Is your health insurance benefit being diluted?

In recent times, there has been a concerning trend where what was once criticized as "cut practice" in the medical field is now being regularized and adopted as a business model by various companies, particularly within the health insurance industry. One prominent company involved in this practice is MediBuddy, a healthcare aggregator app that partners with hospitals to provide outpatient care services. This app is often offered to employees of corporate houses as part of their healthcare benefits, alongside their routine health insurance coverage.

While the idea of offering outpatient care services through an app seems beneficial, there's a hidden catch in this arrangement. MediBuddy takes a substantial referral commission of around 30% from the total bill incurred by patients in the hospitals it has onboarded. This commission can be seen as a new, legalized form of "cut practice." As hospitals are now run by corporate entities rather than individual doctors, they are more inclined to collaborate with MediBuddy to increase patient footfall. The 30% kickback is cleverly disguised as a marketing expense.

The consequences of this kickback scheme are concerning. Hospitals, in order to compensate for the loss of revenue due to the commission, resort to cost-cutting measures in their healthcare delivery processes. Unfortunately, this often leads to a decline in the quality of healthcare provided to patients behind the hospital doors. Moreover, the inflated bills, including the additional 30% cost, are passed on to patients, increasing their overall healthcare expenses. For patients covered by health insurance (which is the case for most MediBuddy app users who are corporate employees), the inflated bills are borne by the insurance company, ultimately resulting in higher premiums for employers providing health coverage to their staff.

The situation becomes even more alarming when we examine the relationship between MediBuddy and Mediassist TPA, the largest insurance third-party administrator (TPA) in the market. Both companies share the same promoters and directors, and they are essentially sister concern companies with identical tech infrastructure. TPAs are bill processing entities regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The regulations governing TPAs explicitly state that promoters of TPAs cannot have conflicting business interests, TPAs cannot charge hospitals for their services, and they cannot demand a share of the payout issued to hospitals.

However, Mediassist TPA seems to be violating these regulations through its association with MediBuddy. This raises concerns about a conflict of interest, as overpaid claims would directly benefit MediBuddy's revenue in this business model. According to a report by the Comptroller and Auditor General of India in 2022, Mediassist has consistently maintained an Incurred Claims Ratio (ICR) above 110% concerning health insurance policies for PSU insurance companies. This suggests financial strain on these PSUs, with the funds potentially being funneled to MediBuddy as part of the 30% kickback deal. Despite these findings, no action has been taken to address the issue.

It is crucial to recognize that this business model is not limited to MediBuddy and Mediassist; other players in the health insurance sector might adopt similar practices. If left unchecked, this trend could lead to a significant surge in healthcare expenses, while hospitals and doctors continue to be blamed for the rising costs. Immediate action and regulatory measures are necessary to address these practices and protect the interests of patients, employers, and insurance companies.

But surprising fact is how can the corporate HR department with eagle eye miss this important money drain?