Dr. Supratik Sanatani Vs National Insurance Company Limited (Competition Commission of India)
It has also been alleged that OP-1 to OP-4 have induced a cartel of hospitals called PPN hospitals who compel the insured to sign a ‘PPN Network Declaration Form’ for providing cashless service. By signing this form, the insured is forced to accept that the four OPs would pay hospital expenses only as per the arbitrary ‘agreed packages’ by them with the hospitals and not according to the concerned policy terms and conditions, and thus, the insured has to pay the unpaid amount of hospital bill in excess of the PPN charges to the hospital. It has been averred that, by signing the declaration form, the insured forfeits his right to claim the unpaid amount of his hospital bill as reimbursement even when it is payable under the terms and conditions of the policy. It has been stated that hospitals which do not agree to get this form signed by the insured patients are kept out of the PPN hospitals, and such conduct of the four OPs amount to denial of market access as envisaged under Section 4(2)(c) of the Act. It has also been alleged that four OPs do not offer cashless service in all network hospitals of its TPAs but only in hospitals which agree to forcefully collect the PPN Declaration Form from the insured.
Commission notes that all four OPs appear to have negotiated special package rates with many hospitals across 12 cities for several medical procedures. Apparently, the purpose of the PPN tariff rates is to have standard packages and charges for certain medical procedures to save the insured from being charged more and for better utilisation of the insured amount. Policy holders can avail cashless facility in PPN hospitals approved/empanelled by GIPSA. PPN hospitals have to charge as per the PPN package rate. If any hospital overcharges, it appears that the policy holder can raise a grievance with the insurance company.
From a holistic perspective, the Commission is of the view that, though each insurance company is required to compete with each other (regardless of their being in private or public sector), the Opposite Parties (OP-1, OP-2, OP-3 and OP-4) in the present case (being public insurers) have sought to justify their conduct of coming together to negotiate with hospitals for having a PPN. This, according to them, helps lower the charges for various procedures undertaken by the hospital while providing treatment to the insured. The Commission notes that it has been stated, there is the advantage of standardisation of cost by having uniform costs payable to various hospitals by the insurance companies thereby ensuring settlement of claims of the insured without acrimony between the insurers and the hospitals. The Commission notes that the four Opposite Parties have contended that fixation of PPN tariff rates helps the insured/consumers in the form of lower costs payable to hospitals for various medical procedures undertaken, which ultimately translates to lower premium payable by such policy holders.
With regard to the submissions that PPN by the four OPs restricts the claim amount and is not commensurate with the value of the sum insured, the Commission is of the prima facie view that alleged violation of the terms and conditions contained in the insurance policy can be remedied under the appropriate law, especially when the concept of collective dominance of the OPs is alien to Indian competition law. Suffice it to say that any action which is not in consonance with the larger interests of consumers would lead to the shifting of allegiance to better service providers. The Commission observes that, consumers have the option to buy health insurance policies from alternative channels, should they want.
Thus, in view of the analysis supra, the Commission is of the prima facie view that the allegations under Section 3(3) read with Section 3(1) of the Act remain unsubstantiated in the facts and circumstances of the instant matter. Further, the Commission is of the prima facie view that no case of violation of any of the provisions of Section 4 of the Act is made out in any manner against the Opposite Parties. In view of the above finding, the Commission directs the matter be closed forthwith under Section 26(2) of the Act. Consequently, there arises no case for grant for relief(s) as sought under Section 33 of the Act, and the same is also rejected. The Commission while holding the above has expressed nothing on the merits of the legal rights of the Informants and remedies, if any, available to the Informants, except a finding that no competition concern has been observed as above.
FULL TEXT OF THE JUDGMENT/ORDER OF COMPETITION COMMISSION OF INDIA
Order under Section 26(2) of the Competition Act, 2002
1. The present Information has been filed by Dr. Supratik Sanatani (hereinafter,‘Informant-1’) and Dr. Paromita Sanatani (hereinafter,‘Informant-2’) under Section 19(1)(a) of the Competition Act, 2002 (hereinafter, the ‘Act’) against National Insurance Company of India Limited (hereinafter,‘OP-1’), New India Assurance Company Limited (hereinafter,‘OP-2’), United India Insurance Company Limited (hereinafter,‘OP-3’), Oriental Insurance Company Limited (hereinafter,‘OP- and Insurance Regulatory and Development Authority of India (hereinafter,‘OP- (hereinafter, collectively referred to as the ‘Opposite Parties’/ ‘OPs’) alleging contravention of the provisions of Sections 3 and 4 of the Act. 4’) and Insurance Regulatory and Development Authority of India (hereinafter,‘OP- 5’) (hereinafter, collectively referred to as the ‘Opposite Parties’/ ‘OPs’) alleging contravention of the provisions of Sections 3 and 4 of the Act.
2. It has been stated that Informant-1 is a health insurance policy holder of OP-1 and OP-4 and that Informant-2 is covered as a family member under the said health insurance policies.
3. OP-1, OP-2, OP-3 and OP-4 are in the business of providing health insurance policies in India. OP-5 is the statutory regulatory authority for all insurance related activity in India, which has specified a universal health policy called ‘Arogya Sanjeevani’ that all insurance companies are obliged to offer.
4. It has been stated in the Information that OP-1 to OP-4 have drawn up an anticompetitive agreement vide meeting dated 28.11.2017, which allegedly denies insurance benefits to the insured. Based on this meeting, the said OPs, who are allegedly a cartel, issued an order dated 14.06.2018 to not allow cashless benefits under the terms and conditions of the insurance policy to all health insurance policy holders covered by them. They instead insist on following their own arrangement, called the Preferred Partner Network (PPN), wherein the cost of hospitalisation is paid to PPN hospitals according to ‘agreed packages’ and not according to the sum assured under the health insurance policies. However, except for cataract, no such packages are declared or made known to the insured, either in the insurance policy contract or on their website, which is a violation of Section 3(3)(a) of the Act as it directly or indirectly determines the purchase or sale price. It has been further stated that the resolution passed in the said meeting and the subsequent order of the cartel came to light from an RTI reply given by OP-4 to Informant-1. It has been stated that a cashless service is a value-added service of health insurance in India, which is either provided by the Third-Party Agent (TPA) employed by the insurance company, or directly, where the cost of hospitalisation is directly paid to the hospital by the insurance company subject to the terms and conditions of the insurance policy.
5. It has been alleged that the said OPs deduct an arbitrary amount from health insurance claim with the comment ‘outside PPN package’. It has been averred that OP-1 has acknowledged the fact that packages do not exist for many medical conditions and the same is illegal because the insurance regulations stipulate that all policy terms and conditions must be expressly mentioned in the policy contract.
6. Further, it has been averred that, under the PPN package enforced by the cartel of four OPs, a policy holder with high sum assured is forced to accept the same cost of consumables and services of the same doctors (in terms of having medical experience) as that of a policy holder with low sum assured even when the policy offers different cost of consumables and services of different doctors depending upon the sum assured under the insurance policy. It has been alleged that, even with respect to bed charges, the cartel of four OPs has allegedly worked out different categories.
7. Further, it has been stated that, as indicated in the Annual Report 2020-2021 of IRDAI, the four OPs together have the largest market share of approximately 46.75% in the market for non-government individual and group health insurance business.
8. It has also been alleged that OP-1 to OP-4 have induced a cartel of hospitals called PPN hospitals who compel the insured to sign a ‘PPN Network Declaration Form’ for providing cashless service. By signing this form, the insured is forced to accept that the four OPs would pay hospital expenses only as per the arbitrary ‘agreed packages’ by them with the hospitals and not according to the concerned policy terms and conditions, and thus, the insured has to pay the unpaid amount of hospital bill in excess of the PPN charges to the hospital. It has been averred that, by signing the declaration form, the insured forfeits his right to claim the unpaid amount of his hospital bill as reimbursement even when it is payable under the terms and conditions of the policy. It has been stated that hospitals which do not agree to get this form signed by the insured patients are kept out of the PPN hospitals, and such conduct of the four OPs amount to denial of market access as envisaged under Section 4(2)(c) of the Act. It has also been alleged that four OPs do not offer cashless service in all network hospitals of its TPAs but only in hospitals which agree to forcefully collect the PPN Declaration Form from the insured.
9. Further, it has been stated that the PPN declaration form has been prescribed nowhere in the total 115 pages of IRDAI Circular no. IRDAI/HLT/REG/CIR/193/07/2020 dated 22.07.2020, called the “Master Circular on the Standardization of Health Insurance Products”, which is a violation of IRDAI Health Insurance Regulations 2016, more particularly, Regulation 20(i), which states that only standard forms and terms will be used in the administration of health insurance policy. It has been averred that, by using such forms, the four OPs have denied benefits assured under the insurance contract to the insured.
10. It has been further stated that, in numerous claims, the Insurance Ombudsmen and other fora have disallowed the arbitrary deduction in health insurance claims in the name of the PPN package, ordering that such packages are outside the policy. For instance, the Andhra Pradesh State Consumer Disputes Redressal Commission, in its order dated 20.01.2014 in Appeal No. F.A. 997 of 2013 (United India Insurance Company and Others vs S. Sampath Reddy), has held that the agreed package pricing claimed by the four OPs is outside the scope of the policy and therefore, illegal.
11. Further, it has been stated that the Securities Appellate Tribunal (SAT), Mumbai, in its order dated 08.12.2021 in Appeal No. 04 of 2021 (Dr. Supratik Sanatani and Anr. vs IRDAI and Anr.), observed that it did not have the jurisdiction to deal with the matter and directed the Informants to approach another forum. The Informants are therefore before the Commission after exhausting all avenues of justice.
12. It has also been pointed out in the Information that the magnitude of the malpractice is enormous because it affects approximately 8.04 crore insured lives and premium of approximately Rs. 25,220 crores, as deduced from the annual report of IRDAI for the year 2020-21.
13. The Informants have also quoted Suo-Motu Case No. 02 of 2014 in which the Commission, vide its order dated 10.07.2015, had issued a cease-and-desist order against the four OPs for indulging in practices which had been found to be anticompetitive in terms of Section 3(1) read with Section 3(3)(d) of the Act. It has been stated that, the order reasoned that, since the liberalisation of the insurance market in India, the four public sector insurance companies are supposed to work independently.
14. Further, it has been stated that Regulation 12 (vi) of the IRDAI (Protection of Policyholders’ Interests) Regulations, 2017 states that details of all packages must be explicitly mentioned in the policy, along with cross- reference to the concerned policy section. It has been averred that, apart from cataract, no other packages are mentioned. Use of such opaque terms and conditions in the administration of insurance policy contract is expressly forbidden in the Insurance Act and IRDAI regulations which govern all insurance activity in the country. It has been averred that such practice violates Section 4(2)(a)(i) of the Act where the public sector undertakings use their dominant position to directly or indirectly impose unfair or discriminatory condition in the purchase or sale of goods or services.
15. The Informants have sought interim relief by way of seeking a direction from the Commission on the immediate stay on the use of the ‘PPN Declaration Form’ which is collected from the insured by PPN hospitals under compulsion before offering cashless service.
16. The Informants have, inter alia, prayed to the Commission:
i) For an order of inquiry under Section 26(1) of the Act read with Section 42(1) thereof to examine violation of the order of the Commission in Suo-Motu Case No. 2 of 2014.
ii) For an order of inquiry under Section 26(1) of the Act into anti-competitive activities under Sections 3 and/or 4 of the Act.
iii) For an order of a reference to OP-5 under Section 21(a) read with Section 19 (4)(g) of the Act.
iv) Any other relief which the Commission may deem fit to pass.
17. In the ordinary meeting held on 18.05.2022, the Commission considered the Information filed in the matter and decided to seek additional information from the Informants. The Commission also decided to seek requisite information from OP-1, OP-2, OP-3 and OP-4 on various aspects of PPN. The Informants filed their response on 13.06.2022. Responses from OP-1, OP-2 and OP-3 had been received on 30.06.2022, 29.06.2022 and 11.07.2022, respectively. However, OP-4 did not file its response.
Summary of the submission of the Opposite Parties
18. The submission of the Opposite Parties has been succinctly stated as under:
i) The legal constitution of GIPSA (General Insurance Public Sector Association), its aims and objects and details of its members: Poddar Committee was constituted by the Government of India to suggest modalities of coordination mechanism after delinking of four subsidiaries, viz, National Insurance Company Limited (OP-1), New India Assurance Company Limited (OP-2), United India Insurance Company Limited (OP-3) and Oriental Insurance Company Limited (OP-4) from the holding company (GIC of India). GIPSA is an internal forum and coordination mechanism for the purpose of facilitating deliberations and discussions amongst its four member companies on matters of mutual interests so mandated to it by public sector insurance companies. GIPSA does not have supervisory, administrative or statutory authority over its member companies. GIPSA is merely a coordination agency functioning as a voluntary association looking after the coordination amongst the four public sector insurance companies to ensure uniformity amongst them and provide a common consultative platform to assist the four companies in arriving at best business practices in the competitive environment, as expected by their owner, the Government of India.
ii) The terms and conditions of PPN are uniform and uniformly applicable to all four public sector insurance companies. Terms, rates and conditions are negotiated with the providers and are hospital specific. These may vary from provider to provider primarily owing to the infrastructure, facilities, popularity, location, etc., of the provider, in each region and are applicable to all retail as well as group health policies, except government mass health schemes. For effective administration of PPN, the four Public Sector General Insurance Companies (PSGICs) act as flag insurers for the region in which their corporate office is located, i.e.,
North- Oriental Insurance Company,
West- New India Assurance Company,
East- National Insurance Company, and
South- United India Insurance Company.
iii) PPN is defined in the policy documents of the policyholder, and a list of all PPN Hospitals is available on the Insurer’s as well as TPA’s websites. Any insured, when approaching any hospital for any planned surgery or conservative management, is free to enquire about the package rate of any hospital from the hospital desk, the insurance company or TPAs. The PPN tariff negotiation is done by all four member companies for their respective areas, as stated above, on behalf of all four public sector companies and the rates are being followed uniformly by all four PSUs in the empanelled hospitals. The agreed rates for a hospital are the same for OP-1 to OP-4 and MOUs are signed to that effect. The hospitals/nursing homes on the PPN network are mandated to extend cashless services to all eligible policyholders of PSGICs. Policyholders are treated by the hospitals on PPN negotiated rates in cashless claims. These rates are made available to the insured and consent forms obtained from the insured are submitted by the hospitals to the TPAs for pre-authorization of cashless claims. At the time of final discharge of the patient, the final bills are submitted to the TPA by the hospital/network provider, and the same is processed by the TPA on the basis of negotiated rates as well as the terms and conditions of the policy, and final recommendation is done to the insurance company for final settlement with insured/policyholder. In case of reimbursement claims, PSGICs settle the bill raised by the policyholder as per the policy terms and conditions.
iv) The main objectives for Preferred Provider Network (PPN) are:
