In a radical change, therecently-constituted Health Insurance Forum is set to recommend that feescharged by hospitals from patients with mediclaim policies might be capped.

The forum, constituted by theinsurance regulator to help evolve policies and processes for the health insurance sector, is set to bringsweeping changes. For instance, it is also thinking of capping the rate ofincrease in premiums during renewals of claims. Besides, life insurancecompanies should issue policies with a minimum tenure of five years. Onportability, the industry is talking about standardising the wording, along witha data-exchange mechanism to control frauds.

“These are the basic pointsbeing discussed in the initial meetings. We would like to see that theserecommendations are in place by the next financial year. However, these arebroad points, and it would take some time before new forming new regulations,”said a source privy to the discussion.

The fees hospitals can chargewould be capped depending on the type of disease and the class of the hospital.This is aimed at reducing medical charges for the insured, as in India, ahospital tends to typically overcharge in case of cashless mediclaim polices.

“In India, for thesame treatment, fees are higher for people with health insurance policies,while patients who don’t have such policies are charged lower. This practice ismore pronounced for cashless policies. In developed countries, the situation isthe opposite—people without health insurance policies are charged much higher,”the source said.

The members of the forumwould include chief executives of health insurance companies, lifeinsurers, third-party administrators (TPAs), officials from labour and healthministries and representatives of the health service providers.

The forum also favors cappingthe increase in premiums in case of a claim. The policy document should includethe extent of the increase in premiums in case of claims.

“Right now, there are no suchnorms. Insurers increase the premiums based on their respective claimexperiences, but there is a need for some standard norms for such rises.Policyholders should have some idea of the possible increase in premiums duringrenewals,” said another source.

Other changes being consideredare removing the entry age barrier in health insurance policies, which wouldbenefit senior citizens, sources said. Typically, for most existing healthinsurance plans, the entry age is capped at 65 years.

From October 1, the InsuranceRegulatory and Development Authority had approved portability of healthinsurance schemes, allowing customers to change insurers without losing policybenefits. However, the scheme is yet to pick up, as there is concern regardingdata exchanges between insurers. Keeping this in mind, the forum favours astandardized policy wording.

When this year's budget laiddown new rules for life insurance, it was presumed that mis-sellingwould lose its sting. Far from it, mis-selling has now become more dangerousfor your finances. 

Till 31 March, if someone was mis-sold an unsuitable life insurance policy, themost he would have lost was the liquidity and the opportunity to invest in amore lucrative avenue. But at least he got the tax benefits-tax deduction ofthe premium under Sec 80C and tax-free incomeon maturity under Sec 10(10D). 

Now, if a buyer is not careful, he may end up buying a policy that won't offerany tax benefits. Even the money received by his nominee in case of death willbe taxable if the policy does not cover the buyer for 10 times the annualpremium. 

Individual agents as well as aggregator sites are happily selling insurancepolicies that are not eligible for tax benefits. Till last week, a prominentinsurance portal was hawking Jeevan Vriddhi, a single premium plan from LIC that covers the buyer for 5 times the premium. Posing asa buyer, ET Wealth called up the portal and was given the assurancethat the policy will offer the tax benefits under Sec 80C and Sec10(10D). 

Insurance agents also have their hands in the till. They are bombarding buyerswith attractive benefit illustrations without educating them on the post-budgettax implications. An agent of a private insurance company approached us with anendowment insurance policy that offered a cover of 7 times thepremium. 

It is by itself a good plan because it offers the option of a whole life coveras well as term cover and accidental death riders. But the five-year optionthat he was trying to sell is not eligible for any tax benefits and he wasoblivious of the fact. When this was pointed out to a senior official, hemumbled that the company will soon be conducting training sessions on thechanges in the rules. 

To ensure that companiesdon't design products to circumvent the rules, the budget has clarified thatthe cover shall not include bonuses and other payments made by the company.Only the basic sum assured will be taken into account. 

The budget has also mentioned that the cover should remain at least 10 timesthroughout the tenure of the policy. This means that plans in which the covercomes down from the second year onwards will also not make the cut. 

If you are planning to invest in a life insurance policy, make sure it complieswith the new eligibility norms for tax benefits. The base cover offered by thepolicy should be at least 10 times the annual premium. For instance, if thepremium is Rs 12,000 a year, then the cover should be at least Rs 1.2lakh. 

Two weeks back, FinanceMinister Pranab Mukherjee had asked the Insurance Regulatory and DevelopmentAuthority to take strict action against companies that are mis-sellinginsurance. The truth is, companies don't mis-sell-their agents and advisersdo. 

The problem is that companies don't actively discourage the mis-selling anderrant agents usually get away with a mild rap on the knuckles. Insurers willhave to take stricter action against mis-selling. If they do not takecorrective measures now, in a few years Irda will be inundated with mis-sellingcomplaints from taxpayers who have been denied tax deduction and exemption ontheir investments in life insurance.

The Insurance Regulatory and Development Authority (Irda)has strongly come out in support of an upcoming government-backed healthinsurance policy aimed at providing health cover to a large population of the country.

"Why not has state-backed health insurance coverage for people whenpractically all the governments in the world have similar coverage for theircitizens," asked IrDA chairman J Hari Narayan. He was referring to ameeting of a group of experts in the Planning Commission today on the newhealth insurance scheme which is in the works.

Stating the cover could be on the lines of the RashtriyaSwasthya Bima Yojana, he said Irda had to see the contours of the scheme onceit was ready. A government-backed health scheme involved risks, too. "Onesuch could be that the pricing may go up," he said, while addressing thelaunch of Health Forum, a self-regulatory body that IrDA constituted to addressthe issues of the health insurance sector.

According to the Irda chairman, government-sponsored healthinsurance schemes provide cover at various levels to 189 million people, whilethe non-government sector covers 22 million people under group schemes. Sevenmillion people are covered under individual policies. Per capita pricing ofthese policies stands at Rs 110 in government schemes, Rs 219 in group healthinsurance schemes and Rs 5,500 in individual policies.

Though the per capita price is lower in government schemes,they are more efficient in terms of loss ratio, especially those underwrittenby public sector health insurance companies. Thehealth insurance sector in the country is growing at 45 per cent annually, andwould soon touch Rs 35,000 crore in business this year, Narayan added.

Irda will notify a comprehensive health insurance regulationafter taking into account the issues of non-standardisation of procedures,coverage of patients with HIV/AIDS and mental illnesses and the prospect of thebringing Ayush (alternative medical systems) into health insurance. "Wewill bring the regulation after the Health Forum takes a look at it, and comesup with its recommendations," the chairman said.

The consultative body includes General Insurance Council(non-life), Life Insurance Council, multi stake holder groups of Federation ofIndian Chambers of Commerce and Industry and the Confederation of IndianIndustry, besides the Health Forum formed with the representatives of healthinsurance companies, third-party administrators, hospitals and otherstakeholders.

Narayan came down heavily on unviable methods adopted bycompanies, especially in group schemes, saying nothing prevented Irda fromtaking action against such practices. "So far, we have maintained arestraint, which will not last forever," he said, stating the regulatormight prohibit companies from marketing such products.

Referring to rising complaints from policyholders in thehealth insurance sector, he said unhealthy pricing practices had been putting alot of stress on the management of the companies, leading sometimes to refusal ofthe claims. However, he ruled out prescribing the pricing either of policies orof healthcare services -- and said it was up to the companies and theself-regulatory body to handle the issue.