Putting in action the report of the working group set up to standardise and simplify exclusions in health insurance contracts, the insurance regulator has come out with draft exposure that aims to enhance the scope of health cover by rationalising and standardising health insurance exclusions. The entire draft can be read here. The Insurance Regulatory and Development Authority has sought public comments till the 31 May. We take you through some of the important features of the draft. But first, understand exclusions in a health insurance policy.
Exclusion in health policy
In order to protect the insurer from dangers of adverse selection, moral hazard or fraud health insurance contracts that pay per hospitalization broadly come with five types of exclusions, three of which are time bound exclusions. The first is the initial 30-day period during which time a policy doesn’t pay claims on account of an illness. The second is disease-specific exclusion wherein certain ailments are excluded for a defined period. The third is the exclusion on pre-existing ailment in which the ailment is excluded in the initial years—up to four years. The fourth constitutes permanent exclusion where certain medical procedures are permanently excluded from the scope of cover such as cosmetic surgeries—unless it is required due to an accident and requires hospitalization; medical expenses on account of alcohol or drug use or birth control; sterility and infertility. The fifth is a list of non-payable items that constitute consumables and other non-medical items.
More cover, less exclusion
The draft has clearly defined what can or can’t be excluded. For instance, the draft clearly states that any ailment that’s contracted after the policy is bought can’t be denied by the insurer. According to an insurer we spoke to on conditions of anonymity, since he was part of the working group, explained that currently other than standard exclusions, some ailments like Parkinson’s disease and Alzeimer’s disease also form a part of exclusions. The draft has trimmed and standardised exclusions which ensures ailment contracted after the policy is bought can’t be excluded.
The draft also states that health insurance policies can’t exclude treatment on account of mental illness, internal congenital diseases or genetic disorders.
“Health insurance contracts sometimes excluded these ailments even if these ailments were contracted or found out after the policy was taken. Of course these ailments are covered only if any of these results in hospitalization. In case they are identified before buying the insurance, the insurer can take a call whether to insure the policyholder or not," said Kapil Mehta, co-founder, securenow.in.
Further, in order to allow insurers to cover customers with pre-existing ailments they may not have otherwise insured, the draft has identified 17 pre-existing conditions that can be excluded and customers insured for other ailments.
The draft has also effectively tackled the definition of a pre-existing ailment that’s loosely defined. Currently, even the presence of signs or symptoms can make an ailment pre-existing in nature and this has caused a lot of confusion. The draft now defines a pre-existing condition as a condition that’s diagnosed by a physician or for which medical advice or treatment was received.
What it means for you
The draft has enhanced the scope of health insurance through six key changes: one, ailments contracted after buying health insurance can’t be denied; two, the list of exclusions are standardised and trimmed; three, draft allows for permanent exclusions of pre-existing ailment; four, included lines of treatment due to medical advancement like chemotherapy and stem cell therapy; five, sharpened the definition to remove ambiguity; and six, a moratorium of eight years after which policy is not contestable except for proven fraud and permanent exclusion.
However this may not come without a hike in prices. “The draft has removed ambiguity and for the customer the ‘ifs’ and ‘buts’ have gone. But this is bound to have some impact on premium as the scope of cover has gone up and we will have to see how it will impact pricing,"said Prasun Sikdar, managing director and chief executive officer, Cigna TTK Health Insurance Co. Ltd.
The draft has ushered in the much needed second wave of health insurance reform to make the policy more comprehensive. As per the draft, all products will have to conform to the guidelines by April 2020.