Evaluation. Mizoram Health Care Scheme

Transcription

1 Evaluation of Mizoram Health Care Scheme August 2008 Aloke Gupta Health Insurance Consultant New Delhi

2 TABLE OF CONTENTS 1. Executive Summary 3 2. Introduction 5 3. Review of Mizoram Health Care Scheme 7 Salient Features of the Scheme 7 Comment on Indicators 10 Implications 11 Key Implementation Issues 11 Financial Performance of the Scheme Mizoram Health Care Scheme Agreement Mizoram Health Care Society 22 Providing of Additional Coverage for Critical Illnesses 23 Management of Mizoram Health Care Society Corpus 23 Cost Recovery Need For Capacity Building Summary of Recommendations 29 Implementation Issues 29 Agreement with Insurance Company 29 Capacity Building 30 Annexure 1. Terms of Reference 31 List of Tables Table 1 State Sponsored Major Health Insurance Schemes 6 Table 2 Important Indicators of the Scheme 8 Table 3 Distribution of Reimbursement Claims based on Size 9 Table 4 Different Claim Scenarios 14 Table 5 Key Risk Factors and Mitigation Interventions 16 Table 6 MHC Society Empowerment versus Capacity 22 Table 7 Capacity Building Plan 27 List of Figures Figure 1 Claims Distribution Percentages 10 2

3 1. Executive Summary 1.1. There is a visible shift in government thinking on healthcare from provision of healthcare to financing it. This change is reflected in the growing inclination of both, the Central Government and many State Governments, towards using health insurance as a means of improving access to healthcare delivery for the poor. Important initiatives in this regard relate to Yeshasvini scheme, of the Government of Karnataka for members of the cooperatives, Rajiv Aarogyasri health insurance of the State of Andhra Pradesh and the ambitious Rashtriya Swasthya Bima Yojana launched in April 2008 by the Central Government to insure the 300 million BPL (Below Poverty Line) persons over a period of five years Mizoram Health Care Scheme, a health insurance scheme, was implemented in April It is aimed at improving access of families to quality medical care for treatment of diseases involving hospitalisation and surgery through an empanelled network of healthcare providers. The scheme covers 150,000 families, all bonafide residents of Mizoram, except Government and Public Sector employees and their dependents. Benefits covered relate to medical expenses incurred on hospitalisation in hospitals both within and outside the State Government of Mizoram established the Mizoram State Health Care Society as the project implementation agency for the scheme. Through a process of selection that involved bidding by national level insurance companies based on a published Request for Proposal (RFP), Reliance General Insurance Company was chosen to provide the coverage An evaluation of the Scheme after nearly 4 months of its implementation was carried out. The evaluation included a review of i) the Mizoram Health Insurance Scheme, ii) the Agreement between the State Government and the Insurance Company, iii) the Terms of Reference of the Mizoram Health Care Society The Mizoram Health Insurance Scheme, a universal coverage, hospitalisation expenses scheme stands out for its good features in comparison to other similar state sponsored schemes, both with reference to the coverage amount as well as benefits covered. Its coverage of pre-existing conditions and ailments, maternity and no age restrictions for eligibility, adds to its appeal The scheme with its size and scope has its share of operational and implementation issues. Some of the important implementation issues include i) lower than expected level of enrollment of beneficiaries due to inadequate awareness about the benefits of the scheme, ii) poor implementation of the facility of cashless hospitalisation by the Third Party Administrator (TPA) resulting in continued lower level of access of the poor to healthcare providers, iii) service deficiency issues with the TPA causing a host of beneficiary grievances, iv) inadequate monitoring, audit and MIS systems, and v) capacity challenges being faced by the implementation team. 3

4 1.7. The agreement between the Government of Mizoram and the Insurance Company follows the standard format followed for group insurance contracts. The agreement however requires inclusion of some additional provisions on its renewal, such as, i) profit sharing/stop loss clause to ensure that premiums are commensurate to risks, ii) payment of premium in installments, iii) multi-year agreement, iv) provision of a system of claims review and audit, v) MIS reporting, and vi) insurance company s responsibility in technical capacity building of the Mizoram Health Care Society Key functions of Mizoram Health Care Society consist of i) management of funds/corpus received from the State and Central Government, ii) functioning as a resource centre for scheme implementation, iii) capacity building to improve implementation of the scheme and iv) mobilizing financial/non-financial resources for complimenting/supplementing the activities under the scheme The terms of reference of the Mizoram Health Care Society are broad enough and provide sufficient freedom to the society in discharging the responsibilities it has been created for. The need lies in equipping the functionaries of the Society with requisite skills in effective implementation of the Scheme Health insurance being a complex subject and a highly specialized activity, implementation of a large health insurance scheme of the magnitude of Mizoram Health Care Scheme requires technical knowledge and skills pertaining to health insurance management and accounting, underwriting, claims adjustment and insurance regulations. Deficiency of these skills is bound to impact effective implementation of the scheme. It is critical that a capacity building plan is developed and implemented without delay to ensure successful operation of the scheme Though an inventory of fulfillment of the main objectives of the Mizoram Health Care Society was not undertaken, it is evident that the society has succeeded, given its limited resources, in designing a good health insurance scheme that has wide appeal. However, the test lies in its effective implementation so as to achieve the key scheme objective of improving access of healthcare to all the residents of the State, and specifically the poor. 4

5 2. Introduction 2.1. In the last few years, there has been a visible shift in government thinking on healthcare from provision of healthcare to financing it. This change is reflected in the growing inclination of both, the Central Government and many State Governments, towards using health insurance as a means of improving access to healthcare delivery for large vulnerable sections of the population. State Governments of Assam and Goa have provided universal coverage of health insurance, while those of J&K and Mizoram have experimented with health insurance coverage for their employees only. Under the Yeshasvini scheme, the Government of Karnataka made health insurance cover available to members of the cooperatives in the State on a subsidized basis Central Government too has made similar efforts. It has implemented national level health insurance schemes for specific segments like handloom weavers and for handicraft artisans. Under its recently launched Rashtriya Swasthya Bima Yojana, the Central Government in partnership with various State Governments aims to cover all BPL workers in the unorganized sector in the states with a premium subsidy component of 75% The uncommon element in this common theme is that almost all these schemes are different in their composition. Dissimilarity lies in factors like payment of part or whole of premiums by beneficiaries, coverage ranging from a few critical illnesses to wider omnibus hospitalization, benefits ranging from Rs. 15,000/- to over Rs. 1,00,000, etc There are successful models of risks underwritten by insurance companies as well as risks self-insured by the States with the administration of benefits of the Scheme being outsourced to a Third Party Administrator (Yeshasvini). Both public and private insurance companies as well as specialized health insurers have come forward to underwrite these large policies and have met with mixed luck regarding their success. Table 1 provides information on some of such large schemes currently in operation With the objective of removing financial barriers and improving access of its residents, including the poor, to quality medical care; of providing financial protection against high medical expenses, the Government of Mizoram introduced a health insurance scheme in April The Scheme was introduced on the model of publicprivate partnership between the Government represented by the Mizoram Health Care Society, Insurance Company and a Third Party Administrator and a network of empanelled public healthcare facilities and private hospitals. 5

6 Scheme Scheme Organizer Table 1. State Sponsored Major Health Insurance Schemes Number Eligible Number Insured Premium Insurance Cover Govt. Share Contribution of Insured Handloom Weavers Govt. of India 6.5 million 1.77 million Rs. 782 per family Rs. 15,000 80% from Centre 20%, but met by states in some cases Rashtriya Swasthya Bima Yojana Rajiv Aarogyasri Govt. of India and State Govts. Govt. of Andhra Pradesh 300 million 6.5 million 1.5 million BPL persons All Rs. 750 per family Rs. 330 per family Rs. 30,000 per family Rs. 150,000 can go up to Rs. 200,000 75% from Centre, rest by state govt. Fully met by AP govt. Rs. 30 as registration fee Nil Yeshasvini Govt. of Karnataka Around 65 million 12.1 million Rs. 120 per person Rs. 100,000 Subsidy from govt. Rs. 120 per person Mizoram Health Care Scheme Govt. of Mizoram 150,000 families or 750,000 persons All Rs.1,929 per family Rs. 100,000 Fully met by state govt. Enrollment Fees per family - Rs.100(BPL), Rs. 200(APL) 6

7 3. Review of Mizoram Health Care Scheme Salient Features of the Scheme 3.1. Objective - The Mizoram Health Care Scheme is aimed at improving access of families to quality medical care for treatment of diseases involving hospitalisation and surgery through an empanelled network of healthcare providers Eligibility for Coverage Any person who is a bonafide citizen of India and residing in Mizoram, with the head of his family being in the voters list, is eligible to be covered under the scheme, irrespective of age. The scheme aims to cover around 150,000 families or 750,000 lives (considering average family size of 1+5 members). All employees and dependents of Central Govt., State Govt. and public sector are excluded from coverage under the scheme Premium Entire premium is paid by the Government of Mizoram. However, through an enrollment process, Rs. 100 per family for families below poverty line and Rs. 200 per family for families above poverty line is collected as registration charges/premium contribution from the beneficiaries under the scheme Covered Benefits The scheme covers hospitalisation within the State of Mizoram both in public or private hospital/nursing home for illness/disease contracted or injury sustained by the beneficiary. Treatment outside Mizoram is also covered subject to the family floater limit. (Family floater relates to a floater amount/sum insured that can be availed by members of a family either individually or collectively) Benefit Limit Scheme covers expenses towards hospitalisation and surgical procedures up to a maximum of Rs. 100,000/- per family per annum. The limit of Rs. 100,000/- operates as a family floater Period of coverage From 9 th April 2008 to 8 th April Pre-existing diseases All pre-existing diseases are covered from day one Pre and Post hospitalization - The scheme covers the cost of treatment of the patient one day prior and five days post hospitalisation Coverage Area Benefits under the scheme are applicable within the territorial limits of India but restricted to the bonafide residents of Mizoram, irrespective of the place they undergo hospitalisation Reasonable cost of travel to the healthcare provider incurred by the patient and one attendant is also covered. There is also a provision for giving an allowance of Rs. 50/- for each day of hospitalisation (from the 4 th day onwards up to a maximum of 15 days of hospitalisation) if the earning head of the family is BPL (below poverty line). 7

8 3.11. Package Rates These are rates for hospitalisation expenses for 1,127 named ailments/surgeries forming part of the Agreement between the Insurance Company and the Government of Mizoram. A revised list of package rates has recently been issued, taking into consideration current healthcare costs Cashless Treatment The scheme envisages cashless access to empanelled hospitals/healthcare facilities for hospitalisation episodes Provider Network A network of both public and private hospitals recognized and approved in and around the State of Mizoram and outside the State of Mizoram by the Government of Mizoram has been created to provide the facility of cashless treatment to the beneficiaries. Additionally, the network also includes other hospitals across India recognized by the Insurance Company. Table 2. Important Indicators of the Scheme (9 th April 2008 to 7 th August 2008) Premium: Gross Premium Rs.289,388,192 (exclusive of 12.36% Service Tax) Average Premium per Family Rs.1,929 (exclusive of Service Tax) Average Premium per Individual Rs.386 (exclusive of Service Tax) Enrollment: Number of families enrolled 80,182 as against the target of 150,000 Registration Fees collected Rs.8.5 million Claims: i) Reimbursement Claims No. of Reimbursement Claims Paid 2,091 Claims Amount Paid Rs.11,283,127 No of Reimbursement Claims as per cent 87% of Total Claims Reimbursement Claims Paid Amount as 88% percent of the Total Claims Paid ii) Cashless Claims No. of Cashless Claims Reported 316 No. of Cashless Claims Paid 203 No. of Cashless Claims Pending 113 Cashless Claims Amount Paid Rs.1,539,732 No of Cashless Claims as per cent of 13% Total Claims Cashless Claims Paid Amount as Percent 12% of the Total Claims Paid 8

9 Claims Ratio 1 : Based on Gross Premium 4.43% Based on Premium Paid (95% of Gross 4.66% Premium) Average Claim Size 2 : Reimbursement Claims Rs.5,396 Cashless Claims Rs.7,585 Claim Frequency 3 : For enrolled beneficiary families (80,182) 3% For total covered families (150,000) 1.6% Provider Network: i) Public Healthcare Facilities 76 Primary Health Centers 57 Community Health Centers 9 District Hospitals 8 Annexe Hospitals 2 ii) Private Hospitals 8 Table 3. Distribution of Reimbursement Claims based on Size Claim Size No. of Claims % of Total Amount Paid (Rs.) % of Total Up to Rs , Rs ,127, Rs ,931, Rs , ,432, Rs.10,001-20, ,596, Rs.20,001-30, ,144, Rs.30,000-50, , Rs.50,001-75, , Rs.75,001-1,00, , Total 2, ,283, Claims Ratio Claims Ratio is the ratio of claims (benefits) paid to gross premium 2 Average Claim Size Claims paid amount divided by the number of claims 3 Claim Frequency Number of claims as a percentage of total beneficiaries 9

10 Figure 1. Claims Distribution - Percentages Percent of Claims Percent of Amount Paid Percent Up to Rs.1000 Rs Rs Rs ,000 Claim Size Rs.10,001-20,000 Rs.20,001-30,000 Rs.30,000-50,000 Rs.50,001-75,000 Rs.75, ,000 Comment on Indicators: Table 2 and Table 3, also represented through Figure No 1, highlights some important indicators, namely: i) 70% of claims fall within the range of Rs. 1/- to Rs. 5,000/- utilizing 29% of total claims outgo ii) 29% of claims fall within the range of Rs. 5,001/- to Rs. 50,000/- utilizing 60% of the total claims outgo iii) The balance of 1% claims fall within the range of Rs. 50,000/- to Rs. 1,00,000/- utilizing 11% of total claims outgo iv) Penetration of Cashless Hospitalisation is low, reflected by only 14% claims as cashless v) Average claims size of Cashless Claims is 41% higher than Reimbursement claims vi) There is a high pendency of Cashless Claims at 36% of cashless claims reported vii) There is a preponderance of public healthcare facilities in the healthcare provider network 10

11 3.15. Implications: a. Presently, 99% claims fall within the range of Rs.1 to Rs. 50,000/- and utilize 89% of total claims outgo. If this trend continues till the close of the policy period, the maximum family floater amount may be reviewed. b. Lower level of Cashless Hospitalisation impacts access to healthcare due to the prevalence of the concept of cash and carry in seeking treatment at a provider facility c. Higher claims size of Cashless Hospitalisation claims indicates higher utilisation by healthcare providers. With proposed higher penetration of cashless hospitalisation, this may have an adverse impact on the claims ratio. d. Preponderance of public health facilities increases healthcare delivery cost recovery for the State Government, but also imposes a responsibility on the State Government to improve quality benchmarks in public health facilities. Key Implementation Issues The Mizoram Health Care Scheme, a universal coverage health insurance scheme, is rich in benefits and coverage, but suffers from implementation inadequacies. The following discussion highlights key implementation issues and recommendations for improvement Low Level of Awareness Multipronged approach has being adopted by the Government to create awareness about the scheme. Publicity is being created through TV and Radio Spots and Newspaper advertising. Hospital coordinators at the network hospitals have been enlisted to explain the benefits of the scheme to the patients and to facilitate enrollment. Political representatives and district administration officials have been reaching out to their constituencies to propagate the scheme. ASHAs are being financially incentivized to create awareness and enroll people into the scheme The creation of awareness about the Scheme and its benefits has been moderately successful, with the number of families enrolled being around 80,000 in 4 months Government should augment its efforts to increase awareness about the scheme by using different methods of reaching out to the population. If necessary, a separate budget allocation should be made for disseminating information among the covered population. Active NGOs operating in the State may also be involved in spreading awareness about the scheme Low Enrollment The enrollment process under the scheme is aimed at identification of beneficiaries as bonafide residents of the State of Mizoram which in turn helps prevent misuse of the scheme benefits by non-covered persons by 11

12 impersonation. Additionally, it also enables some cost recovery through collection of beneficiary contribution to the scheme It is important to increase the enrollment figure from the existing 54% to at least over 75%. Larger enrollment serves as an indicator of wider acceptance of the scheme amongst the population, while the contribution paid in form of registration fees promotes ownership of the Scheme among the beneficiaries Inadequate implementation of the facility of Cashless Hospitalisation Inability of the scheme to bring larger number of claimants under the cashless system of hospitalisation defeats the basic purpose of the scheme. It is widely known that people postpone or decide against going to a hospital due to lack of funds to meet the hospitalisation costs. As per available data, only 14% of claims under the scheme pertain to cashless hospitalisation. This low level of cashless hospitalisation needs to be studied and remedial measures taken Package Rates The Scheme has developed a schedule of package rates of various procedures and surgeries that fixes the maximum amount of reimbursement for claims. This is a progressive step in limiting claims outgo, since it is empirically established that in third party payor/health insurance regimes, healthcare providers have an inducement to increase utilisation thereby leading to inflated claims It is recommended that the package rates be periodically reviewed to reflect current cost levels so as to benefit both the beneficiaries as well as the healthcare providers Deficiencies in Servicing The Insurance Company has appointed MediAssist, a Third Party Administrator (TPA) for administration of benefits under the Scheme. Deficiencies have been reported by the implementing team regarding inadequate and inefficient level of servicing by the TPA to both beneficiaries and healthcare providers. This is leading to growing level of dissatisfaction among the users, which if not addressed timely and adequately, may result in adverse impact on enrollment and adoption of the scheme. The main causes of dissatisfaction relate to: i) delay in issuance of ID Cards to beneficiaries ii) delay in issuing pre-authorisation to healthcare providers in case of cashless hospitalisation iii) inappropriately qualified medical professional (homeopathic) delegated with the responsibility of issuing pre-authorisations and claims adjudication iv) unexplained deductions of charges from claim amounts v) delay in claims settlement to beneficiaries vi) delay in settlement of bills of healthcare providers vii) non-delegation of claims payment powers (including funds) to the TPA by the Insurance Company resulting in delays 12

13 viii) non-customization (content and vernacular) of pre-authorisation, claims forms etc by the TPA ix) refusal of out-of-state healthcare providers to accept requests for cashless hospitalisation In view of the above, there is an urgent need to stress on the Insurance Company and its TPA to improve servicing levels related to fulfillment processes as recommended below Accelerate Turn-around Time (TAT) - It is necessary to provide better service experience by accelerating the TAT of activities like issuance of ID Cards, Preauthorisations, claims settlement and payment to healthcare providers Simplify and Streamline Fulfillment Processes Processes related to preauthorisation and claims documentation for reimbursement and cashless claims requires simplification and streamlining. Various forms (pre-authorisation, claims, etc.) being used by the TPA are generic ones being used for commercial group health insurance policies. These require to be customized to meet the features of the tailormade policy for the State. Further, all forms should be developed in local vernacular Develop Claims Review and Monitoring Mechanism Presently, no mechanism exists for reviewing delayed or denied claims or explanation of deductions made in claims that have been paid. There have been numerous complaints from beneficiaries as well as healthcare providers questioning deductions from claimed amounts It is recommended that a claims review and audit system be put in place. A Claims Review Committee consisting of the representatives of the Society, Insurance Company and the TPA should conduct a sample review and audit of paid claims, denied claims and claims unduly delayed for payment. The audit should be aimed at determining i) correctness of deductions made in case of fully or partially paid claims, ii) reasons for denial of claims and iii) an ageing analysis of pending claims. The review should be done on a monthly basis Build MIS Reporting System Except periodic reports on claims paid, no MIS reports are being generated or shared relating to pending claims, ageing analysis of pending claims, disease profiles with costs, geographical cost variations, demographic profiling of diseases, etc. Important MIS reports covering the above mentioned attributes should be demanded on a regular basis to study the impact of the scheme in enabling access of beneficiaries to healthcare providers as well as on the health status of the beneficiaries Investment in IT system A robust IT system along with requisite software is needed for effective monitoring of the scheme. It is recommended that help and advice of an accredited IT company be sought for the purpose of developing a plan for software and hardware architecture. An interaction with project implementation agency i.e., Rajiv Aarogyasri Trust, that implements the Rajiv Aarogyasri Community Health Insurance Scheme may be helpful in understanding their experience of IT 13

14 intervention for their scheme. The IT software being used for the Rajiv Aarogyasri Community Health Insurance Scheme was developed by Tata Consultancy Services (TCS) Conduct Beneficiary Satisfaction Survey An outcome study based on the claims figures and beneficiary feedback is necessary to periodically evaluate the scheme. It is recommended that a satisfaction survey consisting of beneficiaries, healthcare providers and other stakeholders be carried out. The survey should be outsourced to a professional survey organization to enable unbiased feedback The Scheme will complete 6 months in September It is recommended that a complete review of the functioning of the Scheme, its impact and shortcomings should also be undertaken. Financial Performance of the Scheme The Scheme is currently operating at a claims ratio of about 4.5%, which is considerably low given the level of benefits covered as well as coverage of preexisting conditions. It is important that the Society study the reasons for the low claims ratio since continuance of this trend over the policy period may raise doubts about the rationale of the Scheme Table 4 depicts different claims scenario with projected claims ratios. Assuming that the claims ratio remains at the present level for the entire period of the scheme, the total claims ratio at the conclusion of the scheme may close at around 13%. If the existing claims trend grows by 25%, the scheme may end up with an overall claims ratio of 15%. Similarly, in case of claims exceeding 100% of the existing trend, the overall projected claims ratio would be only 25%. Table 4. Different Claim Scenarios Claims Scenarios Projected Claim Amount (Rs.) Claim Ratio (%) For entire period based on existing trend 33,849, For entire period at 5% of existing trend 35,541, For entire period at 25% of existing trend 42,311, For entire period at 50% of existing trend 50,774, For entire period at 75% of existing trend 59,236, For entire period at 100% of existing trend 67,698, For entire period at 200% of existing trend 101,548, For entire period at 300% of existing trend 135,397, For entire period at 400% of existing trend 169,246, An insurance company s standard pricing of an insurance policy consists of components like expected claims, acquisition costs, management and administrative expenses and profit margin. For a new product, due to absence of data on past claim trends, a projected claims ratio is assumed. Acquisition costs and management and administrative expenses normally range between 25-30% and a reasonable profit 14

15 margin say of 5% of the gross premium. The balance 60-65% of the premium is considered sufficient to meet the claims, provided the pricing of the cover has been appropriate, i.e., conforming to actuarial principles In the case of the Mizoram Health Care Scheme, with the given claims trend, the scheme seems capable of absorbing claims ratio in the range of 400% to 450% of the existing trend, translating in to total claims ratio of 62% to 67% for the entire policy period. Discounting any catastrophic conditions like epidemics and natural calamities, it is highly unlikely that the claims ratio for the entire policy period would touch these levels It is difficult to project the final claims ratio that the policy may end up with. However, in view of the existing claims trend, and with an expected increase in claims frequency due to greater awareness about the coverage during the remaining period, the claims ratio could rise but still remain within 40% of paid premiums, indicating over 200% increase on the existing claims trend Projecting Renewal Premium With the given current data, a projection of the renewal premium can be made as follows: Expected Claims (at 40% of current paid premium) Rs.110,000,000/- Expected acquisition and management expenses (30%) - Rs.33,000,000/- Profit margin (5%) - Rs.5,000,000/- Projected Total Premium on renewal: Rs.148,000,000/- Plus Service Tax as applicable Based on the above exercise, it is evident that the Mizoram Health Care Scheme with the existing benefits would require an insurance premium corpus of approximately Rs. 150 million, exclusive of service tax. The projected premium is only indicative based on prevailing claim trends and is subject to change based on actual claims outgo and other risks that may manifest over the period The impact of the projected renewal premium on average premium per family would be significant. It would come down to Rs. 990/- from the existing Rs. 1,929/- (both exclusive of service tax) Any large community health care scheme is exposed to various risks that may impact its success and long term continuance. It is important that such risks be identified, factors originating these risks be understood, and commensurate coping strategies be developed in time to abate the tide. Table 5 attempts this exercise. 15

16 Table 5. Key Risk Factors and Mitigation Interventions Risk Factors Possible Reason Mitigation Measures Low awareness about scheme benefits Low level of Adoption of the Scheme by beneficiaries Inability to afford enrollment fees Need Gaps in Benefit design Continued low access to health providers due to low cashless penetration Initiate awareness creation measures to increase enrollment to > 75% Reduce enrollment fees for the BPL Seek beneficiary feedback to assess need gaps Initiate steps to increase Cashless hospitalisation to > 75% of claims Ineffective Implementation High Claims Ratio Insurer reluctance in renewing contract Implementation inefficiencies of the TPA Over utilisation by private health providers Increase in incidence of critical illnesses Increased frequency and severity of claims High medical inflation High claims ratio High administrative expenses Lack of locally available skilled manpower Initiate measures to address: - Delays in ID card issuance, preauthorisations, claims settlement - Enforce TAT on fulfillment processes Develop Monitoring and Review mechanism Develop MIS reporting Adopt claims control measures, including fraud control Rationalise benefit design Introduce Co-payment of claims by beneficiaries Periodically review package rates Rationalise benefit design to control claims costs Enter into multi-year policy contract Introduce concept of profit sharing/stop loss Assist insurer in lowering administrative costs by co-locating Society and TPA offices Take joint steps in technical capacity building Widen insurer choice by approaching niche health insurers 16

17 Reluctance of private health providers to participate in the Scheme Fraud Issues Lack of Technical Capacity among the State Implementing Agency Delays in claims settlement Inappropriate deductions from claim amounts Inadequate cost recovery due to medical inflation Provider related false claims, inflated claims Beneficiary related impersonation, over-utilisation of services New initiative by the State Lack of in-house health insurance experts Lack of implementation skills Enforce TATs by TPAs Initiate claims audit process Periodically review package rates Initiate claims audit and utilisation reviews Photo identification Rationalise benefit design Introduce co-payment of claims by beneficiaries Initiate technical capacity building measures, e.g. Training Seminars and Workshops Case Studies 17

18 4. Mizoram Health Care Scheme Agreement 4.1. The agreement between the Government of Mizoram and the Insurance Company follows the standard format followed for Group insurance contracts. The agreement does require some refinements and additional provisions. Recommended changes may be incorporated on renewal of the policy Date of Cover There are contradictions in the agreement regarding the date of the commencement of the scheme, which has led to ambiguity and wrangling between the signatories. As many as three dates are mentioned in the agreement as follows: i. Effective date: means the date of execution of this agreement which is 28 th March 2008 ii. Commencement of the Policy: will commence from the date of receipt of the premium by the Second Party (Insurance Company) from the First Party (Government of Mizoram). The premium was paid to the Insurance Company on 9 th April 2008 iii. Commencement and Eligibility: The scheme shall cover a period of twelve months commencing from 1 st April, 2008 and concluding on 31 st March This plethora of dates has led to ambiguity in the commencement date of the insurance policy which in turn has resulted in disputes between the Policyholder (Government of Mizoram) and the Insurance Company regarding the actual date of commencement of the benefits under the policy. The Policyholder considers 1 st April 2008 as the date for commencement of policy benefits, while the Insurance Company insists that 9 th April, 2008, the date of receipt of consideration/premium by them is the correct date. As per Section 64VB of the Insurance Act, 1938, no insurance cover can incept unless premium has been received by the Insurer. Hence the actual date of commencement of policy benefits in the above case can only be from 9 th April The shortcoming lies on the part of Insurance Company in not having educated the Policyholder about this important aspect of regulations contained in the Insurance Act, Lump sum Premium Payment - The State has paid 95% of the total premium at inception, not keeping provision for adjustments in case of lower claims. It would have been prudent for the Government to have paid the premiums in two equated installments one at the commencement of the policy and the other after 6 months based on an agreed formula taking into account management expenses and claims outgo of the Insurance Company. This practice is already being followed in the Rajiv Aarogyasri Community Health Insurance Scheme of the State of Andhra Pradesh. 18

19 4.6. Premium Rate The total premium of the scheme is Rs. 289,388,192/- (plus service This translates into a premium of Rs.1,929/- per family or Rs.386/ per person (exclusive of service tax). This appears to be on the higher side when compared to some other large health insurance schemes, as shown in Table 1. This is further evidenced by the prevailing low claim ratio Post hospitalization Expenses The existing provision of coverage of posthospitalisation expenses up to 5 days after discharge from the hospital is inadequate. The normal industry practice is to cover post hospitalisation expenses up to 90 days after discharge for individual health insurance policies; such coverage is generally lower for community health insurance schemes. The Rajiv Aarogyasri Scheme meets post hospitalisation expenses up to 10 days from the date of discharge from the hospital. Further, the in case of Kidney Transplantation the postoperative care is extended to 1 year. It is recommended that the time period for covering post hospitalisation expenses be increased for general hospitalisation episodes with a higher duration for identified critical illness that require extended medication Infrastructure The agreement lays down that the Insurance Company, through its TPA would establish its representative offices in all District headquarters of Mizoram. This apparently has not happened. It is recommended that the Mizoram Health Care Society enforce this provision so as to increase access of beneficiaries to the TPA resulting in to an improvement in the fulfillment process Profit sharing Given the existing claims trend of the scheme, it is unlikely that the number of claims and the claims outgo (both paid and outstanding) will experience huge surges. This will lead to considerable profits for the insurance company. To obviate this, the agreement should have incorporated a profit sharing or stop loss clause wherein any profits made by the Insurance Company after taking into account claims outgo and its expenses (defined percentage) would be refunded back to the Government at an agreed percentage say 90%. Alternatively, the Insurance Company would stop paying claims after its total outgo (including expenses) exceeds a defined percentage. Such an arrangement rationalizes both profits and losses for the Insurance Company as well as for the Policyholder and ensures that premiums are commensurate to the risk. Similar practice is being followed in the Rajiv Aarogyasri Community Health Insurance Scheme Buffer Sum Insured - The scheme provides coverage for expenses of hospitalization up to Rs.100,000 per family per year on a floater basis. However, there is no provision in the contract of a buffer floater to take care of expenses of an individual or a family; if, in case of hardship, they exceed the original sum insured It is recommended that on renewal of the contract, a provision of buffer floater be introduced. A buffer floater is a floater amount that supplements the family floater in selective cases only. It is fixed both at the aggregate policy level as well as the level of family/individual. To determine the eligibility of individual cases for application of the buffer floater, a Committee should be set-up by the Society with laid down guidelines. 19

20 4.12. Cover for Critical Illness Due to epidemiological transition in the State, there is growing incidence of lifestyle and chronic diseases like Cancer, Cardio Vascular Diseases, Diabetes, etc. There is a felt demand for covering these critical illnesses under the existing Scheme in addition to existing benefits. Cover for critical illness may be provided through a buffer floater on renewal of the policy Provision of Multi-year contract This provision relates to longer than one year policy, which is the present norm followed by general insurance companies. A multi-year contract assures an insurance company with assured revenues for the multi-year period, while it saves the policyholder the annual effort of selecting a new insurer. Existing insurance regulations do not allow general insurers to issue multiyear insurance policies. However, the regulations do not prohibit insurers and policyholders entering into an MoU wherein the provision of multi-year contract are made with well defined conditions of renewability along with a formula for arriving at renewal premium. This method of entering into a multi-year contract is feasible and legal and the State Government should explore this possibility The benefits of a multi-year contract are as follows:- i) makes it economically viable for the insurance company to create adequate infrastructure which it is lacking presently; i) allows the Insurance Company to review premium rates and claims experience over a multi-year period rather than the Year on Year approach adopted presently. Multi-year averaging smoothens out claim spikes and hence stabilizes premium; i) encourages the Insurance Company to invest in customizing MIS systems, processes, etc. as per the scheme requirement; ii) iii) iv) facilitates availability of long-term data helping framing of State health policy and in health interventions; allows the State Government to budget for premium allocation in the State Budget; generates awareness about the scheme enabling larger number of beneficiaries to avail of the scheme benefits; Claims Review and Audit The agreement does not contain any provision for Claims Review and Audit of both paid and denied claims. It is important to analyze reasons for any deductions in paid claims and for claims that have been repudiated. The Agreement should have contained a provision for the setting up of a Claims Review Committee comprising officials from Government of Mizoram and from the Insurance Company. The role of the Committee would have been to periodically review claims on an agreed basis Management Information System (MIS) Periodic MIS on operational aspects like Paid and Unpaid claims, Ageing analysis of Unpaid claims, Amounts Paid, Frequency of Claims etc. are essential for concurrent review of effectiveness of the scheme. Of equal importance is reporting of the healthcare related data like disease profile of the insured population, age and sex-wise disease profile, district- 20

21 wise disease profile, cost parameters relating to different diseases, etc. The agreement does not contain any provision of such MIS information flows from the Insurance Company, which should have been incorporated Capacity Building The agreement does not lay down any responsibility upon the Insurance Company to help build capacity by imparting health insurance education to Government representatives implementing the Scheme, Healthcare Providers, ASHAs and other functionaries associated with the Scheme. This stipulation should be a part of the agreement. 21

22 5. Mizoram Health Care Society 5.1. The Mizoram Health Care Society was set up in April 2008 develop, execute and manage the Mizoram Health Care Scheme, which was initially envisaged as a health insurance scheme. The Scheme was later enlarged to include coverage of critical illness benefits on a self-insurance basis. Presently, the Scheme operates on a hybrid model of insurance and self-funding Mizoram Health Care Society was formed to operate as a Project Implementation Agency for implementing the Mizoram Health Care Scheme. Through its terms of reference, the key functions envisaged for the Society can be classified into three broad categories, namely:- i) Project Management Project management functions include execution of contracts/agreement, development of operational guidelines and preparation of policy change proposals. Other aspects of project management activities include monitoring the performance of the scheme through surveys and policy review studies ii) Fund Management - mobilization of funds from various sources, its management and disbursement for scheme implementation iii) Capacity Development operating as a resource centre for implementation of the scheme. As a resource centre, its other functions include policy development and. Technical and management capacity building of its various organizational levels. Vast arrays of capacity augmenting activities are envisaged which include organizing of workshops, seminars, conferences exchange visits and recruitment of experts The terms of reference of the Mizoram Health Care Society are broad enough to provide sufficient freedom to the Society to discharge the responsibility it has been created for. Table 6 inventorises the list of i) activities required to be undertaken at various stages of scheme implementation, ii) whether the Society is empowered to undertake those activities, and iii) the level of capacity within the Society for effectively discharging these functions. Table 6. MHC Society Empowerment versus Capacity Set of Activities for implementing the Health Care Scheme Society Empowerment Level of Capacity Fund Mobilisation (From Government) Yes High Fund Management Yes Low Scheme/Policy Development Yes Medium Insurer Selection Yes Medium Development of Contract/Agreement Yes Low/Medium Insurance Regulation Yes Low Execution of MoU/Contract/Agreement Yes High Premium Payment Yes High Implementation of the Scheme Yes Low/Medium 22

23 Development of Operational Guidelines Yes Low Collection of Supplemental Funds from Beneficiaries Yes Medium Monitoring Performance of the Scheme Yes Low Disbursement of Funds for Supplemental Schemes Yes High Capacity Building Yes Low Other Issues: 5.4. Within its terms of reference, the Society is presently struggling to address some important issues listed below. The following discussion highlights these issues with recommendations. Providing of Additional Coverage for Critical Illnesses 5.5. In addition to the coverage provided to families under the Mizoram Health Care Scheme, the Government has also taken a decision to provide a Critical Illness cover to the population. The number of critical illnesses to be covered is 13 and the benefit amount is Rs. 200,000. It was reported that the Insurance Company quoted a premium amount of Rs. 75 million for the additional coverage. Finding the quote too high, the Mizoram Health Care Society has recently implemented the Critical Illness coverage on a self-insurance basis Going forward, the Government has two options regarding the Critical Illness coverage viz. Option 1 Continue to self-insure the Critical Illness cover Option 2 Incorporate the Critical Illness component into the Insurance Policy on its renewal by incorporating a Critical Illness or Buffer Floater It is recommended that the Government consider self-insuring the Critical Illnesses as a stop gap arrangement only. It would be prudent to review the claims incidence, claims outgo and administrative costs and efforts expended on this selfinsurance scheme when the Mizoram Health Care Scheme comes up for renewal. The decision regarding self-insurance versus risk transfer should be based on a thorough analysis of the costs and benefits involved in the long term. Assistance of an Actuary may additionally be sought to project long-term claims liability and the ensuing fund requirement. Management of Mizoram Health Care Society Corpus 5.8. As per the Memorandum of Association of the Mizoram Health Care Society, its source of funds consists of the following:- i) Grants-in-aid from the State Government ii) iii) iv) Cash assistance from the Government of India Premium collection from Beneficiaries Grants and donations from industry, trade, institutions & individuals 23

24 v) Interests from investments vi) Receipts from disposal of assets 5.9. One of the main objectives of the Society is to implement the Mizoram State Health Care Scheme for the benefit of the beneficiaries. Conforming to this objective, the Society s fund requirement relates to financing two components of the Scheme:- i) Health insurance component of the Scheme by paying premium to an insurance company ii) Self-insurance component of the Critical Illness cover for the present Management of Mizoram Health Care Society corpus involves financial management of the health fund which includes maintaining an adequate operating reserve (a reserve intended to cover unforeseeable short-term risks) In the present scenario, while the risk of hospitalisation expenses, up to a limit of Rs. 100,000 has been transferred to the Insurance Company, the risk of meeting additional hospitalisation expenses of Rs.200,000 arising out of 13 named Critical Illnesses rests wholly on the health fund /corpus of the Mizoram Health Care Society Since the health fund /corpus, for paying for the Critical Illness would be managed on a pay-as-you-go basis, there is a need to maintain an operating reserve for the following reasons:- i). meeting the Critical Illness claims over the insured limit ii). meeting unforeseen changes in morbidity iii). meeting staff and related administrative costs iv). meeting unforeseen changes in costs Unfortunately, in absence of any historical data on claims incidence and severity, it is difficult to estimate the amount of technical reserve to be maintained. Normally, the reserve should equal at least two months of projected claims and costs. Since it is a new health fund it is advisable to start with a larger reserve and reduce it gradually when it becomes clear that a lower amount would be adequate In view of the above, it would be prudent to work out a monthly cash-flow requirement taking into account projected monthly claims outgo and expenses of the Mizoram Health Care Society. The available health fund /corpus may be invested in fixed deposits of various maturity dates. The fixed deposits should be kept with a select mix of public sector and private sector banks after negotiating the best possible return. There should be a caveat that no investment of the health fund /corpus be made in equity markets either directly or through mutual funds. 24

25 5.15. The Mizoram Health Care Society may seek the services of a Chartered Accountant/Financial Planner to help project cash-flow requirements and for designing an investment plan that provides maximum returns with utmost safety. Cost Recovery Based on the claims experience under the Mizoram Health Care Scheme, following steps needs to be taken to improve cost recovery: Negotiate renewal premium with the Insurance Company based on claims outgo. Projected renewal premium, based on existing claims trend is estimated at Rs. 150 million as against the current premium level of Rs. 290 million Provision of profit sharing and stop loss should be introduced at the time of renewal of the policy Policy interventions to reduce claims outgo should be introduced, such as:- (i) (ii) (iii) deductibles/co-pays in the policy to restrict small and frivolous claims use of generic drugs in the hospitals to reduce medication costs periodic review of package rates of procedures and surgeries to reduce cost arbitrages, if any Increase in enrollment of beneficiaries to improve collection of registration charges. With the existing enrollment percentage at 54% of the total beneficiaries, the collection of registration fees amounts to Rs.8.5 million. Increase in enrollment to over 75% of beneficiaries would considerably increase the collection amount From Table 1, which lists down data about various Government sponsored health insurance schemes, it is apparent that registration charges being charged by the Mizoram Health Care Scheme are the highest. One of the most successful Government sponsored health insurance scheme, namely, Rajiv Aarogyasri, does not levy any registration fees Further, with pre-enrollment not being a pre-condition for availing benefits under the scheme, any increased registration charges may lead to fall in preenrollment numbers reducing the overall collection. Increase in these charges may also encourage beneficiaries to enroll in the scheme only in the eventuality of hospitalisation. Thus, it is not advisable to increase the registration charges lest they prove a demotivator for BPL and economically weaker sections to join the scheme Central Government has over past few years implemented national level health insurance schemes covering various population segments like weavers and handicraft workers. It is also encouraging State Governments to implement health insurance schemes like Rashtriya Swasthya Bima Yojana which contain premium subsidies to the State Governments on its implementation. The State Government may work out 25