What is Health Insurance?
A health insurance policy is a type of insurance that offers coverage for the medical and surgical expenses incurred by the policyholder when he/she is hospitalised during the policy period.
Health insurers, today, also provide coverage for day care hospitalisation, pre-hospitalisation, and post-hospitalisation. The expenses incurred are either reimbursed to the insured individual or are paid to the healthcare provider directly.
On one hand, issues with health have become unavoidable, thanks to changes in the environment and lifestyle over the past few decades. Leading a healthy lifestyle doesn’t guarantee a healthy body any more. On the other hand, medical costs have skyrocketed, which can leave you in a dire situation if you aren’t prepared. Health insurance has gained importance in today’s world due to these reasons. It is a smart investment to make but requires a bit of research to ensure the plan is affordable, offers good coverage, and will pay out sufficiently when needed.
Why is Health Insurance Important?
There are plenty of reasons why buying a health insurance plan is not just a good idea, but in fact, necessary. The benefits provided by such plans outweigh the cost of premiums and the exclusions that are involved. Currently, the life expectancy rate has risen substantially owing to medical advancements. But many people face financial strains or even a lack of finances when it comes to funding their treatment. This results in loans, mortgages and sale of assets just to keep the person alive. This is where a health insurance plan could be a real lifesaver as the cost of hospitalization, surgeries, treatments, medicines and so on, have risen.
India’s total expenditure on health stood at 4.7% of the country’s GDP in 2014 according to the data released by the World Health Organization (WHO). India is also a country where medical costs are surging at the rate of 15% to 20% every year. In addition to mounting medical expenses, the increase in lifestyle diseases is also affecting the people of our country.
In this time of unpredictability, medical insurance provides the much needed financial stability to an individual or family. Despite gaining popularity in the recent years, health insurance penetration is still not adequate in India. Considering the range of benefits offered, medical insurance is a must for everyone in a family.
Some of the major reasons why health insurance is important have been listed below:
- Health issues can suddenly arise and catch you off guard.
- In today’s world, the chances of contracting cancer and other illnesses is high.
- If you are not rolling in dough, chances are you will need to figure out how to fund your treatment.
- Medical costs have risen substantially over the past few years.
- A health insurance plan will take care of most of the expenses associated with treatment and lighten the financial burden.
- Cashless facility offered by all insurers can help reduce out-of-pocket expenses. The patient can focus on recovering and be at peace knowing that the finances are taken care of.
- The financial burden will not fall on the family of the insured person.
- Insurance companies provides added benefits such as emergency assistance, ambulance cover, critical illness cover, hospital cash and so on.
How Does Health Insurance Work?
Health insurance covers whole or part of the medical expenses incurred by the life insured during the policy term. Over 30 health insurance products are offered by numerous private and public sector health insurance companies in India. The 4 main type of health insurance plans are mediclaim, critical illness cover, hospital cash plan, and personal accident insurance.
- Individual or group health insurance: Before purchasing a health insurance policy, assess your insurance needs and decide whether you require an individual health insurance plan or if insurance coverage from a group health insurance plan will suffice.
- Family Floater Plan: Floater option comes in handy if you want to provide health cover for your entire family under a single policy. The sum assured is shared by all the insured members which can include self, spouse, children, and parents.
- Insurance coverage: The extent of financial protection an insurer is ready to pay for medical services covered under the policy is called insurance coverage. The best health insurance policy is one that offers adequate health cover at affordable premium.
- Buying a policy online: Compare the features and benefits of various policies on a comparison website, select the one that best serves your need, get an instant quote on the chosen policy, calculate the insurance premium using the online premium calculator, purchase the insurance policy through the insurer’s website. Payment can be made via net banking, credit card or debit card.
- Claim process: For reimbursement claims, you have to intimate the insurer within 48 hours of hospitalisation. The medical bills have to be paid by you upfront. Submit the duly-filled and signed claim form along with the medical bills and discharge summary to the insurer. The insurer will verify your claim and settle the claim within 21 days. For cashless claims, show your e-card and ID card at the network hospital desk. The hospital will submit a pre-authorisation form to get TPA approval. Once the claim is verified, the insurer will pay the hospital directly. You don’t have to pay the medical bill upfront.
- Renewal: A health insurance policy is active for 1 year. You have to renew it each year to avoid losing out on the policy benefits. If you fail to the pay the premium on time, the policy will lapse. Usually, a grace period of 15 days is given within which you have to pay the due premiums. The policy benefits aren’t available for the duration of non-payment. If a policy lapses, some insurer’s give you the option to revive it within 6 months provided you pay all the outstanding premiums and reinstatement fees. You will also have to provide proof of insurability for reinstatement.
IRDA Regulations – Things Policyholder should know about Health Insurance
Matters to be stated in a health insurance policy
According to the Insurance Regulatory and Development Authority of India (IRDAI), a health insurance policy must clearly state the following:
- The name of the policyholder, the address of the policyholder, the name of all beneficiaries, the Unique Identification Number (UIN) of the product, code number, and contact details of the person involved in selling the policy
- The age of the insured along with his/her date of birth
- The sum insured amount for the policy, sub-limits for specific illnesses, proportionate deductions (if applicable), and package rates (if any)
- Periodicity of premium payment (monthly, quarterly, half yearly, or yearly)
- Policy period
- The period of insurance and the date from which the policyholder has been continuously insured in India (including cover from other health insurers)
- Any co-pay limits applicable for a policy
- Waiting period for pre-existing diseases and waiting period for specific illnesses
- Specific and general terms associated with deductibles
- Cumulative bonus available for every claim-free year
- All conditions, exclusions, terms, and warranties related to a specific policy
- Claim procedure on what actions to take for cashless treatment and reimbursement options
- Whether or not a third-party administrator (TPA) is used for policy administration, details about the TPA (if applicable), toll free number, other contact details, etc.
- Grievance redressal mechanism that can be used by the insured
- Conditions related to free look period and policy portability
- Conditions related to policy migration facility
- Provisions involved in cancellation of the policy
- Terms and conditions about renewal including details about the possible change in premium rates at the time of renewal
- Address and other contact details of Ombudsman within whose territorial jurisdiction the policyholder is located
Free look cancellation of health insurance policies
- IRDAI regulations require an insurer to mention clearly about the free look cancellation period of 15 days for a policy. This free look period must be clearly stated in the letter forwarding the policy. For electronic policies and policies obtained through distance mode, the free look period is increased to 30 days. During this period, the policyholder can review the terms and conditions of the policy and decide whether or not to continue with the policy. If there is any disagreement with the terms, the policyholder can cancel the policy by stating the reason for cancellation. Upon cancellation within the free look period, the insurer may refund the money obtained for the premium charges. Certain deductions such as proportionate premium for the period of cover, charges incurred by the company for medical examinations, stamp duty charges, etc. may apply during the return of premium.
- Any request received by an insurer for free look cancellation must be processed and refunded within 15 days.
Claim procedure in respect of a health insurance policy
According to the regulations set forth by the IRDAI, every insurer that provides health insurance service must adhere to the following procedures.
- According to the provisions of Regulation 27 of IRDAI regulations, 2016, an insurer must provide the settlement amount within 30 days upon receipt of all necessary documents.
- If there is any delay in payment of settlement, the insurer shall be liable to pay interest at 2% above the bank rate from the date of receipt of the last necessary document.
- If a claim warrants an investigation, the insurer must initiate and complete the investigation within a maximum of 30 days from the date of receipt of last necessary document.
- For claim settlement following an investigation, the insurer must settle the claim within a maximum of 45 days from the date of receipt of last necessary document. If the delay is beyond 45 days, the insurer must pay interest at 2% above the bank rate from the date of receipt of last necessary document.
- According to the provisions of Regulation 14 of IRDAI regulations, 2016, return of premium following cancellation during free look period must be processed and refunded within a maximum of 15 days.
Healthcare Initiatives Announced in Union Budget 2018-19
- Modicare: Rs.5 Lakh Health Cover for Each FamilyThe Union Budget 2018 witnessed the announcement of a mega healthcare programme for the poorest segment of the society. Two new initiatives have been announced under the state-run scheme of Ayushman Bharat Programme. The new initiative named “National Health Protection Scheme” will provide health insurance coverage worth Rs.5 lakh per year for about 10 crore vulnerable families in the country. It is estimated that about 50 crore individuals will benefit from this grand scheme, which is commonly dubbed as ‘Modicare’. Finance Minister Arun Jaitley also announced the development of over 1.5 lakh health and wellness centers that will provide free medications and diagnostic services for poor families.Tax Benefits for Senior Citizens in Union Budget 2018Various tax rebates have been announced for senior citizens enrolled in health insurance plans. Under Section 80D of the Income Tax Act, the limit of deduction for senior citizens has been increased to Rs.50,000 from Rs.30,000. Senior citizens also received benefits under Section 80DDB of the Income Tax Act. In the previous budget (Union Budget 2015), the deductions for medical expenses was Rs.40,000 for senior citizens and Rs.60,000 for very senior citizens. As per the announcement made on Union Budget 2018, this deduction has been increased to Rs.1 lakh for both senior citizens and very senior citizens.
Types of Health Insurance Plans in India:
There are a variety of insurance plans designed to cater to different strata of society. According to your needs, you can select a plan under any of the following categories.
Individual Health Insurance Policies:
These policies are designed for one person. The premiums on these plans are low as the risk is borne for only one person. Premiums, however, depend on a variety of factors such as age, previous medical conditions, location, and so on. The plan will cover a number of illnesses as stated in the terms of the policy. The costs usually taken care of include in-patient care, pre and post-hospitalisation, medical examination charges, laboratory charges, maternity care expenses, and consultation fees.
Family Floater Health Insurance Policies:
These plans are designed for multiple members of a family. Instead of taking separate policies, the parents, along with minor children (usually up to 2 children) can be covered under one plan. Some family floater plans cover up to 15 people. Depending on your insurance provider, each insured member will receive an equal amount of coverage, or all members may receive a combined sum. With a combined sum, if one family member requires a substantial amount for treatment receive, they can take it from the entire sum assured. This is a big advantage as it helps balance out the cost of those who need to make a claim and those who do not. The premiums for these plans are generally higher, but will be a money saver because one need not spend on multiple policies.
Senior Citizen Health Insurance Plans:
Anyone who has attained the age of 60 years will be eligible for senior citizen plans. These plans usually bear lower premiums or discounts on premiums. Insurance companies might require a medical check-up before they sell the plan. There are just a handful of companies that offer exclusive senior citizen health insurance plans. These plans are designed specifically to cater to the medical needs of the aged.
Critical Illness Plans:
These plans are designed to fund specific illnesses. A critical illness can result in permanent disability or even death. If one has a family history of a specific disease or is more prone to getting a specific illness, then these plans are suitable. Critical illnesses generally covered include cancer, organ transplant, multiple sclerosis, blindness, heart valve surgery, coma, heart attack, paralysis, kidney failure, and so on. Critical illness plans may be offered as a standalone plan or as a rider that can be attached to a base plan.
Maternity Health Insurance:
As the name states, these plans specifically cater to women who plan on bearing children. Maternity plans may be offered as a standalone plan or as a rider that can be attached to a base plan. The coverage offered under this plan covers the mother and the newborn, end-to-end pre-natal and post-natal expenses incurred, complications that may arise and hospitalisation costs.
Group/Employee Health Insurance Schemes:
Many companies offer health insurance to their employees to safeguard their interests, make the job position attractive and to mitigate risks. These schemes are designed to include and exclude members as they join and leave the organisation. Premiums are relatively low and the coverage offered is more lenient in terms of covering pre-existing illnesses and so on.
Preventive healthcare includes regular check-ups and care received in order to prevent a disease, cancer or illnesses. Annual physical exams are one way of checking for early symptoms and nipping any problems in the bud. Preventive health care insurance takes care of these costs associated with preventive healthcare measures.
Personal Accident Covers:
Accidents can occur at any time and at any place. Unforeseen events can lead to major injuries that could seriously put a dent in one’s pocket. Personal accident insurance takes care of the costs that arise out of accidents. These plans provide compensation in case of death, disablement, injury, impairment or mutilation as a result of violent, hazardous, visible and external means. Accidents that are covered include road, rail, water and air. These plans may be a benefit of the base plan or could be attached as a rider.