Health Insurance – Everything you need to know

Purpose of Health Insurance

A health insurance is meant to protect you from unexpected and substantial expenses which are normally occurred during multiple days of hospitalization and surgeries. It is not meant to cover small claims on diagnostics, outpatient (not requiring hospitalisation) visits and general consultation. It does not cover certain specified diseases during the waiting period to avoid being inundated by claims by people who bought insurance post diagnosis of the disease.

Diagnostics are covered as part of inpatient procedures but not on a standalone basis.

Also currently comprehensive health policies in India do not cover dental, spectacles or mental health disorders.

Optional surgeries such as bariatric surgeries for weight loss, plastic surgery etc. A retail policy also does not normally cover pregnancy related hopitalisation such as delivery and or mis carriage. However, most group policies provided by employers cover this.

Day Care treatments are those that are done in Outpatient due to advances of technology and not requiring hospitalization such as cataract, dialysis, chemotherapy etc. The exhaustive list of day care and any sub limits would be given in the policy guidelines.

You probably think more things should be covered by them. But one must realize additional coverages come at a cost. India has one of the affordable health care and health insurance costs. The biggest hikes in health insurance premium in recent times happened when a well meaning court insisted on the insurance companies to cover more medical treatments than was previously covered.

Health Insurance – Do I need it ?

Even when you are covered by your employer, it is better to have your own separate health insurance, especially when you are young. Why? Primarily, It is your responsibility to protect your family’s health and wealth and not your employers.

1. Even when you pay annual premiums your health insurance is available to you only when you continue to be employed in the organization.
2. Group Health insurance is a contract between the employer and the insurance company. The inclusions and exclusions are subject to mutual discussion between them. Most employees have no idea what it contains.
3. The Health insurance cover provided my most employers is inadequate for any serious illness.
4. It may not be possible to obtain a health insurance post retirement if you had developed any serious health conditions meanwhile which impacts insurability.
5. Even for Government employees and defense personnel, there are various restrictions like the hospitals, type of treatment, amount of reimbursements etc

Most of these restrictions also apply to group policies given by banks to its customers. It is best to avail a retail policy when your physical and financial abilities allow you. Group policies should be a temporary or a last resort only.

Of course the retail policies have sub limits and restrictions too, but most are determined on a good faith basis and not by companies financial conditions and drive to reduce expenses.

Once we have determined the need, the next is to determine how to choose one.

How to determine the Health insurance company?

(1) Network Hospitals: This is more relevant for people who live away from major cities or expect themselves to be travelling around the country. Rather than go by the number of hospitals, one can look for major hospitals close to where they live or intend to live to see suitability. This is a constantly evolving list where hospitals get added and removed, so please check at least every year during renewal that it is still relevant to you.

(2) Claim Settlement Ratios: CSR in health insurance is not as straight forward as life insurance. IRDA does not publish separate company wise claim settlement, so it is hard to say which is correct. I have received tables from different insurance companies and I generally check the trend as different data is provided by multiple intermediaries and companies. But although its very important, its hard to go by this data as it is not collected and published by a neutral third party.

(3) Incurred Claims Ratio: This basically means as against the premium collected, how much claims was made and settled. This shows early trends if the insurance company may not be sustainable. But as for a policy holder, its a pretty useless piece of info as insurance company overview and regulation is not policy holders problem but that of the regulators. It is widely shared solely because it is published in the annual report of IRDA. Who doesn’t like to over analyze irrelevant numbers?

(4) City specific restrictions: Certain insurance companies have uniform premiums throughout the country, but most have differential premiums for Delhi and Mumbai Zone. So the premium also differs based on where you live. Some companies have in built co-pay clauses, when the patients are admitted in these two zones. The zones cover a much wider area than just the city limits, so if you belong to these cities or live in vicinity, this may be an important factor for you to consider while choosing your insurance company.

How much Health Insurance is ideal ?

Unlike a term policy, it is hard to come up with a value for the Health Insurance. Some use guidelines like Family Health Cover must be equivalent to 1 Year Income. Some others suggest to check out the packages cost in near by hospitals that you may most likely be admitted. Either ways Base cover should not be less than 5L as a lesser cover, brings with it several other restrictions. One great way to increase the cover with very little cost is to opt for Super Top up.

Super Top Up Health Insurance

Super Top up is usually a high cover available with a deductible amount i.e it covers health expenses in the year beyond the initial deductible amount. For Eg: 25 L policy with a 5L deductible cost about 3K for a couple in Mid 30’s.

A few things about this Super top up is:

1. The initial deductible may come from your own pocket, a different retail policy or a group policy. So even if you are short of cash, do buy a super top up beyond your office cover.
2. Higher the deductible lower the cost, Deductibles are usually at 2L , 3L , 5L etc.
3. Super top – ups is not available for senior citizens unless they had availed for it earlier.
4. Companies also deny Super – Top ups for high risk patients with pre – existing conditions.
5. No Claim Bonus is not available in Super – Top ups.

Health Insurance – Features to watch out for:

Room Limit:

Commonly Room limits are defined either as ‘1% of Sum Assure’ or as ‘Single Private Room’. You may think I have a 5L policy, room costs should be less than 5,000 and it may be true for today. But a limit based on room definition is more likely to be inflation adjusted than the amount itself. So I generally prefer the second one.

In a hospital bill, Room determines , much more than the room cost, it determines the consultation fees, nursing fees etc. So many other line items are likely to be cut short in approval too.

Sub- Limits:

Most policies have sub limits for common procedures like angioplasty, dialysis etc. Rather than scouring for a policy with no limits look for ones with reasonable limits. It is important for these limits to be in alignment with the cost in a hospital you would like to be admitted in.

Waiting Period:

Waiting Period for policies may vary from 2 years to 4 years. Most people think waiting period means nothing will be covered by the insurance company during this period. This is not true. What will be covered and not covered during waiting period is mentioned in fine print. Accident hospitalization is covered from Day 1. Any other hospitalization is covered after 30 days. Waiting period is generally applicable to planned surgeries and other procedures for illnesses that are developed over a period of time. This enables the insurance companies to properly manage the risk pool and not let people who take the insurance after diagnosis to take advantage of the health insurance.

In general, lesser the waiting period the better it is. This is why it is recommended to take health insurance earlier in your life when one is less likely to have any health issues and not wait till later.

Co- Pay:

Co – Pay is a feature in which the insured pays the hospital bill in part. This is one of the features, that can help keep the premiums viable and pocket friendly for high risk groups. But it is best avoided if possible, reduced if not. Most policies that cover senior citizens have some co – pay elements to it. However better options are still available for those with no health issues.

Renewability:

Health insurance policies have life long renewability as directed by IRDA. However certain companies even on renewals have an added co- pay after a certain age. This is best avoided, else kept lower.

Reinstatement:

Reinstatement refers to reinstatement of the sum assured limit. This according to me is one key factor and also one of the biggest advantages of a retail policy over a group policy. All retail policies have minimum of one reinstatement while group policy has none.

Let’s say you have a Health insurance for 5 L and have an hospitalization claim for 6 L.

In a group insurance, you will be paid 5L and no more claims will be available for the year.

In a retail health insurance, you will be paid 5L plus any no claim bonus you have accumulated over the years. Your Sum Assure will be reinstated for any other related/unrelated claims for the rest of the year.

Some insurers provide unlimited reinstaments in their policy at no extra cost. Some provide them at an extra cost as an optional rider.

One more thing to be noted is, some policy insist on complete exhaustion of limit, before reinstaments. i.e. for a 5L policy if you have a 4L claim, the reinstatement is applied only remaining 1L is also used up. Practically, this can be a real pain. So do check how reinstaments work for your policy.

Health Checkups:

Most companies provide an annual checkup or something similar. This is a good to have feature.

Entry Age:

Many insurance policies have limit on entry age of 65 years. Beyond this age the choice of policies and features is vastly reduced. But this still provides a good scope for retired people with good health to opt for a good policy. Certain policies have been designed with senior citizens in mind and hence may be available only for people above 60 years. One should remember getting a health insurance is not a right and it is solely upto the insurance companies to decide whether they will provide cover or not and if there will be any additional cost.

Common Reasons for Loading/Rejection of Health Insurance:

The ordinary rates of premium are applicable for most people with good health. However the underwriting team of the insurance company may decide that the person is of higher risk category and may accept the risk with additional premium or reject the application. The additional premium charged is known as loading. It is a counter proposal by the insurance company to the applicant and is up to the insured to accept with additional premium or reject it. The common reasons for the same:

(1) Body Mass Index

(2) Hypertension

(3) Diabetes

(4) High Cholestrol

Whether it will be a loading or rejection is based on the levels of abnormality. Serious conditions like heart attack, stroke is more likely to cause outright rejection or permanent exclusions.

Loading cannot be introduced based on claims made as long as the underlying condition was developed during the policy term and did not exist prior to policy proposal. It is important for you to declare all existing health conditions during the proposal stage to avoid claim rejections at a late stage. It is better to have your policy rejected at proposal stage than have your claims rejected after being admitted in the hospital.

Hike in Premiums :

Premiums in a health insurance is hiked generally by age range i.e 35- 40 , 40 – 45 etc. However some polices may have annual hikes as well. Any other overall hike across age category has to be approved by IRDA.

Changes on Renewal:

Every year during renewal you may request the insurance company for following material changes:

1. Change in Plan
2. Change in Riders
3. Change in Sum Assured
4. Addition/Deletion of members in family floater (may also be done during policy term)

The additional Sum Assured is subject to the waiting period of the original policy terms.

Portability of Health Insurance:

Health insurance is portable across providers. Portablity allows you to enjoy the benefits of the previous policy such as completion of waiting periods in your new plan too. I believe the proposed health card will make portablity even more smooth in the coming days.

However while your existing insurer cannot deny you a renewal , an application to port is subject to the approval of the insurance company and your porting request may be denied or counter proposed with loading.

IRDA allows for porting between same insurer on insurance categories too i.e from a group insurance to a retail insurance. Although this could be a useful feature, its cumbersome to impossible to actually get this done. Neither your HR nor the insurance company nor an agent is motivated to help you here.

Even at additional retail premiums, most insurance companies are reluctant to carry this out. Unless I own the company, I will not rely on a group insurance to cover me and my family for health emergencies.

What about State Govt/Central Govt insurance like Ayushman Bharat?

It is a great initiative of central and state government to cover people below the poverty line for medical treatments. It even has zero waiting period. So if you are eligible, you should definitely get the card. But whether this sufficient cover for you will be hard to say. You may consider evaluating it against your needs as per the features I have mentioned above.

My uncle had a procedure done with this card. It was a cashless claim. But practical difficulties faced were as below:

1. Allied procedures that had to be done due to new discovery during the surgery was not covered and only the pre approved procedure was covered.
2. The less invasive procedure was suggested by only one hospital which was not part of the hospital list in the scheme and hence the cost had to be borne out of pocket (on a follow up procedure)

Should NRI’s have an health insurance in India?

India is a growing destination for medical tourism due to world class medical facilities and a competitive price. For most people in the western world flying down to India to get a procedure together with flight and stay costs much cheaper than getting it done in their home country. So it is no surprise many NRI’s would choose to do the same. If the below reasons apply to you, you should consider getting an health insurance even if you don’t live in India currently:

1. You would choose to fly to India for a treatment either due to family support or costs
2. Your stint is temporary and you plan to settle down in India

Add on’s in your Health Insurance:

Add on’s are those that you can attach to the main policy.

Hospital Cash:

This is one of the most popular add on’s. It has been around for a long time. When the patient has been admitted in the hospital for over 48 hours , a cash allowance is paid. This can be used to cover out of pocket expenses like that of attendant or inadmissible expenses or loss of income due to hospitalization. Most policies limit the duration to 30 days.

The amount of hospital cash is usually arrived from the amount of Base cover opted,

Shield/ Safe Guard :

This is a recent add on to the health insurance particularly more popular after the excessive out of pocket expenses during corona. During corona much of the hopitalisation involved disposable like oxygen masks, PPE Kits, gloves are other disposables. Typically these are not covered in a health insurance plan. But until recent times, this formed a minor part of the bill and was not generally a burden to pay. But recently due to the pandemic this has become so huge. Health insurance companies responded to this challenge by introducing this as an add on which will pay for consumables/disposables in hospitalisation. The rider also usually comes with a few other frill benefits. But this is an add on relevant to current times and I feel everyone should opt for it.

There are also other Add on’s to reduce waiting period, reduce co pay etc. It all differs from policy to policy. You may choose to add whatever is relevant to you.

Conclusion

Health Insurance is no longer optional. It is an important and an urgent need for every one. Health Care inflation is much higher than the CPI inflation. Don’t postpone it thinking, I will subscribe for it later.

I’m sure you have heard many stories of people who had to sell their property in distress or depend on charity due to their inability to pay medical bills. You probably even helped some. Please don’t let that happen to your family. Take sufficient cover when you are healthy and build a safety net for your family and your wealth.