Health Insurance

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Health Insurance Plans

Health insurance, as humans we are vulnerable to falling sick or getting a disease due to our hectic and stressful lifestyle. Sometimes even a minor change in weather can cause sickness. Health care of late is very expensive and more than the disease itself, it is often the cost of treatment that takes its toll on our peace of mind. The solution to these health-related expense worries lies in having a good Health Insurance Policy which covers medical expenses incurred during pre and post-specific period of time. Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a the insured’s nominee a sum of money in exchange for a premium, upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included in the benefits.

hospitalization. As per the IRDA regulations on Health Insurance, the insurance companies should have an entry age restriction for Health insurance policies. Hence almost all the health insurance plans do not have any restriction in the entry age. This means that an insured of any age can purchase a health insurance policy.

Similarly, almost all plans come with a Lifelong Renewability feature (again directed by IRDA) and this ensures once an individual is enrolled with an insurer, they can renew their policy till they are alive, either with the same insurance company or port their policy. They only need to ensure payment of renewal premium within the stipulated timeframe to ensure timely renewals.

The free look period is the time period provided to the insured during which they can review the terms and conditions of their newly purchased health insurance policies and if not satisfied can terminate the policy without penalties, such as surrender/closure charges. A free look period normally lasts 14 or more days (depending on the insurer), allowing the insured to decide whether or not to keep the insurance policy; if he or she is not satisfied and wishes to cancel, the policy purchaser can receive a full refund.

Insurance policies are legal contracts that grant rights and responsibilities to both the insurance company and insured policyholder. Hence if the insured is not satisfied with the terms and conditions of the policy purchased, they can cancel and return the policy within this specified period after receiving it, and premiums will be fully refunded. During the free look period, the purchaser can continue to ask the insurer questions regarding the insurance policy contract in order to better understand the policy.

Health care in india

Health is a human right. It’s accessibility and affordability has to be ensured by the Government but the escalating cost of medical treatment is beyond the reach of common man especially in Tier II and Tier III cities (Rural areas). Health care has always been a problem area for India, a nation with a large population and larger percentage of this population living in urban slums and in rural area, below the poverty line. Under this situation, one of the ways for the government to reduce funding and augment the resources in the health sector was to encourage the development of health insurance. Currently (according to the Health Vertical Specialist team at Cognizant Technology) some of the challenges being faced in the Health Sector are :

Increase in health care costs due to better quality treatment, more qualified doctors and other facility maintenance Costs in Urban Areas

The poor are finding the escalating medical costs a huge financial burden

Need for long term and nursing care for senior citizens because of increasing nuclear family system

Increasing burden of new diseases and health risks – There have been disruptive lifestyle changes in the country over the past two decades mainly due to the rapidly evolving urban economy and the Indian middle class. It is estimated that around 130 million people may suffer from lifestyle diseases such as diabetes and obesity in the next few years, leaving a $160 billion hole in the national economy during the next few years

Preventive and primary care and public health functions in Rural India have been neglected. Affordable care (government hospitals or community-based care) suffers from quality issues and is unable to cater to the basic healthcare needs of the growing population. While some private care delivery centers and professionals are accessible to the needy, they are not affordable for a majority of the population.

Medical health insurance penetration is very low. Health insurance is a minor contributor in the healthcare ecosystem. Insurance payment structures are based on an almost indemnity-based payments. Indian insurance has been limited to critical illness coverage for inpatient surgical procedures.

The India Healthcare Industry is estimated to row to $280 billion by 2020 from the $79 billion that was the size in 2012. This is despite the per capita spending on Healthcare in India (according to WHO Report 2012) amongst the lowest in the world.

In India the Per capita spending is just $109 per person against the world average of $863, this highest being in the USA who have this number pegged at $7,285. The focus of the India Healthcare Industry thus has to focus on Access, Cost and Quality to ensure we correct this alarming situation. According to a detailed study by the Global Conference of Actuaries a few years ago, almost 78% of the Healthcare spend is borne Out of the Pocket of the individuals… this presents perhaps the biggest gaps that the Health Insurance players must fill aggressively over the next decade or so as well as being the biggest opportunity for Health Insurers and Distributors to capitalise upon…this is significantly higher than most developed nations across the world.

In India the Per capita spending is just $109 per person against the world average of $863, this highest being in the USA who have this number pegged at $7,285. The focus of the India Healthcare Industry thus has to focus on Access, Cost and Quality to ensure we correct this alarming situation. According to a detailed study by the Global Conference of Actuaries a few years ago, almost 78% of the Healthcare spend is borne Out of the Pocket of the individuals… this presents perhaps the biggest gaps that the Health Insurance players must fill aggressively over the next decade or so as well as being the biggest opportunity for Health Insurers and Distributors to capitalise upon…this is significantly higher than most developed nations across the world.

You will note in the tables below (in the same study by the Global Actuaries), that India and China lag behind the other developed nations in terms of their Government’s allocation to Healthcare overall. In India this stand at currently around 2.9%, which China is slightly higher at 10.10%. But very importantly as a % of the overall GDP, the Health spends in India is around 5%, a marginal step ahead of China. But even then when we compare this to the largest economy like USA, the Government spend is a whopping 15.4% of their massive GDP. So there is a long way to go for India in the Healthcare space.

What are the Illness plaguing India today?

Almost 38 million deaths occurred due to non-communicable diseases ( NCDs) each year. In that 16 million deaths occur before the age of 70 & 82% of these premature deaths occurred in low- and middle-income countries including India. The World Health Organisation (WHO) indicates that India ranks very high among the nations affected by the rising wave of premature deaths caused by non-communicable diseases, which account for 60% of all deaths in India.

Non-communicable diseases, also known as chronic diseases, which are impacting India today. They are long duration illnesses and have slow progression like cardiovascular diseases, cancers, chronic respiratory diseases and diabetes which are not passed from person to person. In India, roughly 5.8 million Indians die because of diabetes, cancer, stroke, heart and lung diseases each year. In other words, out of 4 Indians 1 has risks dying from an NCD before the age of 70.

About 1.7 million Indian’s deaths caused by heart diseases every year, according to the World Health Organization.

Roughly 16 lakh people suffer from stroke throughout the India and health has found that 55 to 60 per cent men are prone to stroke as compared to women.

In 2014, the incidence of cancer in India was 70-90 per 100,000 populations and this has been growing steadily year on year. And cancer prevalence is established to be around 2,500,000 (2.5 million) with over 800,000 new cases and 5,50,000 deaths occurring each year.

Latest statistics provides that diabetes is fast gaining the status of a potential epidemic in India with more than 62 million diabetic. And it is predicted that by 2030 diabetes mellitus may afflict up to 79.4 million individuals in India. According to International Diabetes Federation (IDF) 1 in every 10 adults will have diabetes in 2030. Study to find prevalence of diabetes & hypertension discovers 80% people had abdominal obesity.

According to the World Health Organisation (WHO) Statistical Profile for India in 2012, the Top 10 causes of death amongst Indians are presented in a chart below.

The positive news for the India market is that between the Stand Alone Health Insurance players and the General Insurance companies offering Health Insurance, almost all policies cover such Lifestyle Illnesses and some of them have products specifically for Cancer, Diabetes etc. The Sum insureds offered by the Health insurers have also significantly increased and with options like “Sum Insured Restore” the customer really is spoilt for choice today. This means that individuals can insure themselves against financial stress in case they are effected by any of these NCD’s.

So what is Health Insurance?

Health Insurance is a policy which covers the insured for Medical Expenses post hospitalization, whether it be a Sickness or Accident. This treatment could have major financial impact on the insured and their family and hence it is prudent for every individual to have sufficient Health Insurance in place. Some of the main coverage under the Health Insurance policy include:

In-patient treatment (Cashless) including room rent, ICU, nursing, medicines drugs & consumables covered without as per the policy terms and conditions up to the Sum insured mentioned on the policy. Covered expenses include:

Seek and receive advice and options patiently Room, Boarding expenses

Nursing expenses Room, Boarding expenses

Fees of surgeon, anesthetist, physician, consultants, specialists

Anesthesia, blood, oxygen, operation theatre charges, surgical appliances, medicines, drugs, diagnostic materials, X-ray, Dialysis, chemotherapy, Radio therapy, cost of pace maker, Artificial limbs, cost or organs and similar expenses.

Pre and Post Hospitalization medical expenses: Medical expenses incurred normally up to 30 days immediately before hospitalization and normally up to 60 days immediately post hospitalization remain covered. The coverage period can be extended by submitting relevant documents to the insurer at least 5 days before the Hospitalization.

Day Care Procedures: Most policies covers medical expenses for 120-150 different day care treatments which do not require 24 hours hospitalization

Domiciliary Treatment: The policy also covers for the medical expenses incurred for availing medical treatment at home on the advice of the attending Medical Practitioner which would otherwise have required Hospitalization.

Organ Donor: The policy covers Medical Expenses on harvesting the organ from the donor for organ transplantation.

Dental Treatment (in case of Accident): The insurance company will reimburse Medical Expenses of any necessary dental treatment from a Dentist provided that the Dental treatment is required as a result of an Accident. Maximum liability shall be limited to the amount specified in the Schedule of Benefits.

Ambulance Charges – In most cases the ambulance charges are paid by the policy and the policy holder usually doesn’t have to bear the same

Cover for Pre-existing Diseases – Health insurance policies have the option of covering pre-existing diseases after 3 or 4 years of continuously renewing the policy without any break in period, i.e. if someone has hypertension, then after completion of 3 or 4 years of continuous renewal with the same insurer (depending on the plan offered and his age), any hospitalization due to hypertension will also be covered)

Other Terms to be aware of:

Sum Insured : The Sum Insured offered may be on an individual basis or on floater basis for the family as a whole.

Cumulative Bonus (CB) : Health Insurance policies may offer Cumulative Bonus wherein for every claim free year, the Sum Insured is increased by a certain percentage at the time of renewal subject to a maximum percentage (generally 50%). In case of a claim, CB will be reduced by 10% at the next renewal.

Cost of Health Check-up : Health policies may also contain a provision for reimbursement of cost of health check up. Read your policy carefully to understand what is allowed.

Minimum period of stay in Hospital : In order to become eligible to make a claim under the policy, minimum stay in the Hospital is necessary for a certain number of hours. Usually this is 24 hours. This time limit may not apply for treatment of accidental injuries and for certain specified treatments. Read the policy provision to understand the details.

Pre and post hospitalization expenses : Expenses incurred during a certain number of days prior to hospitalization and post hospitalization expenses for a specified period from the date of discharge may be considered as part of the claim provided the expenses relate to the disease / sickness. Go through the specific provision in this regard.

Cashless Facility : Insurance companies have tie-up arrangements with a network of hospitals in the country. If policyholder takes treatment in any of the net work hospitals, there is no need for the insured person to pay hospital bills. The Insurance Company, through its Third Party Administrator (TPA) will arrange direct payment to the Hospital. Expenses beyond sub limits prescribed by the policy or items not covered under the policy have to be settled by the insured direct to the Hospital. The insured can take treatment in a non-listed hospital in which case he has to pay the bills first and then seek reimbursement from Insurance Co. There will be no cashless facility applicable here.

Additional Benefits and other stand alone policies : Insurance companies offer various other benefits as “Add-ons” or riders. There are also stand alone policies that are designed to give benefits like “Hospital Cash”, “Critical Illness Benefits”, “Surgical Expense Benefits” etc. These policies can either be taken separately or in addition to the hospitalization policy. A few companies have come out with products in the nature of Top Up policies to meet the actual expenses over and above the limit available in the basic health policy.

Key Points to Remember when Choosing your Health Insurance Plan

Sum Insured by the policy

Co Pays / Deductibles / Sub Limits

Waiting Period for Pre Existing Diseases

Insurer’s List of network hospitals across India and Claim Settlement Ratio

Reputation and Claims paying capacity of the insurer

Premium to be paid for the coverage

The most important things to consider while choosing an optimum health insurance plan include:

The Optimum Sum Insured – every individual should first decide on the sum insured / coverage that they need given their current health exposure, age, risk factors etc.

Exclusions and Waiting Periods under the Plan – these are critical features to be considered while choosing the right plan. Even though most plans have comparable exclusions and waiting periods, one must still do a quick comparison to be aware and opt for the plan with the lowest waiting periods and minimal exclusions.

Benefits under the Plan – this is the key factor that decides the premium. It is strongly recommended to opt for a plan with more comprehensive benefits, even if it comes at a slightly higher premium. If one considers only premium, the coverage could be reduced significantly which may cause financial duress at the time of a claim.

The Right Insurance Partner – the insured should opt for an insurance partner based on their claim settlement capabilities and claims settlement ratio.

Strong and Wide Cashless Network – One must also ensure the insurance company has a reasonable strong cashless network across India because the insured could be hospitalized anywhere in India.

Day Care Procedures / Pre & Post Hospitalization – these are also a few important features that must be present in the proposed plan. Day Care procedures are those surgeries and medical interventions that don’t require hospitalization.

Co Payment by the insured – plans where the premium is low for a comparable sum insured could have a higher co pay, which is the % of the claim expense payable by the insured and vice versa, where a higher co pay will mean a lower premium. So whatever the insured is saving on premium will need to be paid as part of the co pay at the time of a claim.

Lifetime Renewability.

Group Insurance Plan Coverage of Employees – this is typically a family floater coverage for all the members of the family. In this case, if the employee is leaving the organization, he/she can approach the existing insurance company and request them to offer a family floater for the family with the same sum insured limits. The only difference in this case will be that the premium payable will be higher than the Group policy offered by the employer and hence the insured will need to agree to pay the higher premium. Secondly and importantly, the insured should request the insurer to provide a pre existing continuity benefit under the new plan. This will avoid the insured and his family going back to a 48 month pre existing waiting period. For example, if the employee was employed for 2 years and covered under the Group Plan of the Employer, then he/she can request the insurance company to continue the waiting period already crossed and hence under the new plan, the waiting period will only be 24 months, rather than starting from the first month and having a 48 month waiting period all over again.

Individual Insurance Plans for Employees – this is a far more easier option where all the insured will need to do is to apply for a portability of the existing policy to the same insurance company or another insurer. Assuming that the individual premiums earlier were being paid by the employer, the individual will now be required to pay the premium after leaving the organization. This same process holds good for the dependent members also. Since the policies are ported from the earlier insurance plan, the pre existing waiting period continuity will be ensured.

The health insurance sector is easily one of the fastest growing segments in the insurance space in India. Ever increasing medical costs and increasing awareness levels are contributing to this growth, especially over the past few years. India is one of the most uninsured markets across the world with less than 20% of the population having some type of insurance coverage and in rural areas this falls to as low as 15%. Given this growth of health insurance, the industry is seeing significant changes in the range of plans which insurers are offering to customers. This is precisely why the IRDAI also offered licenses to insurance companies only focussed on Health Insurance, known as Standalone Health insurance companies (SAHI). These SAHI companies are leading the product innovation game and are at the forefront of unique product launches. So one shouldn’t be surprised to see a diabetes care or plans specially designed for cardiac patients. As mentioned earlier, the rising cost of medical treatments, inflation and the increased incidence of diseases (given the sedentary lifestyle) today have made health insurance a much needed insurance policy. A health insurance plan covers hospitalization expenses of the insured. Some of the more popular plans are :

Indemnity Plans

This is clearly to most popular and preferred insurance policy. Also known as “Mediclaim” these policies compensate the policyholder by reimbursing the actual hospitalization costs incurred by him/her subject to a maximum opted Sum Insured. The word ‘indemnity’ means compensation for losses or damages and hence this plan covers hospitalization cost, pre and post hospitalization cost, expenses on surgeries, ambulance costs, etc. Under the Indemnity Plan, the insured can opt for an Individual Policy or a Family Floater policy depending on their requirement.

Top-up Plans

A top-up health insurance policy is an additional coverage for insureds who have an existing individual plan or a medi-claim provided by their employer. These plans increase the insured’s coverage amount at lower incremental premium costs. Top-up plans can be taken as supplementary plans for enhancing the coverage if the existing plan does not provide adequate coverage. Each top up plan has a deductible limit in the plan which is the minimum sum insured up to which the plan will not provide cover to the insured. If the claim exceeds the deductible limit, the plan is triggered and the excess claim amount above the deductible sum insured is paid.

Benefit Plans

Also known fixed benefit plans, they pay a specific fixed sum insured amount for a claim irrespective of the actual expense incurred by the insured. For instance, in the event of a Critical Illness, if the SI is ₹2 lacs, the policy will pay the insured ₹2 lacs on diagnosis of the Critical Illness irrespective of whether the insured spent ₹1 lac or ₹5 lacs for the treatment of the illness. Some benefit plans include:

Critical Illness plans – Critical illness plans provide coverage against a list of defined critical illnesses. Although the list of illnesses covered varies from insurer to insurer, yet on the diagnosis of any of the covered illness, the insurer pays a lump sum amount to the policyholder irrespective of the subsequent treatment costs.

Hospital Daily Cash Plans – If the insured is hospitalized, and taken this plan, the policy will provide a fixed sum of money for each day of hospitalization and this does not depend on the actual hospitalization expense but is pre-fixed amount as per the plan.

Specialized Plans

These are specific plans offering coverages relating to only specific illnesses like Cardiac Care or Diabetes Care. So if a Diabetic wants to avail of a Health Insurance plan, regular plans will not offer coverage since diabetes will be treated as a pre existing condition. But under a Diabetes Plan, the insured even with a pre existing Diabetes condition will be offered coverage. Similar is the case for Cardiac Care. Persons with heart related complications can purchase this plan.