Editorial Note: The importance of health insurance is growing day by day. With the globalization of economy, the introduction 24/7 work culture has started impacting the health of Indian youth. BP, diabetes and heart related ailments have become a phenomena of mid-30’s……..

Here is an article that explains the pros and cons of the health insurance policy. Please feel free to give your comments at feedback@personalfinancewindow.com

 October 24, 2007

Health Insurance: A friend in need !

By Rahul Aggarwal

Health insurance has become a necessity. Galloping medical cost due to the rising inflationary pressures has made it difficult for a common man to bear the burden of any  sudden hospitalization. It is the health insurance that comes to the rescue in such a critical situation.  

More and more Indians are now aware of this reality and acknowledge it by taking a health insurance cover popularly called Mediclaim. But is the prospective buyer aware of the fine print in a typical health insurance policy?

On the one hand, high claim ratios and a sharp dip in the margins in other corporate insurance products have made the insurers increase the conditions in the health insurance policies. Insurers are also doing away with their previous benevolent attitude and are enforcing the fine print now.

On the other hand, insurance companies have launched several new policies with different terms and conditions. In such circumstance, it is important that the buyer should understand the fine print of the policy.

Terms and conditions:

Health insurance policies start with the condition that they shall reimburse in-patient medical expenses, which are ‘reasonably and necessarily’ incurred for the treatment of a disease or injuries sustained in an accident. Hence, insurance companies have started questioning whether a single bed A.C. room taken by a person earning a monthly salary of Rs 20,000/- is reasonable and necessary. The condition of reasonability and necessity is fulfilled by the answer to the question that whether the insured person would have behaved in the similar manner had he been uninsured.

Insurance companies have started imposing a ceiling on the ‘room, boarding and nursing expenses’. A typical condition would read ‘Room Rent Limit: 1% of Sum Insured per day subject to maximum of Rs. 5,000. If admitted in IC unit; 2% of Sum Insured per day subject to maximum of Rs. 10,000.’ Insurers now also limit the total reimbursement towards room, boarding and nursing expenses per illness. Typically, they are limited to 25% of the total sum insured.

This means that if an insured has a sum insured of Rs 2 lakhs, then the maximum expenses allowed towards room, boarding and nursing expenses are Rs 50,000/-. Therefore an insured should choose a room keeping in mind such limits and the expected duration of stay.

Some companies also limit the per illness reimbursement towards surgeons’, doctors’ and anesthetist’s fee. The reimbursement towards OT charges, consumables like anesthesia, blood, oxygen, surgical appliances, medicines & drugs and diagnostic material & X-Ray is also capped by some insurers. An insured should be well aware of such limits so that the hospital expenses can be planned accordingly.

All insurance policies reimburse inpatient medical expenses incurred in a nursing home or a hospital. However, it should be noted that the policy reimburses expenses incurred in only such nursing home / hospitals which are either registered with the government or have atleast 15 beds, a fully equipped operation theatre and qualified nursing staff and doctors who are available round the clock. Many insureds prefer to get treated by the doctors they trust but it is important to check whether these conditions are fulfilled by such doctors’ nursing home.

All policies cover expenses only if the duration of stay in the hospital exceeds 24 hours. Hence treatment of fractures and dislocations many times becomes a cause for dispute. Many policies now explicitly mention that the treatment of fractures is covered even if the treatment is less than 24 hours.

All policies cover reimbursement of expenses immediately before the hospitalization and for a certain period after discharge from the hospital. This period is called pre-hospitalization and post-hospitalization and varies between 30 – 60 days for pre-hospitalization and 45 – 90 days for post-hospitalization. Longer period means more benefit to the insured.

Insurers do not cover certain diseases like hernia, cataract, piles etc. for a specified period when the policy is first taken. This period varies between one to two years and is called ‘First Year Exclusions’ in the insurance parlance. The insured should confirm the diseases which are not covered as they vary from company to company.

Different insurance policies take a different stand on the reimbursement of expenses incurred on ‘External Medical Equipments’ like crutches, belts, collars, splints, slings and braces etc.. While some policies explicitly deny coverage others are silent on it which leads to confusion and dispute at the time of a claim. It is better to have this clarified while taking the policy.

A health insurance policy is a legal contract between the insured and insurance company. A Third Party Administrator (TPA) will treat the claim within the confines of this contract. Hence, it is important the buyer is aware of the terms and conditions of this contract. A buyer should either go through the contract thoroughly or should enlist the services of a knowledgeable broker to help him take a suitable Health Insurance Policy.

This author is CEO, Optima Insurance Brokers Pvt Ltd. He is an alumnus of the IIM,  Ahmedabad. The views expressed in this article are his own. He can be contacted at Rahul.a@optima.co.in