Mediclaim, the mass health cover from state-owned general insurance companies, will soon have a competitor priced 20-25 per cent cheaper.
However, the new medical insurance policy comes with a difference -- the policyholder will have to chip in and contribute a certain percentage of the total medical expenses.
This is in contrast to the current Mediclaim policy which allows 100 per cent reimbursement of claims.
Four state-owned insurers -- New India Assurance, Oriental Insurance, National Insurance and United Insurance -- are planning to launch this product parallel to the existing Mediclaim product.
It will give policyholders a choice between continuing with the current policy and the new product.
The new plan is in response to the market demand for cheaper health covers. The cost of buying medical risk cover has shot up by almost 50 per cent over the last one year.
The new product will not have the benefit of cashless hospitalisation service delivered by third-party administrators.
The product will have sub-limits in terms of reimbursement under individual heads, besides introducing a co-sharing arrangement between the insurance company and the policyholder.
For example, if a hospital bed costs Rs 2,000 a day, the product may have a limit of Rs 1,500. Similarly, the insurance company can pay 75 per cent of the actual hospital bed charges or a percentage of the doctor's fees.
"Policyholders need to have a stake in the claim amount. This will put a dampener on the current tendency to drive up costs," insurance company officials said. Introduction of sub-limits and co-sharing in the claims amount is in a major move to control claims. The current Mediclaim plan has no sub-limits.
"There is a propensity to drive up costs and go for more expensive hospitals. This is the key reason we are trying to create an alternate product," said an insurance company official.
At a high-level meeting of the four companies recently, it was decided that individual companies can file a new product alternative with the Insurance Regulatory and Development Authority.
General Insurers' Public Sector Association secretary S K Mahapatra said the introduction of an alternative model would put the TPA model under severe competitive pressure in terms of service delivery.
The latest burden on Mediclaim pricing was the three percentage point hike in service tax to eight per cent in this year's budget.
In January 2002, Mediclaim premiums were hiked by 20 to 30 per cent to counter the rising losses triggered by high claims.
This was subsequent to Mediclaim being covered by service tax two years back.
Further, in October last year, premiums were hiked by six per cent for introducing cashless hospitalisation treatment through TPAs.
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