Health is a very important subject in human life cycle and anyone unpleasant experience related to it will impact very severely to middle class people Government has initiated AB-PMJAY scheme of 5 lac health coverage to poor society of India. Heart problems, diabetes, stroke, renal failure, cancer – the list of lifestyle diseases just seem to get longer and more common these days. Thankfully there are more specialty hospitals and specialist doctors – but all that comes at a cost. The super-rich can afford such costs, but what about an average middle-class person. For an illness that requires hospitalization/ surgery, costs can easily run into five digit bills. A Health insurance policy can cover such expenses to a large.
Types of Health Insurance
There are mainly three types of Health Insurance covers:
- Individual Policy:The simplest form of health insurance is the Individual It covers the hospitalization expenses for an individual for up to the sum assured limit.
- Family Floater policy: The sum assured value floats among the family members. i.e. each opted family member comes under the policy, and it covers expenses for the entire family up to the sum assured limit.
- Unit Linked Health Plans:Taking the ULIP route, health insurance companies too have introduced Unit Linked Health Plans. Such plans combine health insurance with investment and pay back an amount at the end of the insurance term.
The best way is to treat insurance purely as an expense. So if you are single, opt for an Individual Mediclaim policy and if you have family, opt for a Family Floater policy. The amount paid (by cheque or debit/ credit card) for health insurance premium provide tax exemption under section 80D for a maximum of Rs.15,000.
What is the Ideal Cover for Health Insurance?
Health insurance is an expense so we need to be wise enough before purchasing the policy just like to purchase any other product in your daily life. Decision of coverage isdepending on the sum assured, age, current health condition and your previous medical history. Higher the sum assured, higher the premium. So, what is the ideal health insurance cover requirement? There is no standard answer or thumb rule for this. If we agree that health insurance is important, one has to look at his/ her own lifestyle, health condition, age/ life stage, family history of illnesses and affordability. Keep in mind that bestsum insured amount to be purchased from Insurance companies must be of 5 lakhs. Many insurance policies “provide additional benefits” such as daily allowance, ambulance charges, etc. for hospitalization which tend to drive the premiums higher. So, it is best to avoid such plans and stick to something basic and simple.
Health Insurance provided by Employer
Many employers provide health insurance cover to their employees. Three aspects need to be considered in such a case – Is that cover sufficient? Is the insurer good enough? What happens if you change your job? Health insurance is provided as a perk to the employees. So, it is important to understand the policy a bit more in detail and to check for coverage. Ingeneral, separate purchase of policy is a good option for any employee as coverage and premium is change with the advancement of age.
Health Insurance for the aged
Till a few years back, health insurance companies were reluctant to provide cover for the aged. But nowadays there are a lot of insurance companies providing policies for the senior citizens with high premium rates.
http://www.jagoinvestor.com/2008/04/tax-information-for-2008.html
Role of TPA (Third Party Administrators):
A TPA is a specialized health service provider rendering variety of services like networking with hospitals, arranging for hospitalization and claim processing and settlement. The concept of TPA has been introduced by the IRDA (Insurance Regulatory and Development Authority of India) for the benefit of both the insured and the insurer. While the insured is benefited by quicker & better health service, insurers are benefited by reduction in their administrative costs, fraudulent claims and ultimately bringing down the claim ratios. An insurance company can have more than one TPA and a TPA can serve more than one insurance company. Some of the services TPA provides are
- Maintain database of policyholders
- Issue of identity card to all policyholders
- Provide ambulance service
- Provide information to policyholders about hospitals.
- Check various investigations
- Provide Cashless service
- Process claimsThere are 2 ways by which health insurance claims are settled:
- Cashless: For availing cashless treatment (only at authorized network hospitals), the TPA has to be notified in advance (for planned hospitalization) or within the stipulated time limits (for emergencies). The insurance desk at hospitals usually helps with all paper work. The claim amount needs to be approved by the TPA, and the hospital settles the amount with the TPA/ Insurer.
- eimbursement: Reimbursement facility can be availed at both the network and non-network hospitals. Here the insured avails the treatment and settles the hospital bills directly at the hospital. The insured can claim reimbursement for hospitalization by submitting relevant bills/ documents for the claimed amount to the TPA.Source:http://www.jagoinvestor.com/2010/01/introduction-to-health-insurance-in-india.html
Points Need to be Check while purchasing Health Insurance Policy:
A lot of changes have happened in health / General insurance industry over last 5 yrs. The overall health insurance industry to some level is standardized and new regulations are in place. A lot of investors have bought their Mediclaim policies many years back when rules were raw and when few things were in favor of insurers, not investors.
What’s more, thanks to the competition brought in by specialized health insurance companies, there have been many interesting features added to the otherwise standard Mediclaim products.
So now I am putting up 13 points every investor should read before they buy health insurance. These 13 points can act as the guide for someone who wishes to either buy a new health cover or wants to upgrade their health insurance cover. These points are not tips as such, but various dimensions revolving around the health insurance buying decision-making.
Point #1 – Don’t be too late in buying a health insurance policy
I have seen too many customers, especially the well-educated ones, literally trying to find a health insurance product which has all the “dream” features bundled into a single product. They want high cover, less premium, best claim settlement, no loading, OPD cover, extreme fast claim settlement, maternity and high-end benefits.
But sadly, such “dream” products do not exist in real-world. One has to understand that these health insurance products are highly complex and their premium pricing and features are linked to various parameters. You can’t get a product which has everything you wish.
The biggest problem with this approach is that, you might be denied a cover later in life, because you might have crossed that age limit, or you might have catches some illness which will not be covered now.
If there is one advice, just one advice, I would give anyone on Health Insurance. It would be this – “Never Delay. Set a deadline, buy that policy and get covered.”
Point #2 – Assess who do you want to cover and their health status
It is important to finalize the list of people you want to cover. Also, take an account their current health status. Make sure you cover most of your family members for whom you are responsible for. At times, people buy health insurance for self, spouse and kids and ignore parents.
- If all are young and healthy, no hospitalization history, no chronic ailment detected, you are going to be spoilt for choice!
- If you have members who are above 50 and/or have a medical history/condition then you should be prepared for some pain (more on this later) which will most probably include having certain time bound exclusions in your policy. Or you might have to pay higher premiums.
Point #3 – Assess your lifestyle
The greatest health insurance is taking care of your health. Keep a check on your own lifestyle, as well as your family’s. If you/your family is fit, following a healthy routine or regularly exercising, have healthy food habits, doesn’t smoke, has no history of excessive drinking, you’re in a good place with regards to risks and coverage required. If not, then you have a much higher risk to hedge. This, apart from inflation, needs to be taken into consideration, when deciding the sum insured and you also need to understand the risk of job profile-frequency of travelling and exposure to unhealthy environment.
Point #4 – Individual Covers or Family Floater?
Family Floaters seem to be a no-brainer, as they are very efficient and cost effective but if you have any person in your family with >50 y of age than recommended a separate individual plan for them.Here is the comparison of two plan for same product of same insurance company shown:
Point #5 – Decision on choice of Sum Insured basis of Long-Term perspective
The biggest mistake one makes when buying Health Insurance, is when one factors today’s costs and decides the insurance coverage, whereas in reality, you are likely to make claims around 25 years from now by considering average inflation at healthcare of 7.5% in next 10 year
Point #6 – Hospital Room Capping will be deciding factor for Product selection
Many Health Insurance policies have room rent capping, which means you are eligible to claim expenses only up to a room costing below this capping. In case you opt for a room above this cap, you will have to bear the additional proportionate expenses on your own. Let me give you an example
Let’s say, as per your policy you are room rent limit is Rs 4,000 per day. Now if you get hospitalized and you choose a room (for if you are forced to choose) which has room rent of Rs 10,000. You might think that you will just get 4,000 per day for room rent from insurance company and other charges you will get as per the limit. But that’s not true. Your all the other hospitalization expenses will be inflated proportionately.
I hope you are now clear on the implications of the room chosen at the time of hospitalization.
You must be surprised as to why have I suggested Private room eligibility policies above policies without room rent capping. The reason is simple, in my opinion; policies with no room rent capping have larger chances of being abused. Insurers could bear higher losses due to no control over the extravagance of a few customers. In the long run, it would be consumers who will pay for such extravagance of a few, through higher premiums or revision in the terms of the product, so that the Insurer can contain the overall losses.
As mentioned earlier, the above priority is to be kept in mind, in case you have a choice. In case you don’t (due to health conditions, age etc.) it is important to not give up and hedge your risks to the extent possible, by opting for a sum insured with the highest room rent limit. This way you will be able to contain some part of this ‘auto-depreciating’ cover!
Point #7 – Need to Check for any sublimit/co-pay
There are clauses like sub-limits and co-pay in most of the insurance policies. They put a sub limit on a particular expense (like 2% of sum assured). Make sure you are very clear about them and are fine with it.
There are few Insurance products that have limits for specified surgeries also. So even if your sum assured is Rs 5 lacs, they might restrict a particular surgery expense to 50% of your sum assured.
Check with the products you have shortlisted. Also check for words like “limits”, “co-pay” or “deductible” in the policy. These are set deductions in claims. Ensure you have understood, and compared what this mean, before your decision to purchase is made.
Point #8 – Hospital Network is Important Parameter
While you compare the key features discussed above, you should also compare the hospital network of the shortlisted Insurance companies. You must compare these for areas you/your family is likely to be hospitalized. Though such lists are dynamic and can change anytime, it still gives you a good idea of the network that the Insurer has in place so cashless facility of hospitalization can be taken.
While a good network of hospitals is something you should definitely look at, but it should not be your primary parameter to judge a health insurance company.
Point #9 – Read the Policy Wordings thoroughly.
I would strongly suggest look at the policy document sheet yourself online. Just go to google and search for “<health insurance policy name here> + “brochure pdf” and you will surely get the PDF document online. go through it and read it. below you can see, how I searched for Niva Bupa health product brochure online.
Point #10 – Choice of for Super-Topup plan on base Policy .
Consumer should purchase the policy with Top up plan (Deductible of 5 lac with Sum insured of 15 lac ) to increase the sum insured coverage rather than purchasing of large sum insured policy. This can save close to 25-30% of premium vis-a-vis buying a Rs. 20 Lakh base plan.
2 important things here
- Ensure there is no room rent limit in your Super Topup policy.
- Ensure you buy a Super Topup Health Insurance along with your Base health Insurance policy tenure and they have similarly timed renewal dates.
Point #11 – What to ignore while buying a policy?
There aremultiple features provided by the insurance companies as Value added services like Ambulance, Daily Hospital Cash, Domiciliary, and any other benefits which will impact to your annual premium rate but don’t get used often, have a low consequence in the overall scheme of things. Hence, in my opinion, these should be overlooked, so that you focus on the bigger covers.
So, focus on the network of hospital, fees for doctor consultation, Room rent Limit, ICU charges, Check if they are paying for medicines or not and these kinds of expenses which make the major part of your overall bill.
Point #12 – Ensure you appoint a good advisor
By now, you may have realized Health Insurance is a complex product and a good amount of research has to happen (but do not overdo it). It is therefore recommended that you appoint a health insurance expert to help you shortlist products, explain the terms, answer your queries etc.
You even need a post-sales services like claim assistance/ Expert who may helping you out in coordinating with the health insurance company if you are stuck. If you find yourself a policy through an Insurance Broker, if required, he/she may also be able to help you through dispute resolutions with Insurers, in the long run, if any.
Point #13 – Review your existing policy and look at options to Port
If you have an existing policy which does meet the above mentioned 12 points, and you are still young and healthy, I would recommend you to look at porting your Mediclaim policy to a better company around 2 months before your next renewal.
Unfortunately, if you have already made claims in your existing policy, or have any chronic ailment to declare for any family member, the chances of portability are very dim and should not go for portability. I would then recommend you look at upping your cover with the same insurance company, and look for other options (like Super Top-up) by which you can hedge the negatives in your existing coverage but that increase sum insured will be excluded for disease of which claim has already been raised in the existing policy.
Buy your health insurance company NOW!
I recommend that you at least start looking at various options and take your decision quickly. If you need expert help, all you need to do is leave your Name, Email and Contact details on this page, or just click on the button below and share your details, so that you will get expert assistance in choosing your health insurance policy
That’s all folks. If you have any questions, comments, feel free scroll down to post your comments. Happy to help.
