Gujarat ends contracts with 2 insurance firms as PMJAY claims pile up

The Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) and the Mukhyamantri Amrutam (MA) schemes in Gujarat have taken a hit following the piling of insurance claims and termination of contracts with Oriental Insurance Company Ltd (OICL) and Bajaj Allianz General Insurance Company.
Hospitals refusing to accept beneficiaries under these schemes till the backlog is cleared has resulted in Remya Mohan, the state’s National Health Mission Director and additional CEO of PMJAY-MA, terminating the contracts with the two insurance companies, who were responsible for servicing the claims under the two schemes.

According to estimates provided by Gujarat health department officials in charge of PMJAY-MA, nearly Rs 472.2 crore worth of claims submitted to the two insurance companies since July 1, 2021 under the government schemes remained to be cleared as of April 20.

Claims worth around Rs 1,330 crore received under the two schemes as of April 20, OICL received around Rs 740 crore and Bajaj Allianz GIC received around Rs 590 crore. “Fifty seven per cent of the Rs 740 crore have been cleared by OICL (around Rs 422 crore) and Bajaj Allianz has cleared 74 per cent (around Rs 436 crore) of Rs 590 crore claims it received as of April 20,” said the official.

The termination notices were issued for the two companies’ failure to adhere to the agreements signed by them with the State Health Agency (SHA). According to the termination notices dated February 28 and signed by Gujarat NHM’s Mohan, the administration was “very disappointed” with the services of the firms. The state will “no longer use your services” from April 1,” the letter, accessed by The Indian Express, stated.

On February 21, a penalty of Rs 4.44 crore was imposed on OICL and Rs 13.13 crore on Bajaj GIC by the state “which is a trigger of failure to meet KPIs (key performance indicators)”, the termination notices noted.

The notices added that “this inefficacy” on part of the two insurance companies to achieve the baseline key performance indicators (KPI) measures, especially with respect to the claim payment turnaround time (TAT), “even after completion of almost eight months of the policy has not only brought down the name and fame of the scheme but has also made many hospitals stop accepting the scheme patients.. due to huge backlog of pending PMJAY-MA claim payments from the insurance company.”

The PM-JAY guidelines issued by the National Health Authority (NHA) for hospital-based transactions indicate that the TAT for claim payment should be 15 days for intra-state and thirty days for interstate claims. “This was not adhered to, where we were seeing TAT of sometimes 50 days, 75 days and even 150 days and payment would remain pending. We started receiving a lot of grievances and we also imposed penalties but despite the penalty there was no improvement, and hence the termination notices were issued. When we were operating the scheme in assurance mode (prior to July 2021), TAT was around 35-40 days,” said Dr Shailesh Anand, general manager dealing with the PMJAY-MA scheme implementation in the state. The average TAT as on February 16 was 41 days for Bajaj Allianz GIC and 65 days for OICL.

Dr Bharat Gadhavi, president of Ahmedabad Hospitals and Nursing Homes Association (AHNA), said several “small and mid-range private hospitals” in Ahmedabad had stopped accepting PMJAY-MA claimant beneficiaries last year following which the association had made representations to the state health department in December 2021. Claims from Ahmedabad come under the jurisdiction of OICL.

“When we asked the insurance company why they are not paying, they said the government is not paying us the premium. When we asked the government, they said they have made full payment of the premium. So then, the dispute was between the companies and the government,” added Dr Gadhavi.

OICL state coordinator KB Khinchi stated that as of May 10, OICL had cleared Rs 532 crore worth of claims but refused to comment on the reason for the delay.
According to a state health official, the delay in TAT could be because of “lack of capacity in terms of manpower”, especially with respect to OICL. The official added that Bajaj Allianz GIC, after being asked to show cause for the delay in TAT, “the company in 10 days nearly cleared payments worth around Rs 100 crore.”
Meanwhile, a private Ahmedabad-based hospital administrator, on the condition of anonymity, accused OICL of raising “unnecessary” queries and pushing to “find reasons to reject claims”. “The claim should start from the time a patient is diagnosed but to diagnose you would have to conduct tests, or do the general investigation to reach the diagnosis. So the consultation would be chargeable, and there is no clarity from the government on this front. But the insurance company would say ‘we received a complaint you charged a patient so we are issuing show cause notice’, probably because they thought that by rejecting these claims they (insurance companies) can curtail their outgoing amount (towards payment to hospitals/facilities) ),” the administrator said.

“(If) the outgoing claim payments by the insurance companies are higher than the premium received, the insurance companies will make a loss and in order to curtail their losses, they adopt different processes,” said a New Delhi-based official, aware of the developments.

For the sum of Rs 5 lakh per family per year, the state government pays a premium of Rs 2,177.10 per family to the two companies. Being a centrally sponsored scheme, PMJAY sees the Center and states share the cost in a 60 – 40 ratio, while for MA the state government bears the premium cost.

In November 2020, when the tender was issued, bids were invited from “interested and eligible insurance companies to cover 69.80 lakh number of eligible PMJAY, MA and MAV beneficiary family units” in Gujarat. The state had 65.04 lakh families with active MA, MAV and PMJAY cards at the time. The state was then divided into two “almost equal zones with respect to target families”. As of February, 1.15 crore Ayushman cards had been issued in Gujarat, far exceeding the expected beneficiaries that was cited in the tender.

The state has seen 27,44,780 authorised hospitalisations under AB-PMJAY since the commencement of the scheme in September 2018—the second highest across all states and UTs pan-India after Kerala (34,56,393 authorised hospitalisations), according to a reply to a Lok Sabha question in February.

As per an auditor with the state health department, Gujarat used to see an average of claims worth Rs 1,000-1,200 crore under the two pre-Covid schemes with an increasing trend every year, courtesy increase in enrollment of year-on-year beneficiaries. However, the two years of Covid-19 saw a decrease with an “annual average of Rs 900 crore worth of claims owing to hospital shutdowns and deferment of planned tours”. “We are again seeing an increase owing to people getting their pending procedures completed,” the auditor added.

Meanwhile, the state has issued a fresh tender seeking insurance provider partners for the two schemes. However, the termination notice implies that the two companies can still apply and win the bid, as the companies have not been blacklisted from applying to the tender. Moreover, despite the termination notices stating that the two companies will operate only until March 31, the state government has given the two companies “extension until May 15 to operate”, said Dr Anand.

Apart from Gujarat, Punjab–where SBI General Insurance is the insurance provider–appears to be the only other state where “premature termination” of the contract for servicing PMJAY has occurred.

“With so many terminated beneficiaries at stake under these two schemes—around three crore of them across Gujarat—it is not a situation where we can take kneejerk actions and the companies overnight and appoint a new one the next day. Moreover, blacklisting is an extreme step, and OICL is a PSU,” added Dr Anand. “Blacklisting opens a barrage of litigation and also makes the company inligible to apply in other government tenders as well,” said another official.


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