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Things to consider while purchasing health insurance

Health insurance

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No one plans to fall sick or get hurt in a road accident. Well, life throws surprises and sometimes bad ones. Such unfortunate incidents entail a lot of physical and emotional trauma. The last thing you want to worry about at the time is the cost of treatment. Quality healthcare is quite expensive. Add to that high medical inflation which is often quoted to be in excess of 15%. Thus, a prolonged hospitalization can dent your finances severely and put your financial plans off track. Not only that, in extreme cases, you may even have to compromise on the quality of healthcare services. Would you ever want to put your family through this? This is where a health insurance plan figures in overall financial planning.

By purchasing a health insurance plan, you can not only ensure quality treatment for your family but also save you from financial distress. Health insurance plans do not cover all kinds of medical expenses. For instance, you monthly visits to the family doctors or regular dental checkups won’t be covered under most policies. But these plans do cover the most expensive ones such as hospitalization, surgery, transplant, intensive care unit charges etc. These are the medical expenses that are likely to burn the biggest hole in your pocket. Therefore, it makes sense to purchase health insurance plan to secure quality healthcare for your family.

Which health insurance plan to buy?

Now that you have decided to buy a health insurance plan, which one should you buy? There are more than 15 companies each offering multiple plans. Finalizing a health insurance plan is not as simple as finalizing a life insurance plan (term plan). This is because in life insurance, insured event is clearly defined i.e. the death of the insured person. Barring preference for a particular insurance provider, you can simply go with the one that charges the lowest premium. However, in health insurance, there are multiple insured events (hospitalization, day care procedures, organ donor, maternity etc) and these events vary across policies. For the same sum insured, Plan X may cover domiciliary treatment (treatment at home) while Plan Y may not. Even if both the plans cover such treatment, the extent of coverage under the head may be different. A certain procedure may be covered under plan X but not under plan Y. Since all such terms and conditions have to be put into the policy document, it is no surprise that a pure life insurance policy is merely a two page document (policy wordings) while a health insurance policy runs into tens of pages. So, in a health insurance plan, going for a low cost plan may not be that good an idea. You have to understand your requirements and purchase the plan that meets your requirements, not necessarily the cheapest one.

Comparable features in a health insurance plan

In this article, we will explain certain important features of a health insurance plan. You can use compare various health insurance plans based on these parameters and select the policy which suits your requirements and budget the best. The key lies in finding out what features/services you expect from your health insurance plan and finding out the plan which provides all those features at the lowest cost. For example, if you have a pre-existing illness, you may prefer a policy where your pre-existing conditions are covered at the earliest. However, if you are planning to start a family soon, you may prefer a plan with maternity benefits and in-built new born baby cover. Needless to say, the more you expect from your policy, the more you shall be willing to shell out in terms of annual premium.

Insurance Regulatory and Development Authority (IRDA), regulator for insurance sector in India, came out Health Insurance Regulations in 2013 and clearly laid the guidelines for insurance companies. Additionally IRDA, in order to reduce ambiguity and variable interpretation of policy terms, mandated all the insurers to stick to standardized definitions (stipulated by IRDA) for defining 46 core policy terms. The definition for these 46 policy terms shall be same across all policies. This should also reduce the effort in understanding and comparing different policies. For example, definition of domiciliary hospitalization has to be same across policies. Hence, while comparing the two plans, you merely need to see if domiciliary hospitalization is covered and if there are any sub-limits on coverage for such treatment. We have picked up definition for some of the terms/features directly from the standardized definitions as stipulated by IRDA. Following is the list of parameters that you must consider along with the premium amount to finalize the best health insurance plan for you and your family.

  1. Waiting period for pre-existing diseases: As per IRDA, a pre-existing disease refers to any condition, ailment or injury or related condition(s) for which you had signs or symptoms, and / or were diagnosed, and / or received medical advice / treatment within 48 months to prior to the first policy issued by the insurer. For example, you may be suffering from a liver or a heart ailment at the time of purchase of the policy. Insurance providers cover such ailments only post the lapse of the waiting period. The waiting period varies across policies. Lower the waiting period, the better the policy is for you. Hence, it would not be unreasonable for the insurance company to charge a higher premium if their waiting period is lower compared to rivals.
  1. Sub-limits: A policy may put sub-limit on various expenses covered under the policy. There may be a sub-limit on ambulance charges, accommodation charges, domiciliary treatment etc. It is better to go for a policy with lesser number of sub-limits. However, such policies may be slightly more expensive.
  1. Hospital accommodation: A policy may cover only shared accommodation or may have sub-limits on the total expense/daily expense incurred over hospital accommodation. If you prefer a single private room during hospitalization, you might just have to shell out a little bit more.
  1. Pre-hospitalization/post-hospitalization expenses: are those medical expenses incurred before/after the insured person is hospitalized. You can claim only those medical expenses which were incurred for the same condition for which the person was hospitalized. You can make claim for such medical expenses only if such hospitalization is covered under the policy. A policy may have restrictions on number of days or have a sub-limit. For example, the policy may cover such expenses incurred 30 days prior to hospitalization and 60 days post hospitalization to the extent of 20% of sum insured.
  1. Co-payment/annual deductible: Co-payment is a cost-sharing arrangement between the insurer and the policyholder that requires the insured to bear a certain percentage of the admissible costs. Similarly, annual deductible is a cost sharing arrangement that provides that the insurer will not be liable for a specified rupee amount of the covered expenses, which will apply before any benefits are payable by the insurer. Co-payment and deductible feature do not reduce the sum insured.

For example, if your policy has a 20% co-payment clause, in the medical bill of Rs 1,00,000 (covered under the policy), you would have to pay Rs 20,000 and the rest amount will be settled by the insurance company. Under the annual deductible clause, if any, the policy holder will have to bear the medical expense to the extent of the deductible amount and only the excess amount shall be borne by the insurance provider. For example, if you have opted for annual deductible of Rs 1,00,000, in admissible (under the policy) medical expense of Rs 3,00,000, you will have to pay Rs 1,00,000 and the remaining Rs 2,00,000 will have to be settled by the insurance company. Expectedly, for the policies which do not have co-payment or annual deductible clauses, the premium is likely to be higher. Some policies even give you an option to opt for these features. The premium goes down if you opt for co-payment or annual deductible.

  1. Renewal benefits: are the benefits that the insurance company provides you when you renew the policy. These may be in term of gift vouchers or additional sum insured (at no extra cost). For example, if you had sum insured of Rs 5,00,000 for the previous year and you did not make any claim under the policy, the insurance provider can increase your sum insured by, say 10%, to Rs 5,50,000 at no extra cost. Under most of the policies, you get these benefits only if you have not made any claim during the previous policy year. If given the option of choosing between additional sum insured or gift vouchers, it is advisable to go for additional sum insured option.
  1. Day care procedures covered: Insurance policies generally cover the expenses for hospitalization for continuous period of more than 24 hours. However, there are certain procedures such as haemodialysis, chemotherapy etc which do not require hospitalization of more than 24 hours. As per standardized definition by IRDA, day care treatment refers to medical treatment, and/or surgical procedure which is:
    1. undertaken under general or local anesthesia in a hospital/day care centre in less than 24 hours because of technological advancement, and
    2. which would have otherwise required a hospitalization of more than 24 hours.

The type of day care procedures covered varies across policies. You may want to check the entire list before making the decision. Greater the number of day care procedures covered, the better it is for you.

  1. Domiciliary treatment/hospitalization: Domiciliary hospitalization (medical treatment at home) means medical treatment for an illness/disease/injury which in the normal course would require care and treatment at a hospital but is actually taken while confined at home either because the patient is not in a condition to be moved to a hospital or due to non availability of room in a hospital. Not all insurance plans cover domiciliary treatment and there may be sub-limit on the expense covered under this head.
  1. Organ donor expense: A plan may cover expenses for harvesting of an organ (kidney, liver etc) from the donor in case an organ transplant is required. There may be a cap of the expense covered under this head. The health insurance plans that provide for such expense are likely to cost more.
  1. Maternity benefits/New born baby cover: Most insurance plans don’t provide coverage for new born baby (age 1 day to 90 days). However, a few plans may provide such coverage. An insurance plan may also cover the maternity/delivery related expenses and even cover the new born baby from day one (at no extra cost) till the expiry of the policy year. This coverage may be contingent upon meeting certain conditions. For example, there may be a waiting period or requirement of both husband and wife to be covered under the same policy. You may need to read policy document to understand the exact nature of maternity benefits provided and the eligibility criteria. Interestingly, insurance works on the concept of insurable interest i.e. occurrence of an insured event affects the insured/policy holder/premium payer adversely. For example, death in life insurance, accident in vehicle or health insurance. Maternity benefit is an exception. Hence, presence of maternity benefit feature is likely to make your policy expensive. However, if you are a young couple planning to start a family soon, you may go for a policy with maternity benefits and new born baby cover. Plans with maternity benefits/new born baby cover are likely to cost more.
  1. Premium Loading: Previously, the insurance provider could increase your renewal premium in case you made a claim under the policy the previous year. This is called claims based premium loading. Fortunately, under the Health Insurance Regulations 2013, claims based loading is no longer allowed. Therefore, an insurance provider cannot charge you a higher premium in the event you made a claim under the policy the previous year. However, an insurer can charge you a higher premium while issuing the policy for the first time based on your medical history. If the insurer assesses (at the time of inception of the policy and based on your medical history) that you are more likely to make claim than an average person, it may charge you a higher premium.
  1. Network reach: It is advisable to go with policies which offer cashless hospitalization at major hospitals in your city. So, do check the list of network hospitals at the websites of insurance providers. In case the hospital you get treatment at is not part of the network, you will have pay at the hospital first and then file for claim with the insurer.
  2. Hospital/Daily cash: Hospitalization can lead to loss of income, especially to the self employed or small business owners. Certain policies may require the insurer to pay a fixed amount (per day of hospitalization subject to a maximum) to the insured for each day of hospitalization. Generally, the number of days for such payouts is capped. This feature may be extremely relevant for people who are self-employed or own small businesses.
  1. Coverage of Alternative treatments: Alternative treatments are forms of treatments other than Allopathy and include ayurveda, unani, sidha and homeopathy. Most policies don’t cover alternative treatments. There are a few which cover subject to certain sub-limits and conditions. If you have preference for such treatments, you may look for a plan which covers such treatment.
  1. Health check up: This is more of a marketing gimmick. A few plans may offer you free health checkups at renewal based on your age and gender. However, the scope of such tests is quite limited and won’t give much idea about your overall health. Though a free (limited) health check up is better than no check up, we do not recommend basing your decision on this parameter.
  1. Claim settlement record: Though insurance companies have to pay up for everything that is covered under the policy, disagreement during claim settlement may arise due to variable interpretation of terms (about the nature and extent of coverage) or due to false representation (hiding medical details) from the customer at time of purchase of policy. This is why it may be prudent to read fine details atleast once (preferably before you buy the policy). We recommend full medical disclosure at the time of purchasing the policy. If a health insurance company rejects invalid claims (not covered under the policy), you can’t count it against them. However, high/low claim settlement ratio does tell you something about the transparency followed by the insurance company (in terms of explaining product inclusions and exclusions to the potential customers). Hence, it is better to go with a company with a good claim settlement record.

PersonalFinancePlan Take:

We have covered some of the most important features of any health insurance. You can read about these features in the policy or ask your insurance agent to point to clauses in the policy document which refers to such features. You should not base your purchase decision solely on the basis of premium. Consider your (or your family’s) medical history and treatment preferences. Then, go with the plan that meets those requirements.

Premium is important too. However, there are ways to lower the premium amount. For instance, you can opt for co-payment or annual deductible feature to reduce your premium outgo. If you opt for plan features, which increase the risk to the insurance company (of making the payment for your treatment), you will be charged a higher premium.

In one of our subsequent posts, we will randomly pick up five health insurance plans and compare those plans on these features. We will also establish how presence (or absence) of certain features can increase (or decrease) the health insurance premium. We will also discuss tax benefits, employer provided health insurance and how to start researching health insurance plans.

Deepesh is a fee-only financial planner and Founder, PersonalFinancePlan.in

Photo Credit: Darko Stojanovic. Original image and information about usage rights can be downloaded from Pixabay.com

22 thoughts on “Things to consider while purchasing health insurance”

  1. abhayabrahma@gmail.com

    Very useful post. just a query related to the last paragraph- Where can we get claim settlement data for general insurance companies.
    -Abhaya

    1. Deepesh Raghaw

      If you want to find out incurred claims ratio (claims paid/premium received), you can find that in IRDA handbook for insurance statisics.
      For specific information on claim settlement and repudiation, you can visit public disclosures on insurer company websites and have a look at forms NL-24, NL-25 and NL-26

  2. Hi Mr Raghaw! Thanks for the post.
    I had a query regarding my parents. Father’s around 55 and Mum’s approaching 50, so will you advise taking seperate policies for them or go for a family floater? I’d like to keep the premium to a minimum for a cover of 5-6LAC.
    Thanks.

    1. Hi Abha,
      Family floater policy will certainly be cheaper than two individual policies. With family floater policies, premium generally depends on the age of the eldest member. Family floater is better suited to younger families where chances of more than one member getting hospitalized in the same year are relatively low. As the members age, the probability of hospitalization increases. At the time of initial purchase, if one of the members has an illness, the premium for the entire family will go up. If you had gone for an individual policy, loading will apply only for the concerned individual (and not the entire family). Please note I am not talking about claims based loading, which is not allowed. It is underwriting risk that the health insurance company will evaluate at the inception of policy or enhancement of sum insured.
      So, you need to look at the medical history of your parents. If none of them has had any major illness till now, you will save some money by opting for a family floater. However, purchase a large enough cover that does not need to be enhanced too soon. Perhaps, instead of Rs 5 lac cover, you can go for Rs 10 lac cover.
      Keep a large enough cover in the family floater so it can suffice for both. Difficult to put a number to “large enough”. Depends a lot on where you reside and of course your family medical history. Rs 10 lacs looks a decent number.
      Let me know if you need any clarification.

  3. Hi Deepesh,
    I understand claim based loading is not there anymore, but what about age based loading. For instance my dad is aged 59 and the the slab rates are for category 55-59,60,61-65 something like this. SO i will be experiencing a premium increase for the 2nd and 3rd year right..?

    1. Yes, Krish. Insurance companies can increase the premium based on age. This is allowed.
      A few companies have age brackets and increase premium as you move across age brackets.
      A few insurers increase every year.
      IRDA regulations does not prevent them from increasing premium every year.

  4. Navdeep Aggarwal

    Hi Deepesh,

    My father is still in job and will be retiring in next 2 years. My mother is a housewife. Though they are already cover in my employer insurance policy,but I am planning to buy one dedicated policy for them.

    My dad is also insured under his own employer policy. So shall I go for a family floater policy for them or individual policies ? Is there some way I can carry forward their existing policies to a brand new policy with some other insurer.
    Do we have this kind of setup ?

    1. Hi Navdeep,
      If both your parents are about the same age and are healthy, then you can go for a family floater policy. Just make sure the cover is enough for both of them.
      On the other hand, if one of them has an ailment that can increase premium, it is better to go for individual policies.
      Yes, you can port their existing employer group health plan to the same insurer.
      Refer to the post on my website on Health Insurance Portability. You will get the idea.

  5. Hi Deepesh, I need your help. I am 67 years now & mediclaim policy of oriental insurance since 1992.but recently for last 3-4 years my agent started charging huge premium like 21000/- for two lac policy. I read in PNB that 5 lac mediclaim policy is given up to 80 years of age by oriental insurance in just 7000/- whats difference in two. kindly elaborate.Regards,

    1. Deepesh Raghaw

      Dear Mr. Singla,
      We have already discussed this.
      Plan from PNB is a group health plan. The premium for such plans is typically low.
      Do note even though PNB plan is also from Oriental insurance, it does not mean that the policy terms will be exactly same. The coverage may be very different.
      You can move to PNB health insurance.
      You will also not get any credit for waiting period served under Oriental insurance plan.
      So, you need to weigh pros and cons.

  6. Regarding Premium loading, assume if i don’t have any medical history at policy issuance time but later(assume after 5 years) acquired some condition like Diabetes, then whether premium loading is applicable or not?

    And i see with icici lombard complete health insurance there is no underwriting loading described in prospectus – am i right?

    does companies load only on premium payable or on both premium & co-pay.

    Thanks in Advance

    1. Dear Vivek,
      Claims based loading is not permitted by IRDA. Hence, insurance company cannot load premium due to illnesses diagnosed/claims made after purchase of policy.
      However, if you switch to another insurer, insurer can apply the loading.
      If you enhance Sum insured, the insurer can apply loading on the enhanced portion.
      There is no concept of loading for co-pay.

      1. Thanks for your reply Mr.Deepesh.

        My actual question is,

        i) For pre-existing medical condition does co-pay also applied by insurer (as I noted in an insurer prospectus) along with loading on premium or else is it like either of them will be applied.
        ii) Your thoughts on Product “ICICI CHI” not mentioning any underwriting loading on policy prospectus.

        1. Dear Vivek,
          1. Insurer can do both. Load the premium and apply co-payment too. It is within discretion of the insurer. Depends on underwriting policy of the insurer.
          2. I am not sure of your question. Many things are not mentioned on product prospectus.

          1. As per IRDS they are not intended to imply anything upon us which is not mentioned in policy terms & conditions.

            Please correct me if I am wrong.

          2. Dear Vivek,
            Insurance company offers the policy once it decides to underwrite the risk. Hence, loading of premium is done before the plan is offered to you.
            Once offered (and accepted by you), the coverage is governed by policy terms and conditions.
            Hope this clarifies your doubt.

  7. Thank you Deepesh for the explanation of preexisting health conditions. I found this to be ambiguous when dealing with insurance companies. . I went with a guaranteed plan because I never knew what preexisting health conditions entailed. Turns out I do have a preexisting condition because I was on medication for 20 yrs but advised I no longer needed to take it 16 months ago. I thought I would apply for a non-guaranteed plan when my 24 months is up. Not sure if this is possible as I was informed my information can be shared with other insurance companies and to access health records. I wish I took more time to choose but after six months I just felt it overwhelmed and made a choice and still not confident in my choice. How best to get good advice from other than the insurance companies before making a purchase.
    Thank you,
    Marjie

  8. Thank you Deepesh for the explanation of preexisting health conditions. I found this to be ambiguous when dealing with insurance companies. . I went with a guaranteed plan because I never knew what preexisting health conditions entailed. Turns out I do have a preexisting condition because I was on medication for 20 yrs but advised I no longer needed to take it 16 months ago. I thought I would apply for a non-guaranteed plan when my 24 months is up. Not sure if this is possible as I was informed my information can be shared with other insurance companies and to access health records. I wish I took more time to choose but after six months of searching for the right plan I just felt it overwhelmed and made a choice and still not confident in my choice. How best to get good advice from other than the insurance companies before making a purchase?
    Thank you,
    Marjie

  9. Can I port my SBI GENERAL Group Insurance plan to Religare Family floater plan
    As I approached to Religare agent, he told me unable to port
    Plz give ur valuable suggestions

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