As the name reflects, health insurance is the method to provide a safeguard against the expenses of medical treatments.
Changing lifestyles, fast foods, smoking, and drinking habits played an important role in deteriorating the health of Indian people.
COVID-19 also taught a lesson about the importance of health insurance.
Hefty hospitalisation expenses and costly medicines are not affordable for everyone.
New and advanced technology in medical science is able to detect and cure various critical diseases, provided that timely treatment could be given.
In a country like India, there are lakhs of people who are not able to get timely treatment due to the shortage of money which lead to the loss of precious life.
The health insurance system has played an important role in creating the affordability of medical expenses.
But,
How to choose the correct health insurance policy?
It is an important question.
Let me try to make you understand about the various types of health insurance policies and important points to be taken into consideration while purchasing a health insurance policy.
What is a “Health Insurance Policy”?
A health insurance policy is an agreement between the policyholder (Here in after called “Insured”) and the insurance company (Here in after called “Insurer”) to cover the medical and hospitalisation risk of the insured.
It provides safety to the insured against the hefty medical and hospitalisation expenses.
The insured is required to pay a small amount per year known as “Premium” up to the period of policy (Policy term) and in return, the insured gets the benefit of cashless medical treatment or medical reimbursement up to the sum assured on health insurance policy.
Cashless medical treatment
It is the system in which the insured is not required to pay any money to the hospital.
The insurance company directly makes payment to the hospital in case of hospitalisation of the insured.
Medical reimbursement
It is the system in which the insured is required to pay for the medical expenses at the hospital which in turn are reimbursed by the insurer.
Important points to be considered while purchasing the health insurance policy:
When you purchase a health insurance policy you must check the following points. These points are necessarily to be considered while selecting a health insurance policy.
Policy inclusions
Policy inclusions are those medical aspects that are included in the policy.
Check for the following while deciding upon the policy inclusions.
Dare care treatments
Daycare treatments are those which are carried out under local anesthesia and for which just 24 hours of hospitalisation is required.
Daycare could be for heart, ENT, radiotherapy, chemotherapy, etc.
Domiciliary Procedures
As the name suggests, these are the procedures in which hospital-like treatment is given to the policyholder at his home.
This means you could get Hospital like care at your own home, you are not required to be admitted to the hospital.
Restoration benefits
As I have previously said that your health insurance company. i.e. insurer provides the reimbursement of hospitalisation expenses or cashless treatment facility to the limit of sum assured.
This means, if the sum assured in your health insurance policy is five lakh rupees then your insurer is liable to pay or reimburse to the limit of Rs.5 lakhs.
But if your policy provides restoration benefit then if your limit of Rs. 5 lakhs gets exhausted in the treatment of one disease then your health insurance company would restore the entire amount of Rs.5 lakhs again.
For example, if Mr. “A” is diagnosed with some heart disease and the entire limit is exhausted in the treatment of his heart disease, subsequently he is diagnosed with cancer, now the insurance company would again restore the entire amount of Rs.5 lakhs.
Restoration benefit could be provided on complete exhaustion of the sum assured or on partial exhaustion of the sum assured.
Meaning thereby, in our above example, under complete exhaustion the sum assured would be restored only if the entire limit of Rs.5 lakhs is exhausted, and in partial exhaustion, the sum assured would be restored even if only Rs.2 lakhs were exhausted out of Rs.5 lakh.
Policy exclusions
Those medical aspects which are not included in the health insurance policy are called policy exclusions.
Those procedures for which neither the reimbursement of expenses would be given by the insurance company nor the facility of cashless treatment would be given by the insurance company.
Some of the policy exclusions are cosmetic surgeries, dental treatments, and treatment for addiction problems like alcohol, cigarettes, etc.
Waiting or cooling period
When you purchase a health insurance policy it does not mean that the insurance company would become liable to pay the sum assured towards your treatment from the very first day of purchasing the policy.
But there would be a cooling or waiting period of around 30 days.
This means no claims would be paid by the insurance company for the treatment undergone in the first 30 days of purchase of a health insurance policy. This period is known as the cooling or waiting period.
In the case of any pre-existing disease, the cooling period may range from 30 days to 4 years.
Pre-and post hospitalisation expenses
Pre-hospitalisation expenses
Those expenses which are incurred by the policyholder for the diagnosis of the disease which requires hospitalisation of the patient for the treatment are called pre-hospitalisation expenses.
These expenses may include various testing charges for the tests done to diagnose the disease.
Post hospitalisation expenses
After the patient gets discharged from the hospital it does not mean that he is perfectly fine. He is required to undergo various tests even after discharge from the hospital.
These tests are usually done to check the progress of recovery of the patient. Post hospitalisation expenses not only include testing charges but also the consultation charges of the doctor, medicines, etc.
Usually the pre-hospitalisation charges for 30 days prior to admission to the hospital and post-hospital charges for 60 days after discharge from the hospital or covered by the insurer.
Claim settlement ratio
The claim settlement ratio is a very important aspect that is to be checked before selecting the insurer, but usually, during the process of purchasing of health insurance policy, the claim settlement ratio is ignored by the policyholder.
The ratio of the number of claims settled by the insurer out of the total number of claims submitted to the insurer is called the claim settlement ratio.
A higher claim settlement ratio means higher chances of settlement of the claim of the policyholder.
Incurred claim ratio
It is the ratio of the total amount of claims paid by the insurer and the total amount of premiums collected by the insurer.
Let’s say, the amount of premium collected is Rs. 100 and the amount paid towards the settlement of claims is Rs. 60 which means that incurred claims ratio is 60%.
Too high or too low incurred claims ratio is not considered good.
If the incurred claims ratio is too high, it means the insurance company is not earning because a very high portion of the collected premium goes into claims settlement and due to this the insurer may include any such clause which may reduce the settlement of claims by policyholders.
If incurred claims ratio is too low, it means that the health insurance policy is not favorable for policyholders because the claims are not getting approved by the insurer.
Co-payment clause
The co-payment clause provides information about the percentage of medical expenses that are to be borne by the policyholder.
This means, a hundred percent of the expenses are not payable by the insurer but a certain percentage of medical expenses are also required to be paid by the policyholder.
So, always check for the co-payment clause and the percentage of co-payment required to be done by the policyholder.
Network hospitals
During the purchase of a health insurance policy always check the network of hospitals in the panel of the insurer which are providing cashless facilities to the policyholders.
Also, ensure that your nearby hospitals should be on the panel of the hospital network of the insurer, this is necessary because, in the case of any emergency, the person approaches the hospital nearby his place of residence or office.
Past record of Insurer
Understand this by the fact that while admitting your child to a school you generally look for the past year’s performance of the school in board exams.
The same is the method to select the insurer.
You need to check the reputation of the insurer, it’s capacity to pay the claims, the number of years of experience the insurer has in the health insurance business, etc.
Health insurance portability
Have you heard about mobile number portability?
The answer may be an absolute “Yes”
Mobile number portability is the system provided by telecom operators in which the user can change the telecom service provider without changing the mobile number.
The same is the case with health insurance.
Under the health insurance portability mechanism, you could easily change your insurer without surrendering your already completed cooling/ waiting period requirements under the original policy.
This means, while purchasing the original policy if you have already completed the waiting period then you are not required to complete the waiting period again while porting your health insurance policy.
This health insurance portability is subject to certain conditions.
No Claim Bonus
No claim bonus is the benefit provided to the policyholder if he doesn’t make any claim in a year.
This means the benefit provided to the insured by the insurer in case of a claim-free year.
The No claim bonus can be provided either through the reduction of premium or through the addition of a cumulative bonus of up to 100 percent of the sum assured.
For example, If your premium for the health insurance policy is Rs 25,000 and the sum assured is Rs 10 lakhs then under the no-claim bonus clause you may either get a reduction in the amount of premium such that your premium might become less than Rs 25,000 or you might get Rs 10 lakh addition in sum assured as the cumulative bonus.
Types of Health Insurance Policies
Individual Health Insurance Policies
It is a policy that is used by single individuals only.
The amount of reimbursement or the cashless treatment is limited to the sum assured in the policy.
The policyholder is eligible for deduction of premium paid under section 80D of the income tax act 1961.
These policies are best for individuals which are under high-risk health conditions.
The waiting period for these types of policies is generally between 2 years to 4 years.
It is advised to always check for the exceptions and inclusions that we discussed above.
Family floater Insurance Policies
Family floater policies cover the entire family of the individual.
No claim bonus clause should be checked.
Family floater policies are also eligible for deduction/tax benefit of the amount of premium paid under section 80 D of the income tax act 1961.
Always check for restoration benefits under these types of policies.
Always check for policy inclusions and exclusions also.
Critical illness Insurance Policies
Critical illnesses include organ transplants, kidney failure, dialysis heart attack, and similar problems.
Critical illness policies cover the expenses of the above-mentioned types of critical illnesses.
Critical illness policies are different from normal health insurance policies.
The deduction is available under section 80 D of the income tax act 1961.
Check policy documents carefully for exceptions and waiting periods.
Maternity Insurance Policies
Maternity insurance policies cover the expenses incurred by the person being the policyholder during childbirth.
There is an upper limit for such policies. i.e. insurance companies always apply a ceiling limit up to which the expenses would be paid by the insurance company.
Maternity insurance can be purchased as an add-on to your existing insurance policy or a separate maternity insurance policy can be purchased to cover the childbirth expenses.
The condition with these policies is that these policies could be purchased before conceiving the baby. i.e. when you are pregnant then maternity insurance policies cannot be purchased.
It is advised to always check for the waiting period under these kinds of policies.
Senior citizen Health Insurance Policies.
At the age of 60 years, our body becomes more prone to diseases.
During the evening period of life, our respected senior citizens become more prone to diseases and health complications occur with time.
Insurance companies try to take care of the health of senior citizens through senior citizens’ health insurance policies.
While purchasing a senior citizen health insurance policy the waiting period, exclusion, and inclusion of pre-existing diseases have to be checked.
The premium paid is eligible for deduction under section 80 D of the income tax act 1961.
So before purchasing the health insurance policy just go through the important aspects discussed here or if you are not satisfied with your present insurer you can choose to go for porting your present policy on the basis of the information provided here.