A layman’s guide to health insurance in India – Part I


Health insurance is a help for those who cannot afford to pay huge amount in one outgo. In a health insurance policy, the insured pays small amount called premium and in turn the insurer assures to take care of the medical expenses of the insured and his dependents. The premium will be high if medi-claim is taken for all individuals if insured is having a family of 4 members . Hence he can go for family floater policy.

Family Floater Policies: Most health insurance plans give the flexibility of covering up to 4/5 members of the family under the same plan with a slightly higher premium than an individual health insurance policy. It gives the flexibility of choosing say 3 or 5 lakhs of cover for the entire family. If one member in the family is hospitalized and uses about Rs. 3 lakhs for his treatment, then the rest 2 lakhs can be availed by others. It is very unlikely that more than 1 or 2 members would require hospitalization in the same year. Hence the family floater serves the purpose whoever in the family falls ill. If health insurance is taken at younger age, the premium is less. There are two different type of health insurance. One is Regular health insurance and other one is critical illness insurance.

Regular health insurance is related to petty health problems which are not critical and of short duration and less costly. Critical illness refers to the diseases which are mostly non-curable / critical or require huge money for treatment. Critical illness insurance insures diseases like cancer, paralytic stroke, major organ transplant, kidney failure etc. These diseases require long continued treatment. On the other hand, the regular health insurance is covering the expenses only on hospitalization of the insured within particular duration. In critical health insurance , the insured gets the amount in lump sum but it is not so in case of regular health insurance where billed amount only is paid though it may be cashless or reimbursement policy. It is better to consult proper insurance agent before choosing a policy and tell your requirements. If any one wants to obtain cashless claim i.e. no cash payment across the counter and insurance company pays directly to the hospital, then he should know about the list of network hospitals that offer medical service he needs. He should note some hospital nearby with telephone numbers in his diary or in some important place so that in case of emergency, he can go to that hospital and arrange admission of him/her or dependents insured. He can inform the hospital about the insurance and mostly they will arrange all formalities for cashless facility if they have tie up for this facility. Once this is done, he just needs to sign the bill at the time of discharge of the hospital. The insurance company will pay the amount to the hospital. The premium money under health insurance will not be returned at the end of the period of insurance as in the case of life insurances policies (ofcourse excluding whole life policy) but will get income tax exemption up to Rs. 15000 every year under sec.80D . For senior citizens 60 and above, additional exemption is there upto Rs.20000/-.Thus it protects a salary earner/bread winner of a family from falling into any financial crisis due to any medical emergency especially of his/her aged parents and also helps in tax saving. He can lead a peaceful life without thinking about any uncertainties as it covers the medical and hospitalization expenses of the insured and dependents. Normally health insurance is taken for one year and some insurers allow it for two years. Premium varies every year based on cost of hospitalization in general which is on increasing trend. Those who continue in one specific insurance company, he/she gets discounts for no claim. Also after 2 or 4 years, it may allow covering even pre-existing diseases also.

Health insurance policy covers the following basic costs in case of hospitalization due to any accidents/ diseases that doesn’t form a part of the permanent exclusions of the policy.

  1. Room, boarding expenses as provided by the hospital/ nursing home.
  2. Nursing expenses
  3. Surgeon, anesthetist, medical practitioner, consultants, specialist fees
  4. Operation theatre charges, surgical appliance, medical and drugs, chemotherapy, radiotherapy and similar expenses.

Normal exclusions on a health insurance plan vary marginally company to company. What one should pay special attention is whether pre-existing diseases or treatment for common but expensive treatments, such as cataract or hernia are covered in the policy or not.

The stereotype expenses that are not covered by a general health policy of most of the insurance companies are: Any disease/injury during first 30 days of commencement of policy (except accidental injury) Permanent exclusions could comprise of the following illnesses: Vaccination, inoculation, change of life, cosmetic or aesthetic treatment, plastic surgery unless necessitated due to accident or as a part of any illness Dental treatment or surgery of any kind unless requiring hospitalization Cost of spectacles contact lenses and hearing aids Convalescence, general debility, “run-down” condition, sterility, venereal disease, Hospital / nursing home charges not forming part of any treatment Nuclear perils and war group of perils Naturopathy or non-allopathic treatment Any internal congenital illness Pregnancy and childbirth related diseases Expenses arising from HIV or AIDS and related diseases Use or misuse of liquor, intoxicating substances or drugs War, riots, strike, terrorism acts, nuclear weapon induced treatment.

Pre-existing diseases: In most medi-claim policies Pre-existing diseases are defined as any disease that the insured had (whether he was aware of it or not) at any time prior to the commencement of the policy with the insurance company and it also includes any complications arising in the future from such pre-existing disease. Most insured are normally not aware about the inclusive definition of pre-exising diseases (about complications arising from the pre-existing disease). Since the most common pre-existing diseases in India are diabetes and high blood pressure (hyper tension) and these are responsible for a wide spectrum of serious diseases such as heart blockages, organ failure, etc. the insured are taken aback when the insurance companies deny payment of claim on grounds that these diseases arose from an pre-existing condition and hence will be classified as an pre-existing disease. So insured should take care of this definition and arrange to cover pre-existing diseases also especially for elders. Some health polices will cover it after a cooling off period of few years (normally 2 to 4 years). Some insurance companies have even stricter condition that coverage will be provided only if no advice, care or treatment is taken for the pre-existing condition during the cooling off period. So the person taking the policy has to study these and then take a decision for health policy.

Some of the other terms used in Health Insurance policies:

Hospitalization Cash Benefits: This benefit entitles the customer to cash benefits for every completed day of hospitalization, which helps him to take care of the increased financial burden incurred at the time of hospitalization, such as loss of earnings away from work and other expenses.

Cashless facility: There is a network of hospitals tied up with each insurance company which accepts the insured’s medical identity card (issued by the insurance company) for providing cashless facility to the insured. Hence either part of expenses like 80% or entire expenses is covered by the policy and the individual doesn’t need to spend from his pocket.

Pre-hospitalisation and Post-hospitalisation benefits: Some medi-claim policies provide for up to 60 to 90 days of pre-hospitalisation and post-hospitalisation benefits, i.e. the cost of medical tests, medicines, scans, etc. This is usually provided under maternity benefits and treatments which do not require hospitalisation.

Ambulance Charges In most cases the ambulance charges are taken up by the policy with or without cash limits and the policy holder usually doesn’t have to bear the burden of the same.

Health check up Some health insurance policies have a facility of free health check-up for the well being of the individual if there is no claim made for certain number of years.

No-Claim Bonus: Some health insurance policies provide a no-claim bonus. If there has been no claim in the previous year, i.e. if the person covered has not availed any hospitalisation benefit, then a bonus is declared; either by reducing the premium or by increasing the sum assured by a certain percentage of the existing premium.

Top up and the super top up plan in health insurance: A top-up policy is to provide reimbursement of extra-ordinary expenses arising from one single illness above a certain known insured limit for top up.(it is called deductible in insurance world). For e.g. one has taken a mediclaim policy for Rs.2 lakhs and a top up policy for 4 lakhs with deductible of Rs.2 lakh.He incurred medical expenses for single disease like angioplasty which is around Rs.4 lakhs. Under mediclaim policy, he will be given 2 lakhs and in top up, deducting the deductible amount of Rs.2 lakhs from 4 lakhs of total expenses, he will get additional 2 lakhs. Thus he will get full expenses due to top up. But one drawback in this top up is that if the expense of 4 lakhs incurred is 2 lakh each on two occasions (Rs.2 lakhs+2 lakhs) , then he will not get any amount under top up policy. In order to remove this problem, the insurance companies brought in another product called super top up policy which covers for all illnesses during the year put together and any eligible expenses incurred over and above the deductible amount is eligible for reimbursement. So the insured can combine all expenses put together in the covered insurance period and claim the balance amount above deductible amount. In the above case, if the policy is super top up one, then the insured will get full balance amount of medical expenses allowed under policy for the full covered year deducting deducible amount of Rs.2 lakhs and in the above case , it is 2 lakhs under super top-up policy. So super top up policy is the best one if any one thinks to take additional policy under normal mediclaim. Claims under these kind of policies are much lower and only a few people are likely to exhaust the deductible amount and hence the premiums are very reasonable and hence attractive.

C.R. Venkata Ramani

(AICWA)

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