Checklist for selecting right health insurance policy

It is difficult to get a policy after the onset of disease.

34-year-old Sandeep Verma fell sick. He had Rs 10-lakh health insurance, so his family members didn’t think twice before admitting him to the neighbourhood corporate hospital. Sandeep recovered from his lung ailment, but now has to pay off Rs 5 lakh loan that his family members had to take to settle hospital bills. Why they needed to take a loan since Verma had a medical cover for Rs 10 lakh Three reasons. 1) Sandeep’s health insurance policy had a clause that required him to pay one-fifth of any amount even if the insurance company accepted the full claim 2) His policy also had daily limits for the bed charge. Sandeep was in ICU for 2 days and the ICU bed charge was double than the cap under the policy. 3) The policy was a family floater policy but Sandeep’s coverage was restricted at 50 per cent since his wife was the proposer.

Clearly, Sandeep didn’t have adequate health insurance. Renowned ENT specialist and medical adviser to Fortis Healthcare Dr Narottam Puri says that even doctors need adequate health insurance. “For god’s sake, please take health insurance – whoever and wherever you are. Medical costs are going to rise further,” he said. Dr Puri, who is a heart patient himself and had underwent double stenting, says the obvious: “You will be bankrupt, if you have to stay one month in an ICU and especially on ventilator”.

But a person has to take health insurance when he or she is healthy. It is difficult to get a policy after the onset of disease. “Consumers want insurance if they get a disease, but insurers are reluctant to provide cover as it becomes pre-existence disease,” quips Dr Puri.

Health insurance policies generally offer a range of coverage — from cashless hospitalisation, including pre and post hospitalisation expenses, to day-care procedures and even the cost of domiciliary treatment. The premium paid for health insurance policies are also eligible for income tax deduction up to Rs 55,000 u/s 80D, which is over and above the limit of Rs 1,50,000 deduction u/s 80C.

However, only about 8 per cent people in India have taken commercial health cover so far, which is very marginal. “At 8 per cent coverage of population, we are in danger of becoming irrelevant. OPD cover needs to be extended to increase the reach,” said Vidya Hariharan, director, group strategy at Vidal Healthcare Services.

As 66 per cent of total healthcare spend is on OPD treatment, Max India senior director (corporate affairs) Archana Pandey says, “Health insurance should cover OPD and other things to make insurance relevant for all.”

The cost of getting a health cover, however, is not very affordable for all, and needs to be lowered by increasing coverage. “Customer base has to be increased to bring down premium amount and narrow the gap between what is expected and what is offered,” said insurance regulator Irdai chairman T S Vijayan at a recent event.

Apart from some common features, different insurance companies offer different benefits. Here is a checklist for to get the maximum bang for your buck.

Go for policies renewable for whole life: Make sure that the policy you are taking is renewable till you live. There will be little advantage in taking a policy, which is renewable up to a certain age limit (e.g. up to 70-80 years of age). What if you survive beyond that age Who will foot the bill if you get hospitalised then

Check cashless hospital network: Insurers pay medical expenses for coverage for in-patient hospitalisation for more than 24 hours, except in case of day-care-procedures, where 24 hours of hospitalisation is not needed. If a patient goes to a hospital listed in the network of the insurer, the treatment will be cashless. Otherwise, the patient will have to pay the hospital charges first and the insurer will reimburse the bill after considering the circumstances. So, check the list of cashless hospitals carefully. Are at least some of them near your home or office Always go for cashless facility.

Say no to capping: Some health insurance policies come with room rent capping of 1 per cent of sum insured) and ICU fee capping of 2 per cent of the SI. It’s better to avoid policies with capping, as the insured will have to pay the hospital bill in proportion to the excess room rent/ ICU charges. For instance, a person takes a policy of Rs 5 lakh with capping provision which says he/she can opt for hospital room / bed not exceeding Rs 5,000 per day and ICU charges of not more than Rs 10,000 per day. But rent of a single-bed room in some of the leading hospitals is around Rs 15,000 per day, while per day ICU charges, if a patient is put on life support system, is more than Rs 50,000. The insurance company will not foot the bill beyond the cap. The rest has to be paid by you. In case of a policy without capping, the insurance company may pay the entire bill.

Avoid policies with co-payment clause: Some insurers have ‘co-payment’ clause inserted in terms and conditions in case of reimbursement. Here the insured will have to pay a certain percentage of the hospitalisation bill. For example, if a person takes Rs 5 lakh health insurance policy with 20 per cent co-payment on reimbursement, and the hospital generates a bill of Rs 5 lakh, he/she has to pay at least Rs 1 lakh even if the insurance company admits total claim. Co-pay policies have cheaper premiums because you agree to pay a certain amount irrespective of the circumstances. By paying a lower premium, you may be setting yourself for bigger bill shock someday in future in co-pay!

No claim bonus should accumulate and be utilised evenly: Make sure that no-claim bonus is utilised in the same pace in case of claim as it is accumulated in case of no-claim. For example, a health insurance policy offers 10 per cent no-claim bonus with accumulation up to 100 per cent of basic sum insured, and the rate of utilisation in case of claim is also 10 per cent. In this case, if a person takes a policy of Rs 5 lakh and there was no claim for more than 10 years, the total sum insured will become Rs 10 lakh. After that he/she falls sick and claims Rs 10 lakh in a year. Next year he/she may claim up to Rs 9.5 lakh, in the subsequent year Rs 9 lakh and so on, by paying premium for Rs 5 lakh only.

But, there will be no advantage of taking a health insurance policy early if the entire no-claim bonus becomes zero due to a single claim. Choose a policy in which no-claim bonus accumulates in a slow pace and up to 100 per cent of the sum insured and gets reduced in the same pace (of accumulation) in case of claims.

Sum insured should float freely in family floater policy: Before choosing a family floater policy, ensure that the entire sum insured floats freely and may be availed of by any member of the family in entirety in a year. Most family floater policies allow 100 per cent of the sum insured to the proposer, but restrict it to 50 per cent for spouse and 25 per cent for children. As it is very unlikely that all the family members will fall sick in a particular year, it’s better to avoid policies with such restrictions.

Don't be 'penny wise and pound foolish': Don’t compromise on features to save on premium. Compare a horse with a horse and don’t end up buying a mule just so you pay less. Compare the features of different plans of different insurance companies and then look for competitive premium. Look for an insurer with good reputation of settling claim quickly and without much hassle.

There are several other benefits, some of which a person may consider, but without compromising on the above features:

Pre and post-hospitalisation: Chose a policy with considerable pre and post-hospitalisation cover period.

Day-care procedures: These are the medical expenses for enlisted procedures, which do not require 24-hour hospitalisation due to technological advancement. Try to choose a policy, which cover maximum number of day-care procedures.

Domiciliary treatment: Try to choose a policy that pays for domiciliary treatment, the treatment expenses involved in getting a treatment done at home which otherwise would need hospitalisation.

Organ donor: Choose a policy that pays treatment expenses for the organ donor at the time of organ transplant.

Additional cover for critical illness: With payment of additional premium, you may opt for an additional cover for critical illness, which is useful as onset of such illness may result in loss of job and other financial crisis.

Maternity benefit: Don’t take a policy just to avail of this benefit as you will bear additional cost for a benefit you hardly avail of (maximum twice in your life). Look for other additional features such a policy offers.

OPD cover: This involves frequent and recurring expenses and it’s better if they are covered. But look for the terms and conditions to see if the benefit justifies the additional costs.

So, next time you get a health insurance policy check out all of these points so that you can truly be at peace when you buy a health insurance cover.