Claim Settlement

Claim settlement is the end-to-end process by which an insurer or State Health Agency (SHA) evaluates, approves, and pays a request for medical expenses raised by a policyholder or treating hospital. Three participants are involved. The Provider is the treating hospital and its HMIS. The Payer is the insurance company, SHA, or TPA that adjudicates and settles the claim.

What is Health Insurance?​

Health insurance, or an Insurance Policy, is a contract between an individual and a promisor. The promisor pledges to pay the individual's medical bills, up to a set limit, in case of any ailments. The individual is commonly known as a policyholder or beneficiary whereas the promisor can be an insurance company acting by itself or on behalf of Government or any organisation or Corporate entity. It protects one’s personal savings from being drained by unexpected hospital stays, surgeries, and medicines.

What is an Insurance Claim?​

A health insurance claim is a formal request, by a policyholder or by the treating hospital, asking an insurance company to pay or refund money for medical care. The insurance company may act by itself or on behalf of Government or any organisation or Corporate entity.

Types of Health Insurance Claim​

• Cashless - A patient who is a beneficiary of a policy can avail treatment in a hospital without paying any amount out of one’s pocket. This applies when the hospital is in a “Preferred Network” for the Insurance Company, under an existing agreement between them. It also applies when the hospital is “Empaneled” under a specific scheme governing the policy. However, the amount of expenses incurred during treatment is capped either by “Sum Assured” under the policy or some mutually agreed upon “Package Rates” earmarked for a specific medical or surgical procedure.
• Reimbursement - Here a patient is required to pay the bills directly to the treating hospital and later get such an amount reimbursed by Insurance Company upon submission of all relevant documents. This is a common practice if the treating hospital is not a part of “Preferred Network” for that Insurance Company, but this model is not considered in the current scope.

Who is a Provider?​

A Provider is the treating hospital “providing” the healthcare services to a patient, who is a beneficiary under a policy. And the HMIS software that the Provider hospital is using is known as the Provider Application. In common parlance this Provider Application is called just the “Provider”.

Who is a Payer?​

A Payer is the Insurance Company who has issued the policy and is liable to make payments for medical expenses incurred for treatment of the policyholder. In some cases independent TPAs act on behalf of an Insurance Company to settle such medical bills and thereby assume the role of a Payer. On a similar note as above the software used by a Payer is called the Payer Application or simply “Payer”.

Claim Settlement Process​

This is a two-way communication between the Hospital and the Insurance Company, that is, between the Provider and the Payer. It concerns the policy, the treatment rendered to the policyholder patient, and finally the payment of hospital bills after proper scrutiny of all relevant documents. It starts with the treating hospital informing the Insurance Company of an imminent claim for a patient who is to be admitted for treatment. It ends with the realisation of payment from the Insurance Company for all expenses incurred while treating the patient. The entire journey of claim settlement can be broken down into the following distinct flows or use cases.

The Stages of Claim Settlement on NHCX​

The traditional ten stages of claim settlement map directly onto NHCX exchanges. They run in the order below, from intimation to payment.

Intimation​

The hospital informs the insurance company that a patient holding one of its policies is going to be treated for the diagnosed ailments.

Policy verification by the hospital​

The hospital checks that the patient to be treated holds a valid policy from that insurance company and that the ailments to be treated are covered under the policy.

Beneficiary and tie-up verification by the payer​

The insurance company checks that a bona fide policyholder has come for treatment and that a proper tie-up is in place with the hospital for providing such cashless treatment.

Treatment plan intimation​

The hospital sends the insurance company an initial intimation of the treatment plan, any procedures to be carried out, and the expected length of stay needed for treatment.

Preauthorisation​

Once satisfied with the genuineness of the case, the insurance company sends a preliminary approval, commonly known as Preauthorisation or "PreAuth". This authorises the hospital to go ahead with treatment for the policyholder patient, and the patient is then admitted.

Enhancement​

During the course of treatment, the hospital may approach the insurance company again to notify it that additional procedures may be required or that an extension of stay is needed. This is commonly known as "Enhancement".

Discharge and document submission​

The patient is discharged, and the hospital submits all necessary documents to the insurance company, including consultation and clinical notes, diagnostic reports, medication details, the discharge summary and all bills.

Payer query and resolution​

At this stage, the insurance company may ask for further explanation or for documents it considers necessary to substantiate the claim and support its adjudication. Such a communication from the insurance company to the hospital is called a "Query".

Claim adjudication​

The insurance company carries out the final adjudication and conveys the outcome to the hospital, stating whether the claimed amount is "Granted", "Denied" or "Partially Granted", along with the reasons.

Payment and reconciliation​

The insurance company pays the hospital the granted amount for the claim. It also notifies the hospital of the bank transaction details along with other details such as applicable tax or deductions.

End-to-End Claim Lifecycle Flow​

NHCX Platform​

What is NHCX?​

The National Health Claims Exchange (NHCX) irons out the challenges depicted above. It is developed under the Ayushman Bharat Digital Mission (ABDM) by the National Health Authority (NHA), in consultation with the Insurance Regulatory and Development Authority of India (IRDAI). The idea is to introduce a platform of exchange to the Providers and Payers so that both can transfer digitised health records and other pertinent information directly in a machine readable format to its counterpart.

What NHCX aims to achieve?​

The primary objective of NHCX is to streamline and standardise the processing of health insurance claims across the country, ensuring absolute interoperability across diverse systems. Provider and Payer applications may operate on completely different technology stacks. Even so, one system can seamlessly remit health information to the other in a comprehensive, digitised, machine readable format, with the very exact interpretation at both ends. It is achieved by leveraging the Fast Healthcare Interoperability Resources (FHIR) standard protocols and using international coding practices, wiping out even the slightest ambiguity in the understanding.

NHCX Operating Framework​

On securities exchanges like NSE & BSE, anyone can buy or sell independently by merely getting connected to the platform. In the same way, the entire idea of NHCX is to connect Providers and Payers on either side. Once Providers and Payers become compliant to the NHCX protocols like using prescribed FHIR bundles and implementing universally accepted coding practices they can independently connect to one another using NHCX as a medium of exchange. The protocols and standards ensure that a health information does not lose any of its essence during the transfer.

Benefits of using NHCX​

• It is imperative that in the present day context almost every healthcare provider or hospital is generating digitised health records. But there is no point if the hospital has to convert that data into a “pdf” or a “jpg” file and transmit the same to the insurance company in a human readable format. NHCX is the only solution to this widespread problem
• Let us consider a diagnostic report of a patient like “Lipid Profile” that has some 10 parameter values, all very important to understand the criticality of the case. It would be very helpful for the insurance company to have those 10 different values for the individual parameters of Lipid Profile in adjudication of the case. Using NHCX such values for each of these parameters under Lipid Profile can be passed on from Provider to Payer
• Since any standard hospital HMIS already captures data pertaining to a patient like medical history, allergies, medication, line of treatment, etc. it would be apt to convey those same details to the insurance company instead of taking a printout and scanning them again for email attachments or uploads, thereby ensuring chastity of data
• Data precision is also safeguarded as the intervention of data entry operators is only limited to the first level entry into HMIS, rendering this to be the only source of truth. Eventually this translates to lesser queries and rejection of claims on flimsy grounds
• NHCX enables maximum data transfer in the digitised format, thus allowing a Payer run AI tools and conduct automated adjudication to the maximum possible extent
• Government social security schemes like Ayushman Bharat are gaining momentum, and IRDAI is advocating “Cashless Everywhere”. More and more healthcare providers are entering the arena, and only a universal model like NHCX can support this extent of scalability

The Asynchronous Request and Callback Pattern​

Claim decisions can't be made instantly. A pre-authorisation review may take minutes to hours, and a complex claim review may take days. So NHCX handles every major action in two separate steps.

Request​

The sender calls an action endpoint, such as preauth/submit. NHCX checks the message headers, confirms who sent it, and immediately replies with an HTTP 202 Accepted receipt. This receipt only confirms that the message was received. It is not a decision on the case.

Response​

The receiver opens the message, makes its decision, and sends the result later to the matching callback endpoint, such as preauth/on_submit. NHCX forwards this response to the sender's registered webhook, which replies with its own HTTP 202 receipt.