Know Your Health Insurance.

Know the Basics of Health Insurance

What is health insurance?

Health insurance is a type of policy that helps cover the cost of your hospital bills if you become sick and need hospitalisation. Essentially, it is a contract between you and your insurer in which you pay a small amount each year as a premium. In return, your insurer agrees to cover your medical bills should you require hospitalisation.

Medical treatments are becoming more expensive every year, and one hospitalisation can burn a big hole in your pocket. Knowing that you are financially protected in the event of an unexpected medical emergency provides peace of mind.

Now, an important question to consider is: What does health insurance cover?

What does health insurance cover?

A regular health insurance policy typically covers the medical and surgical costs related to inpatient hospitalisation. This includes room rent, ICU charges, doctor’s fees, surgery costs, diagnostic tests, prescription drugs etc.

A regular health insurance policy also covers costs of day care treatments and pre and post-hospitalisation expenses such as costs of follow-up consultations, diagnostic tests, prescription drugs etc. In some cases, it can also cover ambulance charges, OPD costs etc.

How much health insurance cover should you have?

Well, there is no right answer here.

Everyone should have health insurance coverage to take care of their unexpected and huge medical bills. These medical costs will depend on the type of illness, line of treatment, your treating hospital, your city of residence etc. The cost of treatment in tier 1 cities is typically higher than in the rest of India.

If you are living in a tier 1 city, Rs. 10 – 20 Lakh health insurance cover should be good enough. This will cover the cost of most of the treatments for common illnesses. However, this might not be enough for treatment for rare, new or deadly diseases that require very expensive treatments, such as liver or bone marrow transplants.

Weigh your options thoroughly. If you want sufficient cover for rare or new illnesses, you should go for a higher cover amount, such as Rs. 50 lakh or Rs. 1 Cr. However, keep in mind that this will come at a higher cost. Moreover, think of long-term premium commitment as your health insurance premium for the same amount of coverage will rise as you age.

If you are in a tier 2 or 3 city, or a semi-urban or rural place, a Rs. 5 – 10 Lakh cover should be good enough for you for now. However, a cover of less than Rs. 5 Lakh is a strict no for a young person.

If you are looking for health cover for someone who is a senior citizen, a cover of Rs. 3 – 5 Lakh will also do. It might sound counterintuitive, but senior citizens have a lower expected future life span than a fairly young person. Also, health cover for senior citizens is expensive, and higher coverage can be unaffordable.

Exclusions in Health Insurance

Imagine that you are planning for a medical treatment hoping that your health insurance policy would cover the cost. You reach the hospital and provide your health policy details. To your dismay, you get to know that your health insurance policy would not cover the cost since the treatment you are going for falls under the list of exclusions.

This can be a difficult situation for anyone. Arranging funds for the treatment in the nick of time, knowing that your health insurance policy does not cover the cost of treatment, can be challenging. Hence it’s good to know in advance what is not covered under your health insurance policy.

All health insurance policies come with certain exclusions. Here are some of the common health insurance exclusions:

Pre-existing Disease (PED) Waiting Period: If you have health conditions that existed even before you bought your health insurance policy for the first time, your insurer might impose a waiting period before health cover on these conditions becomes active. This waiting period typically ranges from 24 to 36 months, depending on the plan.

Specified Disease/ Named Ailment Waiting Period: Health insurers impose a waiting period of 24 months on certain listed slow-growing illnesses. Cover on these illnesses becomes active only after you serve this waiting period under the policy.

Initial Waiting Period: There is usually an initial waiting period of 30 days at the start of your health insurance policy. Expenses related to any treatment are not covered under your health policy within these 30 days other than those arising out of an accident.

Investigation and Evaluation, and Rest and Rehabilitation: Your health insurance policy does not cover your medical bills if you are hospitalised only for investigative and evaluative purposes or for rest or rehabilitation. Your health policy covers the costs only when you need hospitalisation for a medical treatment necessitated by an illness or injury.

Treatments Related to Obesity or Plastic Surgery: Health insurance policies usually do not cover any treatment or surgical costs related to obesity or plastic surgery.

Gender Change: Any treatment related to change in gender is not covered under health insurance.

Alcoholism, Drug or Substance Abuse: Health insurance does not cover any treatment for alcoholism, drug or substance abuse.

Refractive Error: Any treatment received for the correction of eyesight is not covered if the refractive error is less than 7.5 dioptres.

Unproven Treatments: Any treatment for which sufficient documentation is not available on the efficacy of the treatment might not be covered under health insurance.

Hazardous or Adventure Sports: Any treatment that is required mainly because of injury caused by participation in hazardous or adventure sports is not covered.

Criminal Activity: Your health insurance does not cover any treatment necessitated due to your wilful participation in an unlawful or criminal activity.

This is not the exhaustive list of all the exclusions in a health insurance policy. Exclusions may vary depending on the features and terms of a health insurance policy. To understand all the exclusions under your health insurance policy, please read your policy document carefully.

Pre-Existing Diseases (PEDs)

If you have a medical condition that existed before you purchased your health insurance policy, such medical conditions are called pre-existing diseases. Most health insurance policies have a waiting period, ranging from 24 months to 36 months, before cover of pre-existing illnesses becomes active.

Some pre-existing health conditions might be entirely excluded from your health insurance plan. These are permanent exclusions, and your health insurance policy never covers them.

Some health insurance plans offer add-on features that reduce or entirely waive off the waiting period on pre-existing illnesses on payment of an extra premium. However, it will depend on the illness and its severity, the time since its onset, ongoing medication etc.

Talking to a good advisor to select the right health insurance for you and your family is helpful. If you have any pre-existing condition and you are looking for health insurance cover, talk to us to find out the right health insurance plan for yourself.

How to Select the Right Health Insurer

Selecting the right health insurer is crucial. After all, your insurer issues your policy and settles your claim when the need arises.

Here’s how you can shortlist a few good health insurance companies or eliminate the bad ones.

Claim Settlement Ratio: Go for a health insurer whose claim settlement ratio is 90% or above. Check for the last 3 years’ numbers instead of just last year’s figures to avoid recency bias. Simply ignore insurers who fall below this mark.

Incurred Claim Ratio: Any number between 60% to 80% is good. It implies that the insurer is pricing its products efficiently and is keeping its cost of claims within the range to maintain financial stability.

Volume of Claim Complaints: We recommend you select an insurance company only if its volume of claim complaints is 20 or less.

Business Track Record: Always select an insurance company with a decent business track record. Avoid choosing very new or innovative health insurance products or health insurance companies whose experience is yet to emerge.

Network Hospitals: Network hospitals allow you to avail cashless claims without making any upfront payment. Your insurer directly pays your bill to the hospital. Choose a health insurer that has a decent number of network hospitals in your city or area of residence.

Select the Right Health Insurance Policy

Here are 4 things you need to see.

Must Have Features:

Coverage for all base benefits, including inpatient hospitalisation expenses, daycare treatments, pre and post-hospitalisation expenses and cost of consumables covered at actuals. Make sure you make no compromises here.

No restrictions on room rent or room type, so you can choose to stay in the best room available.

No disease-wise sub-limits or restrictions.

People with pre-existing conditions can scout for plans that provide instant cover for PEDs so that they don’t have to serve the waiting period for PEDs.

Buy a separate policy for senior citizens for their special medical needs.

Good To Have Features:

A good no-claim bonus (NCB) is always welcome as your health cover increases with time to take care of medical inflation.

Unlimited restoration is good to have, but it might not make sense beyond a point.

Look for health insurance plans that offer a lower waiting period for PEDs if you have any pre-existing disease.

A personal accident cover can also enhance your health coverage at an extra cost.

If you get global cover under your health insurance plan, it would be a great addition.

Features Which Can Be Avoided:

In health insurance plans, not all features are desirable. Some features are gimmicky and are added to drive sales. You might be better off by not having them.

Maternity is usually planned, and hence, it comes at an extra cost or with long waiting periods. Health insurance works best when you buy it to cover unexpected and unplanned large medical expenses. If you are buying a health insurance plan to avail maternity benefits or paying an extra premium to get a maternity benefit add on, you can as well avoid it.

The same applies for OPD cover. It is better to pay all your OPD expenses out-of-pocket and keep health insurance for those large, unexpected medical expenses.

Check Out The Exclusions:

All health insurance policies come with some exclusions. Check out what is not covered under a plan before considering it.

Choose a plan with a shorter waiting period for pre-existing conditions. Opt for an insurance plan that does not impose a copayment or a permanent exclusion based on your current health condition.