Garima (surname withheld on request), 28, was suddenly affected by a stomach infection last year. After a week’s treatment, the doctor handed her a bill for Rs4,000. But the pain persisted, and it was discovered that Garima had appendicitis. She had to be rushed for surgery and was barely able to pay the hospital charges of Rs40,000.
For the next few months, her finances were in a mess as she had not anticipated this sudden outflow of cash.
“How I wish I had been covered by a health-insurance policy,” she says, “and that I had taken one when I was advised to. The small premium that I was reluctant to pay would have saved me from this situation.”
While some of us are just plain lazy or ignorant, there are some, especially those who enjoy good health, who see health insurance as a wasteful investment, because if you don’t fall sick during the year, the premium paid doesn’t generate any income. In many life insurance policies, for instance, the premium can generate returns.
“The cheque that you deposit in your bank every month, hoping to save for a safer, brighter tomorrow can be wiped out by a hefty doctor’s bill or hospitalization charges,” says Surya Bhatia, a Delhi-based financial planner. That’s why experts and financial advisers say that health insurance is a must.
Simply put, a health insurance policy takes care of your medical expenses for specified illnesses in lieu of a small premium, paid annually. Swiss Re, a global reinsurer’s survey, throws up a startling fact—India has an abysmally low rate of per capita premium of $2.4 (Rs98.4) in comparison to $1,664 (Rs68,224) in the US. This indicates that we spend very little of our income on insurance premiums.
An added attraction of Mediclaim policies is the tax benefits these attract under Section 80D of the Income-Tax Act. The maximum amount of deduction available under this section is Rs10,000, except for senior citizens who can enjoy a maximum limit of Rs15,000.
But before you consult your financial planner, you need to have an idea of how the health insurance market is shaping up. Since January 2007, insurance companies have been allowed to charge higher premiums from people in a high-risk category. For example, smokers and elderly people are likely to pay a higher premium for health cover.
To spread the risk, insurance companies have now classified rates into two categories: Those below 26 years, who have to pay less, and those above 26. “Ever since de-tariffing, premium rates have gone up by 25-30% on an average, but for some categories, it is much higher. It has got cheaper for the younger generation as claim ratio tends to be low in the less than 26 age group, and this could turn the business profitable,” says C.S. Rao, chairman of Insurance Regulatory and Development Authority, the insurance regulator.
Some public-sector insurance companies refuse to give commission to their agents if the age of the insured is more than 50. This is an indicator that they want to focus on the younger age group to spread their risks.
If you are a senior citizen, ie, over 65, the picture is far from bright. Some premiums have shot up by as much as 100% since the introduction of the non-tariff regime. There are hardly any schemes today for those above 65.
Hospitals also seem to shy away from providing special rates for them. “We give a 10% discount to senior citizens, but only for outpatient cases. We have discounts for residents of Saket in Delhi, which is where our hospital is located, but there is no special scheme for senior citizens,” says Sanjay Rai, marketing director at Max Hospital.
Here are 10 questions you need to ask your insurance agent before choosing a health cover.
1. HAVE YOU TOLD ME ABOUT THE FULL RANGE OF PLANS?
Remember, insurance agents will pitch you a policy that fetches them the maximum commission. So, you need to enquire about the full range of health plans available, ranging from stand-alone to family floater options.
For instance, a person wants to buy a health insurance plan that will provide cover to himself, his wife and their two children. If he chooses a stand-alone plan in which each person is insured for Rs1 lakh, he would have to pay individual premiums, ranging from between Rs1,000 and Rs2,000, for each member of the family. In addition, the cover for each insured member would be only up to Rs1 lakh, even if the treatment costs go beyond that. But if he was to opt for a floater policy of Rs3 lakh for the entire family, anyone in the family can claim up to Rs3 lakh for treatment and related expenses.
However, if he has already availed of Rs2 lakh, he can only avail the remaining cover of Rs1 lakh for the rest of the year.
“Not all companies have the family floater option,” says Archana Bhingarde, a Mumbai-based financial planner. “But since this option gives you an advantage over a stand-alone policy in terms of larger cover, make sure that your insurance agent knows about it.”
2. HOW DO I KNOW YOU ARE OFFERING THE BEST PRICE?
Whether it’s groceries from your neighbourhood store or that designer dress from a boutique, the intrinsic worth of what is bought matters to the buyer. The same applies to an insurance policy.
“After the non-tariff regime was introduced, a great disparity has been noticed in premium rates across the industry,” says S.K. Sethi, chief executive officer, Ria Insurance Brokers Pvt. Ltd, a Delhi-based company. For example, New India Assurance Co. Ltd and Oriental Insurance Co. Ltd have a health-insurance scheme for a 25-year-old male at a premium of Rs1,310 annually. But rates differ widely among similar private players. Reliance General Insurance Co. Ltd, for instance, offers a similar scheme for Rs700 and ICICI Lombard General Insurance Co. Ltd offers one at Rs2,612. “The swing of almost Rs2,000 between schemes indicates that you need to scour the market thoroughly before signing up for any particular product,” notes Sethi.
However, if you are not particularly bothered about the cost, and service is top on your priority list, do check what extra facilities you can get with a higher premium. It could be that the company sends you a reminder about your premium rates, or settles your claims quickly. Value additions to a policy adds to its cost, but also to its worth.
3. WHAT EXACTLY IS COVERED IN MY INSURANCE POLICY?
Generally, your insurance policy covers most medical costs except those such as cancer, or those relating to a pre-existing illnesses, food and transportation expenses during this period. But recently, a few insurance companies, in keeping with rising hospital charges, have fixed an upper limit under different heads. National Insurance Co. Ltd has recently capped the claim amount at 50% of the insurance cover for each hospital visit through the year. Before settling on a policy, confirm how much of the total expenses the company will reimburse you.
4. HOW MANY HOSPITALS FEATURE ON THE LIST?
Be sure to get a list of authorized hospitals from your insurance agent, in which insurance companies or the third-party administrator (TPA), who act as intermediaries between you and your insurance company, has an arrangement for cashless treatment. Most of the time, people don’t know about the list of the hospitals they can go to in case of an emergency. “There is always a list of hospitals with insurance companies,” says Gaurav Mashruwala, a Mumbai based financial planner. “Find out the ones closest to you or the ones you can visit in an emergency. It’s also good to have a countrywide list at hand when you are travelling.”
5. WHAT IF I HAVE A HISTORY OF ILLNESS?
Ask your insurance agent what pre-existing clause the policy holds, as there are very few policies that give you cover irrespective of your medical history. New India Assurance is one of them. However, if you are insuring your whole family and if any family member has a history of any pre-existing disease, they can get a cover but with a pre-existing disease exclusion. If the policy is renewed for the next four years without any claim, then from the fifth year onwards, the disease exclusion clause will cease to be relevant. However, if none of your family members has any pre-existing medical history, you and your family can easily get an insurance policy. A family essentially includes you, your spouse and your children. There are only select policies that cover parents. Royal Sundaram Alliance Insurance Co. Ltd, Reliance General Insurance Co. Ltd and ICICI Lombard General Insurance Co. Ltd are a few of them.
6. WHAT KIND OF ILLNESSES ARE COVERED OR NOT COVERED?
Almost all diseases are covered under a health-insurance policy, but it is always safer to know beforehand about the few exceptions. Moreover, age-related diseases are covered only after two years of taking the policy.
“You need to read your insurance documents carefully as sometimes what is not covered under the policy is written in complicated medical terminology that you tend to ignore. But it is always wiser to ask your insurance agent to explain the complicated terminology. Then, you will know what exactly you don’t have cover for,” says Bhingarde.
Sometimes, insurance companies try to avoid paying you the money by claiming that you have deliberately witheld information about pre-existing medical conditions and ailments from them.
Be careful to present all the facts at the beginning because at this stage, they want your business.
Maternity expenses are reimbursed only under group insurance schemes.
7. HOW CAN I PREVENT MY CLAIM FROM BEING REJECTED?
If an agent is filling out your form, make sure all the information given and put down is correct. It is also good to ask your agent how many Mediclaim policies he handles every month and also about the number of claims he has handled so far.
Make sure that you have declared all pre-existing medical conditions that you have at the time of enrolment. Do not make claims for any hospitalization and diagnostic charges that do not confirm an illness or for an injury that does not require hospitalization. “You can approach the consumer court or civil court if the reimbursement is not as per policy. (The consumer court is a more viable option as you can approach it directly without a lawyer and there are no court fees to be paid). You can do this even if you have been made to sign a final settlement claim to receive the money offered, which may be less than your entitlement as per the contract. For this, you need your claim form, all bills and other documentation”, says Sujata Mehra of Arora, Mehra and Associates, a Delhi-based law firm. She also clarifies that insurance companies cannot refuse to renew an existing policy on the grounds of advanced age or illness during an existing policy period.
8. HOW EASY IS IT TO FILE A CLAIM AND GET REIMBURSED?
With the introduction of TPAs, settling a claim is no longer the long-drawn affair it used to be. All you need is to produce your health card at an authorized hospital to get cashless treatment and then the TPA takes over the claim-settlement process. But be sure to carry your health card in your wallet.
Even here, you need to know in advance what the formalities are for cashless settlement, as some insurance companies require to be notified 48 hours before hospitalization.
And in reality, there are several problems even if you go through the TPA, so it’s better to know all the procedural details in advance.
“Last year, I was admitted to hospital with multiple fractures. That particular hospital didn’t have the cashless facility and it took us almost three months to get the expenses reimbursed. To add to my problems, my TPA lost the medical bills and the whole process of reimbursement was a painful exercise,” says K.T. Srinivasan, a 75-year-old retiree.
If you don’t opt for cashless settlement, you need to settle bills at the hospital and get them reimbursed later.
The only benefit with a cash settlement is that you get to pay a low premium amount and the difference is not significant.
Generally, it takes around 15 days to settle the claim after filing all requisite documents. Ask your insurance agent what constitutes ‘requisite documents’ so that you don’t rush about getting them one at a time.
There is a general perception that public-sector companies take longer than their private counterparts to settle claims.
Rahul Aggarwal of Optima Insurance Solutions, a Delhi-based insurance broker, has a different view. “With the introduction of TPAs, claims are now settled much faster and both sectors could be said to be on par in terms of efficiency,” he says.
9. DOES THE POLICY HAVE A NO CLAIM BONUS?
If you do not make a claim during the policy period, a no claim bonus (NCB) is offered on renewals. Under this, each ‘no claim’ year would fetch you a discount on your premium or an increase in the insured amount at no extra cost. The treatment, however, in case of ‘no-claim’ bonus varies from company to company.
10. CAN MY COVER BE ENHANCED LATER ON?
At the time of buying a policy, any amount of cover looks good as long as it doesn’t mean much expense. However, if you are diagnosed with a medical condition such as diabetes during the policy period, premium rates could change and you need to ask your insurance agent in advance what it takes to enhance a cover. There are grounds for refusal that are part of the fine print, which could spell trouble.
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