Thursday, July 29, 2010

Medical Insurers Stop Cashless Facility

The article presents an example of how the consumer stands to lose out in another battle (cold war) between two corporates/ industries. Insurance companies have withdrawn their cashless facilities from several high end hospitals.

The issue is twofold. On part of the insurers, they believe that hospitals charge differential rates from patients with and without a medical insurance policy. Most private insurers are making loses, the industry as a whole is also incurring huge losses. In this scenario, it only makes business sense for the medical insurance companies to cut corners wherever possible. More so, the move seems reasonable as it still does not deprive the insured from getting treatment. An interesting aspect to look at would be how insurance companies can exhibit this to be a loss for the high end hospital chains in the long run and get them back on the network. As a matter of fact, this is a loss for the high end hospitals as they stand to lose out on many of the customers with medi-claim policies. Some of these customers would now transition to other hospitals helping them build bigger business. Over time, these other hospitals may present tough competition to the current leaders in the business. No doubt, losing high end hospitals, would damage the brand recognition of insurance companies. But, a win-win situation can be created if the high end hospitals realize what they stand to lose in the long run.

On part of the consumers, it presents a problem with no quick solution in the offing. Several people might be taking up particular insurance policies because of their association with some of the high end hospitals. Especially those people, willing to obtain treatment only from the high end hospitals would be worst hit. To add to the medical woes, they would now have reimbursement hassles to take care of. Moreover, there is an added subjectivity with respect to the claims processed.

This can lead to two situations. If the cost of insurance (premiums) remains constant, private insurance companies might end up losing customer base very quickly. Additionally, they also stand to dilute their brand value. On the other hand, a more strategic approach by these firms could be to project their products differently or even restructure them, to appeal to a different segment of people.

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