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Understanding GIPSA rates

Understanding GIPSA rates

. 5 min read

We found several misconceptions regarding GIPSA in our discussions with companies. This is also because of mis-information from online resources that come up when you search online.

Here are a few mis-conceptions that we wanted to address

Misconception 1

GIPSA was formed by the 4 PSUs and all 4 have to adhere to it, thereby only providing cashless facility in their PPN network hospitals, thereby making it difficult for your employees to avail cashless as the options are very limited.

Misconception 2

If an employee goes to a non-PPN hospital they have to go by the GIPSA package only and the claim is settled as per terms and rates of GIPSA only. Therefore too many deductions.

Misconception 3

Hospitals like Apollo and Fortis are not covered in the GIPSA network

First, lets understand what GIPSA is?

GIPSA (or General Insurance Public Sector Association) is the name given to the negotiated rates or tariff structure with hospitals that the 4 large PSU insurers have. Every insurance company has a negotiated tariff structure with hospitals in their network. GIPSA is simply the name given to the tariff structure with PSU insurers.

Now greater the size of the insurance company or scheme, greater is the bargaining power.

For the same procedure, at the same hospital, with the same doctors - insurers which have larger volume are able to negotiate better rates.

Below is a rank-order of tariff rates from lowest to highest

Rank (Lowest tariff to highest) Insurer of Insurance scheme Coverage Remarks
1 Ayushman Bharat 500 million lives Largest government insurance scheme hence lowest negotiated tariffs
2 CGHS & SGHS ~10-25 million lives A significant block enabling lower rates. Futher a large number of network hospitals are operated by government further lowering costs
3 GIPSA (4 PSU Insurers) 60% of market share in corporate health insurance Large consolidated market share allows for 10-30% lower tariffs when compared to private insurers
4 Private Insurers 40% market share divided across ~20+ insurers Private insurers have lesser market share and lower bargaining power

Now lets clarify the understanding of GIPSA by addressing the first misconception

Misconception 1: GIPSA was formed by the 4 PSUs and all 4 have to adhere to it, thereby only providing cashless facility in their PPN network hospitals, thereby making it difficult for your employees to avail cashless as the options are very limited.

PPN stands for preferred partner network, a term borrowed from the US healthcare system. In India PPN essentially means the cashless network of hospitals. These are hospitals where cashless coverage can be sought, in other hospitals claims can be made by paying first and then getting them reimbursed later (reimbursement claims).

Now, the hospital networks of PSU insurers are actually bigger. New India for example has 7000 hospitals in the network greater than most barring Star. Below is list of pan India cashless hospital coverage across insurers. There is some variation in the number of cashless hospitals based on the TPA you select with PSU insurers, but below data rebuts the argument that the network coverage is not adequate

Insurer Cashless network hospitals
Star Health 7500+
New India 7000+
Bajaj Allianz 6800+
Godigit 5900+
Acko 5290+
HDFC Ergo 5000+
Liberty 5000+
Care (Religare) 4800+
Future Generali 4800+
Oriental 4300+
ICICI Lombard 4200+
Manipal Cigna 4100+
Magma HDI 4100+
HDFC Ergo Health 4000+
United India 4000+
National Insurance 4000+
Max Bupa 3100+
Bharti Axa 3000+
TATA AIG General Insurance CO. Ltd 3000+

(Source: Self-reported numbers by insurance companies. Please email us at incase of any discrepancy in the data)

Hence, GIPSA actually has a very strong network hospital coverage.

Let's address the second misconception

Misconception 2: If an employee goes to a non-network hospital they have to go by the GIPSA package only and the claim is settled as per terms and rates of GIPSA only. Therefore too many deductions.

This is incorrect. Tariff structures whether PSU's GIPSA or Private insurer's own tariff structure apply only to cashless hospitals. The tariff structure does not apply if the hospital is outside the network hospitals. In those cases, whatever is the medical bill that the hospital issues is paid for after considering the insurance policy terms. So the argument that there will be higher deductions because GIPSA rates will apply is incorrect since GIPSA rates apply only for cashless coverage.

Now, lets step back and understand why do insurers have tariff structures in place

  • Insurers aggregate the buying power of insured to negotiate better rates with hospitals
  • Since GIPSA is the biggest negotiating block within corporate health insurance with 60% market share, they're able to negotiate rates which are 10-30% cheaper for the same procedure at the same hospital
  • This is one of the reasons why PSU insurers are often able to provide better rates than private insurers. The other reason is their willingness to operate at higher loss ratios
  • Tariff structures also ensures that hospitals are not charging higher than median rates for any procedure. This is a price control mechanism

If all of this is true, why do deductions happen in insurance payout by insurance companies? For this we need to understand why do deductions happen

  1. Policy terms related deductions: If you have room-rent limits, capping on specific diseases, co-payments, maternity limits then this is one bucket of deductions. This is easier to understand why
  2. Non-medical expense related deductions: IRDAI stipulates that insurers need not pay for non-medical expenses. This is laid out in black and white and insurers are not obliged to pay this expense. This is often mis-utilized by hospitals by unnecessarily adding several non-medical expenses and billing it to the patiets. But whether private or psu insurers, non-medical expenses are not obligatory to pay and often can be 10-15% of a medical bill if not more. Now certain insurers can be more lenient when it comes to non-medical expenses and will consider it as medical expenses and pay them off. However the overall impact of this would be a 1-3% additional bill amount being paid by some insurers
  3. Unfair deductions: Often insurers might make unfair deductions simply because of errors or misinterpretation of medical documents. This is where a claims advisor can be helpful to relook at the reasons for deductions and get them over-turned. If there are unfair deductions, these are easy to get rectified by raising a clarification with the insurer

If you google GIPSA rates there is a lot of misinformation that you will find online. One article creates the third misconception

Misconception 3: Apollo and Fortis hospitals are not part of GIPSA.

This is again incorrect information as these hospitals are covered under the GIPSA network. They cannot afford to miss such a large chunk of demand

So in summary here are the points you should take-away from this article

  • Every insurer has a tariff structure negotiated with their network hospitals. GIPSA is the name given to the tariff structure of PSU insurers
  • Since GIPSA has a higher bargaining power (60% market share), they're able to negotiate better rates than private insurers on average with hospitals
  • Cashless network of PSU insurers is comparable to private insurers and in many cases better
  • Tariff rates do not apply in non-network hospitals
  • Deductions in medical bills often happen because of a category of expenses called "NME" or non-medical expenses. These are not paid whether its a private or PSU insurer. However different insurers are sometimes lenient and will cover it, the overall impact of this leniency is small (around 1-3% of medical bill)
  • Large chains like Apollo and Fortis are covered under the GIPSA network