurance and on what terms.

Anti-selection(or adverse selection) is the tendency of people, who suspect or know that their chance of experiencing a loss is high, to seek out insurance eagerly and to gain in the process

Risk classification :

i.Standard risks:These consist of those people whose anticipated morbidity (chance of falling ill) is average.

 ii.Preferred risks :These are the ones whose anticipated morbidity is significantly lower than average and hence could be charged a lower premium.

 iii.Substandard risks :These are the ones whose anticipated morbidity is higher than the average, but are still considered to be insurable. They may be accepted for insurance with higher (or extra) premiums or subjected to certain restrictions.

 iv.Declined risks :These are the ones whose impairments and anticipated extra morbidity are so great that they could not be provided insurance coverage at an affordable cost.

 Underwriting or the Selection Process :

What is Moral Hazard :

While factors like age, gender, habits etc. refer to the physical hazard of a health risk, there is something else that needs to be closely watched. This is the moral hazard of the client which can prove very costly to the insurance company.

 Basic principles of insurance and tools for underwriting

  1. The core principles of Underwriting are :
    1. Utmost good faith (Uberrima fides) and
    2. Insurable interest
  1. Tools for underwriting:

a) Proposal Form :

This document is the base of the contract where all the critical information pertaining to the health and personal details of the proposer (i.e. age, occupation, build, habits, health status, income, premium payment details etc.) are collected.

b) Age proof:

Standard ageproof: Some of these include school certificate, passport, domicile certificate, PAN card etc

Non-standard age proof: Some of these include ration card, voter ID, elder‟s declaration, gram panchayat certificate etc.

  1. Financial documents :Knowing the financial status of the proposer is particularly relevant for benefit products and to reduce the moral hazard.
  2. d) Medical reports :Requirement of medical reports is based on the norms of the insurer, and usually depends upon the age of the insured and sometimes on the amount of cover opted.
  1. e) Reports of sales personnel : Sales personnel can also be seen as grassroots level underwriters for the company and the information given by them in their report could form an important consideration.

Claims management in insurance

Insurance is a „promise‟ and the policy is a „witness‟to that promise.

Insurance is the claims paying ability of the insurance company.

Stakeholders in claim process

Customer : The person who buys insurance is the first stakeholder and„receiver of the claim‟.

Owners : Owners of the insurance company have a big stake as the „payers of the claims‟. Even if the claims are met from the policy holders‟ funds, in most cases, it is they who are liable to keep the promise.

Underwriters: Underwriters within an insurance company and across all insurers have theb responsibility to understand the claims and design the products, decide policy terms, conditions and pricing etc.,


The regulator (Insurance Regulatory and Development Authority of India) is a key stakeholder in its objective to:

Maintain order in the insurance environment

Protect Policy holders Interest

Ensure long term financial health of insurers.

Third Party Administrators

Service intermediaries known as Third Party Administrators, who process health insurance claims.

Insurance agents/ brokers

Insurance agents / brokers not only sell policies but are also expected to service the customers in the event of a claim.

Providers / Hospitals

They ensure that the customer gets a smooth claim experience, especially when the hospital is on the panel of the TPA the Insurer to provide cashless hospitalization.

Role of claims management in insurance company

The health insurance loss ratio of various insurers ranges from 65% to above 120%, with major part of the market operating at above 100% loss ratio”.

This means that there is a great need to adopt sound underwriting practices and efficient management of claims to bring better results to the company and the policyholders

  1. Management of health insurance claims
  2. Challenges in Health insurance : Common perception – “Health insurance is not for Healthy People”

Lack of awareness about the Health insurance Products.

Health care delivery systems focus only on top 20 Cities in india.

Lack of reliable data

Price sensitivity to buying.

Efficient claims management ensures that right claim is paid to right person at the right time.

Claim process in health insurance :

A claim may be serviced either by the insurance company itself or through the services of a Third Party Administrator (TPA) authorized by the insurance company.

Claim process broadly comprises of following steps

a) Intimation

Claim intimation is the first instance of contact between the customer and the claims team. The customer could inform the company that he is planning to avail a hospitalization or the intimation would be made after the hospitalization has taken place, especially in case of emergency admission to a hospital.

b) Registration

Registration of a claim is the process of entering the claim in the system and creating a reference number using which the claim can be traced any time. This number is called Claim number, Claimb reference number or Claim control number. The claim number could be numeric or alpha-numeric based on the system and processes used by the processing organization.

c) Verification of documents

Once a claim is registered, the next step is to check for the receipt of all the required documents for processing. It must be appreciated that for a claim to be processed following are the most important requirements:

  1. The documentary evidence of the illness
  2. Treatment provided
  3. In-patient duration
  4. Investigation Reports
  5. Payment made to the hospital
  6. Further advice for treatment
  7. Payment proofs for implants etc.

d) Capturing the billing information

Billing is an important part of the claim processing cycle.

Room, board and nursing expenses including registration and service charges.

Charges for ICU and any intensive care operations .

Operation theatre charges, anaesthesia, blood, oxygen, operation theatre charges, surgical appliances, medicines and drugs, diagnostic materials and X-ray, dialysis, chemotherapy, radiotherapy, cost of pacemaker, artificial limbs and any medical expenses incurred which is integral part of the operation. Surgeon, anaesthetist, medical practitioner, consultant’s, specialists fees.

Ambulance charges .

Investigation charges covering blood test, X-ray, scans, etc.

Medicines and drugs .

 Package rates

Many hospitals have agreed package rates for treatment of certain diseases. This is based on the ability of the hospital to standardize the treatment procedure and use of resources. In recent times, for treatment at Preferred Provider Network and also in case of RSBY, package cost of many procedures has been pre-fixed.


a) Cardiac packages: Angiogram, Angioplasty, CABG or Open heart surgery, etc.

b) Gynaecological packages: Normal delivery, Caesarean delivery, hysterectomy, etc.

c) Orthopaedic packages

d) Ophthalmological packages

 e) Coding of claims

The most important code set used is the World Health Organization (WHO) developed International Classification of Diseases (ICD) codes.

While ICD is used to capture the disease in a standardized format, procedure codes such as Current Procedure Terminology (CPT) codes capture the procedures performed to treat the illness

 f) Processing of claim

The heart of claims processing in any insurance policy, is in answering two key questions:

Is the claim payable under the policy?

If yes, what is the net payable amount?

Admissibility of a claim

  1. The member hospitalized must be covered under the insurance policy
  2. Admission of the patient within the period of insurance
  3. Hospital definition
  4. Domiciliary hospitalization
  5. Duration of hospitalization
  6. OPD
  7. Treatment procedure/line of treatment
  8. Pre-existing illnesses

Pre-existing illnesses refer to “Any condition, ailment or injury or related condition(s) for which insured person had signs or symptoms and/or was diagnosed and/or received medical advice/treatment within 48 months prior to his/her health policy with the company whether explicitly known to him or not.”

 Initial waiting period

A typical health insurance policy covers illnesses only after an initial 30 days (except accident related hospitalization).

There are lists of illnesses such as Catract, Hernia, Hydrocele, Fistula, Sinusitis, Piles, Knee/Hip JointReplacement – One year/Two year/ more than a year depends upon insurance company.


The policy lists out a set of exclusions which in general can be classified as:

Benefits such as maternity (though this is covered in some policies) .

Outpatient and Dental treatments .

Illnesses which are not intended to be covered such as HIV, Hormone therapy, obesity treatment, fertility treatment, cosmetic surgeries, etc.

Diseases caused by alcohol/drug abuse.

Medical treatment outside India .

High hazard activities, suicide attempt, radioactive contamination.

Admission for tests/investigation purpose only.


g) Arriving at the final claim payable

  1. Sum insured available for the member under the policy
  2. Balance sum insured available under the policy for the member after taking into account any claim made already:

iii. Sub-Limits – percentage of Sum assured.

  1. Check for any limits specific to illness
  2. Check whether entitled or not to cumulative bonus
  3. Other expenses covered with limitation

vii. Co-payment

Non-payable items in a health claim

The expenses incurred in treating an illness can be classified into:

Expenses for cure and

Expenses for care .

The order of arriving at the final claim payable is as follows:

Step I

List all the bills and receipts under the various heads of room rent, consultant fee, etc.

Step II

Deduct the non-payable items from the amount claimed under each head

Step III

Apply any limits applicable for each head of expense

Step IV

Arrive at the total payable amount and check if it is within sum insured overall

Step V

Deduct any co-pay if applicable to arrive at the net claim payable

 h) Payment of claim

Once the payable claim amount is arrived at, payment is done to the customer or the hospital as the case may be. The approved claim amount is advised to the Finance / Accounts function and the payment may be made either by cheque or by transferring the claim money to the customer‟s bank account.

Management of deficiency of documents / additional information required

Processing of a claim requires the scrutiny of a list of key documents. These are:

  • Discharge summary with admission notes
  • Supporting investigation reports
  • Final consolidated bill with break up into various parts
  • Prescriptions and pharmacy bills
  • Payment receipts
  • Claim form
  • Customer identification

j) Denial claims

The experience in health claims show that 10% to 15% of the claims submitted do not fall within the terms of the policy. This could be because of a variety of reasons some of which are:

  1. Date of admission is not within the period of insurance.
  2. The Member for whom the claim is made is not covered.

iii. Due to Pre-existing illness (where the policy excludes such condition).

  1. Undue delay in submission without valid reason.
  2. No active treatment; admission is only for investigation purpose.
  3. Illness treated is excluded under the policy.

vii. The cause of illness is abuse of alcohol or drugs

viii. Hospitalization is less than 24 hours

Apart from the representation to the insurer, the customer has the option, to approach the following in case of denial of claim:

Insurance Ombudsman or

The consumer forums or


Law courts .

 k) Suspect claims for more detailed investigation

Few examples of frauds committed in health insurance are:

  1. Impersonation, the person insured is different from person treated.
  2. Fabrication of documents to make a claim where there is no hospitalization.

iii. Inflation of expenses, either with the help of the hospital or by addition of external bills fraudulently created.

  1. Outpatient treatment converted to in-patient / hospitalization to cover cost of diagnosis, which could be high in some conditions.

Claims are chosen for investigation based on two methods:

Routine claims and

Triggered claims

Cashless settlement process by TPA

“Third Party Administrators or TPA means any person who is licensed under the IRDAI (Third Party Administrators – Health Services) Regulations, 2001 by the Authority, and is engaged, for a fee or remuneration by an insurance company, for the purposes of providing health services.

Step 1 A customer covered under health insurance suffers from an illness or sustains an injury and so is advised admission into a hospital. He/she (or someone on his/her behalf) approaches the hospital‟s insurance desk with the insurance details such as:

  1. TPA name,
  2. His membership number,

iii. Insurer name, etc.

 Step 2 The hospital compiles the necessary information such as:

  1. Illness diagnosis
  2. Treatment,

iii. Name of treating doctor,

  1. Number of days of proposed hospitalization and
  2. The estimated cost This is presented in a format, called the cashless authorization form.

 Step 3

The TPA studies the information provided in the cashless authorization form. It checks the information with the policy terms and the agreed tariffwith the hospital, if any, and arrives at the decision on whether the cashless authorization could be provided and if so, for how much amount it should be authorized.

The TPA could ask for more information to arrive at the decision. Once the decision is made, it is communicated to the hospital without delay.

Both forms have now been standardized under IRDAI Health Insurance Standardization Guidelines; refer to Annexure at the end).

Step 4

The patient is treated by the hospital, keeping the amount authorized by the TPA as credit in the patient‟s account. The member may be called on to make a deposit payment to cover the non treatment expenses and any co-pay required under the policy.

 Step 5

When the patient is ready for discharge, the hospital checks the amount of credit in the account of the patient approved by the TPA against the actual treatment charges covered by insurance. If the credit is less, the hospital requests for additional approval of credit for the cashless treatment. TPA analyses the same and approves the additional amount.

 Step 6

Patient pays the non-admissible charges and gets discharged. He will be asked to sign the claim form and the bill, to complete the documentation.

 Step 7

Hospital consolidates all the documents and presents to the TPA the following documents for processing of the bill:

  1. Claim form
  2. Discharge summary / admission notes

iii. Patient / proposer identification card issued by the TPA and photo IDproof.

  1. Final consolidated bill
  2. Detailed bill
  3. Investigation reports

vii. Prescription and pharmacy bills

viii. Approval letters sent by the TPA

Step 8

TPA will process the claim and recommend for payment to the hospital after verifying details such as the following:

  1. The Patient treated is the same person for whom approval was provided.
  2. Treated the patient for the same condition that it requested the approval for.

iii. Expenses for treatment of excluded illness, if any, is not part of the bill.

  1. All limits that were communicated to the hospital have been adhered to.
  2. Tariff rates agreed with the hospital have been adhered to, calculate the net payable amount.

Customer must make sure that he/she has his/her insurance details with him/her. This includes his: TPA card, Policy copy, Terms and conditions of cover etc

The services that an insurer expects out of the TPA are as follows:

 Provider networking services

The TPA is expected to build a relationship with a network of hospitals across the country, with the objective of providing cashless claim payments for health claims to the insured persons.

 Call centre services

The TPA is usually expected to maintain a call centre with toll-free numbers reachable at all times including nights, weekends and holidays i.e. 24*7*365.

The call centre should be accessible through a national toll free number and the customer service staff should be able to communicate in the major languages normally spoken by the customers.

“Cashless facility” means a facility extended by the insurer to the insured where the payments, of the costs of treatment undergone by the insured in accordance with the policy terms and conditions, are directly made to the network provider by the insurer to the extent preauthorization approved.

 TPA Remuneration

  1. a) A percentage of the premium (excluding service tax) charged to the customer,
  2. b) A fixed amount for each member serviced by the TPA for a defined time period, or
  3. c) A fixed amount for each transaction of the service provided by the TPA – e.g. cost per member card issued, per claim etc.

 Claims management – personal accident

Personal accident is a benefit policy and covers accidental death, accidental disability (permanent / partial), Temporary total disability and may also have add-on coverage of accidental medical expenses, funeral expenses, educational expenses etc. depending on particular product.

Claims manager should mark caution and check following areas on receipt of the notification of the claim:

a) Person in respect of whom the claim is made is covered under the policy

b) Policy is valid as on date of loss and premium is received

c) Loss is within the policy period

d) Loss has arisen out of “Accident” and not sickness

e) Check for any fraud triggers and assign investigation if need be

f) Register the claim and create reserve for the same

g) Maintain the turnaround time (claim servicing time) and keep the customer informed of the development of the claim.

 Claim documentation – Personnel Accident :

 Death claim

a) Duly completed Personal Accident claim form signed by the claimant‟s nominee/family member

b) Original or Attested copy of First Information Report. (Attested copy of FIR / Panchnama / Inquest Panchnama)

c) Original or Attested copy of Death certificate.

d) Attested copy of Post Mortem Report if conducted.

e) Attested copy of AML documents (Anti-money laundering) – for name verification (passport / PAN card / Voter’s ID / Driving license) for address verification (Telephone bill / Bank account statement / Electricity bill / Ration card).

f) Legal heir certificate containing affidavit and indemnity bond both duly signed by all legal heirs and notarized

Permanent Total Disability (PTD) and Permanent Partial Disability(PPD) Claim

a) Duly completed Personal Accident claim form signed by the claimant.

b) Attested copy of First Information Report if applicable.

c) Permanent disability certificate from a civil surgeon or any equivalent competent doctors certifying the disability of the insured.


Temporary Total Disability(TTD) Claim

a) Medical certificate from treating doctor mentioning the type of disability and disability period. Leave certificate from employer giving details of exact leave period, duly signed and sealed by the employer.

b) Fitness certificate from the treating doctor certifying


Claims management- Overseas travel insurance

The covers under the policy can be broadly divided into following sections.

a) Medical and sickness section

b) Repatriation and evacuation

c) Personal accident cover

d) Personal liability

e) Other non-medical covers:

Trip Cancellation Xi . Hijack Cover

Trip Delay Xii. Sponsor Protection

iii. Trip interruption Xiii. Compassionate Visit.

  1. Missed Connection Xiv. Study Interruption
  2. Delay of Checked Baggage Xv. Home burglary.
  3. Loss of Checked Baggage

vii. Loss of Passport

viii. Emergency Cash Advance

  1. Hijack Allowance
  2. Bail Bond insurance

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