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Buy healthier insurance plans now

If you already have a health plan, it will be made compliant to new regulations when you renew

Shyamal Banerjee/MintPremium
Shyamal Banerjee/Mint

Starting 1 October, you can place more faith in your health insurance policy. This year, the Insurance Regulatory and Development Authority (Irda) rolled out two key pieces of regulation, which come into effect today, that not only ensure better health plans, but also better understanding of the policy and processes.

The health insurance regulations that came out on 16 February mandated all health plans to be renewable for lifetime, whereas the 20 February health insurance guidelines on standardization aimed to remove confusion in understanding some benefits and encouraged better coordination among insurers and hospitals. Mint Money brings to you five key changes that will make health plans a lot friendlier.

Minimum entry age

Remember a time when it would be very difficult to buy a health insurance policy if you had crossed the 55-60 years age mark, especially for first-time buyers? For insurers, it meant more risk—the probability of senior citizens needing medical care is more—so they simply refused to give a cover.

Not any more. All health insurance policies, unless customized for a certain age group, will now have to offer health insurance to first-time buyers who are up to 65 years.

“In the absence of any minimum entry age even if an insurer offered higher entry age on paper, senior citizens would be discouraged to buy health insurance. But with the guidelines, insurers will have to offer up to the minimum entry age because customers now will have a better mechanism to air their grievance," said Rahul Aggarwal, chief executive officer, Optima Insurance Brokers Pvt. Ltd.

In other words, if you are healthy then you should have no problems buying a health insurance policy afresh. Yes you may need to undergo some medical check-ups but there is little chance of refusal. “Insurers will refuse only in case of an adverse health condition. For instance, a person suffering from cancer may not be given a cover," said Sreeraj Deshpande, head (health), Future Generali India Insurance Co. Ltd.

Renewability for life

This is a big departure from the way health insurance plans were designed earlier. You would pay health insurance premiums every year only to find out that your policy would not come in handy in your old age. That’s because health plans were designed to offer benefits only up to an age of 70-80 years. If you survived beyond that, you were pretty much on your own.

Now, as a rule, all health policies will have to offer insurance through your lifetime. However, insurers don’t seem to be very comfortable with the idea of lifetime renewability in case of defined benefit policies. Defined benefit health plans such as critical illness plans provide insurance against a specified ailment and pay the entire lump sum or sum assured if the policyholder contracts the insured illness. Insurers feel that as one becomes older, the probability of such insured risks would increase and since the insurer will need to pay a lump sum, it would put a lot of pressure on pricing these policies. Insurers are hoping for a review on this front.

No premium surprises

Surprises regarding health insurance premiums will now be minimized. According to the regulations, now insurers can’t increase premiums if you have made frequent claims on your policy. Any increase in the premiums will have to be done on the basis of the insurer’s experience with all its health policies.

This will also mean that insurers will have to price policies sensibly since they will not be able to change premiums for the first three years. From the fourth year, the premiums can be changed every year but with proper justification. This should take care of some of the predatory pricing practices that the industry witnessed a couple of years back when policies were sold at rock bottom prices only to increase manifold in a few years. The regulations now emphasize on sustainable pricing.

Standardization of terms

From today, insurers will have to adopt standardized terminology to explain health insurance coverage. This makes your job of understanding a health insurance policy a lot easier.

There are about 46 health insurance terms in your policy document that have been standardized. “Earlier insurers would use the same term to mean different things. For instance, maternity benefit for one insurer could mean paying only for a caesarean section, while for the other it could mean covering any complication. Now the definition has been standardized," said Manasije Mishra, CEO, Max Bupa Health Insurance Co. Ltd.

Now a maternity benefit would mean medical treatment expenses during hospitalization traceable to childbirth including complicated deliveries and caesarean sections and expenses towards lawful medical termination of pregnancy during the policy period. Obviously the insurer may choose to offer maternity benefits and also charge you extra.

Even the list of exclusions—be it certain treatments such as weight control programmes or treatment of sexually transmitted disease or items such as laundry charges, gown charges and barber charges—have been clearly spelt out.

Standardized forms

But what will also contribute in removing confusion and settling claims quickly, to a great extent, is standardization of claims forms.

To smoothen the process further, these forms will be in an optical character recognition format that will enable data entry from handwritten paper to computer systems.

Additionally, Irda has prescribed set formats in which hospitals will need to furnish information such as the discharge summary report.

“Hospitals may not come under the purview of the regulator but it’s in their interest to welcome standardization. Dealing with so many different forms and third-party administrators only compounds administrative problems, so even the hospitals will look forward to minimizing the confusion," said Bhargav Dasgupta, managing director and CEO, ICICI Lombard General Insurance Co. Ltd.

In fact, insurers will also have to play a greater role in claims handling. “Earlier, third-party administrators (TPAs) were given the authority to deny or accept a claim and the insurer would give them a certain budget to settle claims.

According to Irda, such decision-making powers can’t be delegated and the insurer will need to be involved directly with the hospitals in settling claims. Therefore, more in-sourcing can be expected," said Mishra.

This would mean that hospitals will work directly with the insurers in handling claims and TPAs will have a larger role in processing activities such as collecting bills. Even existing products will have to conform to the regulations. So if you already have a health insurance plan that does not comply with the regulations, you will get a policy that’s compliant upon renewal.

But should you expect a huge premium hike to accommodate the new regulations? “Not really. Newer firms have a younger pool so new regulations will not affect pricing drastically. Also, many products that have been launched recently are more or less compliant with the regulations. Insurers with the older pool may need to review their premiums, but even there premium hikes will not be drastic or immediate," said Deshpande.

So ensure your existing policy undergoes a change according to the new norms.

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Published: 30 Sep 2013, 08:37 PM IST
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