CAG of India2024-06-222024-06-2205-08-2022https://resourcerepository.azimpremjiuniversity.edu.in/handle/apurr/386Health insurance business is the second largest line of business of the PSU insurers (the first being motor insurance) having gross direct premium of INR 1,16,551 crore during the five-year period from 2016-17 to 2020-21. However, the performance of PSU insurers in health insurance business is at present not profitable and they are incurring continuous revenue losses, which amounted to INR 26,364 crore during five years ended March 2021. In health insurance business, TPAs are engaged to have better expertise, specialization in provider interface, medical adjudication of claims and technologically driven customer services. The Compliance Audit was intended to ascertain whether the PSU insurers managed the health insurance portfolio in a sustainable manner and the performance parameters were optimal; the PSU insurers have laid down a system for empanelment of TPAs, enrolment of hospitals and monitoring of services rendered by TPAs; there existed a suitable system for processing and settlement of claims in line with IRDAI regulations, guidelines, rules, circulars, policies, and agreements with various parties and risk underwriting of health insurance policies was done in a prudent manner and appropriate internal control mechanisms were in place to protect revenue. Audit examined performance of health insurance portfolio of PSU insurers for the last five years i.e., from 2016-17 to 2020-21. Also, underwriting and claim settlement records of PSU insurers for three-years (i.e., from 2016-17 to 2018-19) were examined based on sample selection. Audit observed that the losses of health insurance business of PSU insurers either wiped out/ decreased the profits of other lines of business or increased the overall losses. The cumulative loss of `26,364 crore for last five years was on account of the following factors: • Efficiency was lacking in underwriting of group policies due to non-loading of premium for adverse claim experience and non-adherence to outgo calculator. Out of 3215 group health policies, test check of 188 group health insurance policies in Audit revealed undercharging of premium to the tune of INR 1,548.19 crore in 155 policies and excess discount of INR 9.28 crore in three policies. • PSU insurers were not giving due importance to past claim experience of the TPA, particularly the ICR, while allocating business to TPAs. TPAs continued to get same level or even higher level of business despite high ICR of above 100 per cent in the previous years. TPA-wise high ICR has driven up the overall ICR of the health portfolio leading to high losses. • IT systems of PSU insurers lacked appropriate validation checks and controls resulting in excess and inadmissible payment for claims. Ministry of Finance has laid down (September 2012/May 2013) guidelines for underwriting of Group policies as per which the Combined Ratio of Standalone Group policies shall not exceed 95 per cent and for group policies involving cross subsidy, the Combined Ratio shall not exceed 100 per cent. Audit noticed that the guidelines were not complied with by the PSU insurers and the combined ratio for group health insurance segment as reported by the PSU insurance companies ranged from 125-165 per cent. The comparative performance of PSU insurers in health segment was poor vis-à-vis private and SAHI insurers. The PSU insurers carried out empanelment of TPAs (except UIICL) but allocated business to non-empaneled TPAs also. Safeguards such as maintaining valid bank guarantees of TPAs and regular collection of claim records from TPAs was not prevalent. Resultantly, when fraudulent activities by a TPA came to light and their registration was cancelled by IRDAI, the PSU insurers could not carry out a proper investigation into claims settled by the TPA. PSU insurers incorporated HITPA as their joint venture with an objective to enhance customer experience and bring greater efficiency in health insurance claim processing. Despite, HITPA having comparable performance parameters and presence in major cities, the allocation of business to HITPA by the PSU insurers was minimal. PSU insurers took the initiative to have their own network of hospitals by forming PPN but even after 10 years, enrolment of hospitals under PPN coverage was inadequate. Data analysis by Audit revealed that NIACL and UIICL have settled claims more than once on different dates although the policy number, insured name, beneficiary name, hospitalization dates, illness code, hospital name and disease were the same. Audit pointed out 792 cases (INR 4.93 crore) of multiple settlements in NIACL and 12,532 cases of multiple settlements (INR 8.60 crore) in UIICL, as seen from the database. Audit observed that the systems and procedures for internal audit/ health audit were inadequate and number of audits carried out was insignificant to the targets fixed/the total number of claims settled, thus leaving scope for loss of revenue due to excess settlement of claims.EnglishAudit Report