Health Insurance Plans you should avoid

Unlike life insurance plans, health insurance plans come in multiple variants. Two plans can differ in coverage on many aspects. One may have room rent sublimit while other may have a co-payment clause. One has a waiting period for pre-existing illnesses of only 2 years while the other offers no-claim bonus of 50%.  And there is a difference in many more coverage aspects.

Therefore, finalizing the best health insurance plan for you may be a really difficult exercise if you are really keen about purchasing “the best” health insurance plan. To find out the best plan, you look for plan with coverage features you need and with the lowest cost. Fair enough.

In this post, let’s take a slightly different path. In this post, I will focus on features that you should try to avoid in your health insurance plan. The cost (excess premium) that you pay for such coverage outweighs the benefit you get.

This will most certainly prune your shortlist. Let’s look at the coverage that you should avoid.

1. Avoid Health Insurance plans with Maternity Benefit

A plan with maternity benefit covers delivery-related expenses.

Concept of covering maternity expenses goes against the concept of insurance. Typically, under any insurance plan, the insured event affects your adversely. That’s not the case with birth of a child. It does not affect you adversely.

Insurance company is aware while issuing the plan that such an expense may come their way and the insured may even plan for it. Therefore, to cover for increased risk of payout, insurance companies hike the premium for such plans.

You can read more about health insurance plans with maternity benefit in this post.

What are the issues?

• Birth of a child is not a recurring event. In any case, insurance plans typically do not cover expenses for more than two deliveries. No point paying excess premium for so long.
• Benefit is typically capped. For instance, your Sum Insured may be Rs 10 lacs but the maternity benefit may be capped at Rs 50,000 only.
• There is a waiting period of 2-4 years. You can see there is benefit for the excess premium in the waiting period.
• A few plans might require both husband and wife to be covered under the same plan.
• The excess premium you pay is simply not worth the benefit. You wouldn’t want to pay Rs 15,000 excess premium for a benefit that is capped at Rs 50,000 after a waiting period of 2-4 years.

Don’t act smart. You may think that you will get the expenses covered for two deliveries and subsequently switch to a cheaper non-maternity plan. Porting your policy to a different plan with the same insurer or a plan with another insurer may not be as easy. Insurance companies are smart too. Your existing insurance company won’t let you out of an expensive plan easily. Read more about Health Insurance Portability here. Therefore if you can’t port, you are stuck with a very expensive policy for life.

Birth of a child brings joy to the family. Pay for it happily.

If you have a group health cover from your employer, a part of delivery-related expenses will automatically be taken care of. Such plans typically cover maternity related expenses. Go find out about maternity plans from your employer.

One good point about maternity plans is that the newborn is covered from Day 1. In other plans, you will have minimum entry age. For many plans I have checked, the entry is at 91 days. However, if your employer covers you for maternity, it will most likely provide newborn baby cover too.

2. Avoid Health Insurance Plans that provide OPD coverage

There are a few health insurance plans that cover regular visits to doctors too. You (or your family) may not have to b hospitalized for many years. However, it is quite unlikely that you have not visited a doctor for many years. Something or the other keeps coming up on a regular basis.

By the way, OPD stands for the Outpatient Department. Do note OPD is different from a day care procedure. Many day care procedures (such as dialysis etc) are covered under regular health insurance plans. OPD coverage covers you for visit to the doctor and perhaps diagnostic tests (depending upon the plan).

Read about my opinion on Health Insurance plans with OPD coverage.

What are the issues?

1. Number of consultations and the coverage may be capped. For instance, insurance plan may cover up to 6 consultations at Rs 1,000 per consultation. Hence, the benefit is capped at Rs 6,000 per annum. There may be cap for per consultation cost at non-network hospitals.
2. This benefit can’t be cashless.
3. You have to apply for reimbursement of such expenses. You will have to put in some effort to make a claim.
4. It is foolish to pay excess premium and then be too lazy to fill reimbursement forms.
5. Visit to your family doctor may not be covered.

PersonalFinancePlan Take

In this post, I have covered only two coverage features that you should try to avoid. There are a few others such as hospital cash that can be avoided.

I am sure insurance companies will keep adding new areas of coverage to keep ahead of the competition and differentiate their products. However, you must look into the cost of such coverage before you purchase. It may not be possible for you to figure out the exact cost (or excess premium) for such coverage because you wouldn’t easily find the two plans that differ only on this particular coverage. However, you will get some idea.

Insurance is about covering risk. Birth of a child is not a risk. Why should you cover it?

Insurance is also about covering reasonable risk. You cannot cover all the risk. The cost will be too high.

Transfer only that risk to the insurance company that can jeopardize your financial life.

Paying Rs 4,000 for a benefit that is capped at Rs 5,000 makes little sense. Pay for such events from your pocket.

“Sir, we cover your out-patient consultations too.” Fair enough but at what cost.

There is no such thing as a free lunch. Make sure that you are not paying too heavy a price. Cost-benefit analysis is extremely important when it comes to insurance.

Personal Finance is personal. It is quite possible that in specific scenarios you might find utility for such plans.  In such a case, you can go for such plans. You will have to decide for yourself.

Disclosure

I am currently covered under Max Bupa Heart Beat Gold plan, which provides maternity coverage. I tried to port my insurance plan to a cheaper non-maternity plan. Max Bupa declined my portability application giving very flimsy (according to me) reasons. I have taken up the matter with IRDA. However, knowing IRDA, I don’t expect much out of it. You can read more about my case in this post.

One of the options available to me is to port to another health insurance company. I will consider this option when my policy comes up for renewal.

I purchased this plan when I did not know much about the cost implications but now I am stuck with a very expensive plan. Max Bupa is not providing me a way out of this expensive plan. You must avoid the mistake I made.

Please understand this is not a commentary on Max Bupa as an insurance company. To be honest, my claims experience with Max Bupa has been quite good.

Image Credit: Pictures of Money, 2014. The original image and information about usage rights can be downloaded from Flickr.