Covid has caused irreversible damage to mankind. It has disrupted the way the world used to function and has brought in a concept of ‘New Normal’. However, if there is one learning from this pandemic, it would be that it has put the focus on the right things that should matter.
Be it following all hygiene-related practices, understanding the value of time spent with family or the need to invest, improve and upgrade the health infrastructure, Covid has brought about some much-needed and necessary realizations to society. One of them is the need to have adequate health insurance coverage to safeguard oneself and family from unforeseen medical expenses.
Health insurance is becoming indispensable in the current times. Unhealthy lifestyle and food habits has made even our young population susceptible to many health conditions at an early stage in life. To add to that, high medical inflation and increasing frequency of epidemic such as dengue, bird flu, malaria, typhoid and not to mention Covid-19 has made having health insurance more crucial than ever. The current pandemic has catalyzed awareness, which has been in rise, many fold.
Surveys in the past have suggested that people spend much more time on due diligence before purchasing a discretionary item than they would before buying a health insurance policy. For instance, we rummage through a host of brands and clothing options before choosing a dress for that special occasion. But when it comes to health insurance it is often about casting a cursory glance at the fine print, or entirely depending on some third-party advice.
And this, clearly warrants a behavioural change. Ticking the right boxes is essential to avoid mistakes that could leave a gaping hole in your pockets and, worse still, not being able to access quality care.
This is even more important considering the market is flooded with over 400-plus insurance products to choose from, each having its own set of terms and conditions. To get started, figuring out the answer to some of the important questions is the key.
So, here’s a deep dive to ‘zero-in’ on the right health plan best suited for you and your family.
How much Health Insurance Do I Need?
The first mistake is to try and understand the policy details without evaluating how much health insurance cover would be sufficient to meet your requirements. Therefore, the first step is to determine the sum insured based on the following three parameters:
Which city or town am I living in?
It is important to note that healthcare costs varies depending upon the geographical location one lives in. The treatment costs in a Tier 1 metropolitan city is invariably higher than that in a Tier 2 small town. Since disproportionate part of healthcare services consumption is local, a person living in Mumbai or Delhi would therefore need a higher sum insured vis-à-vis a person living in Lucknow or Dehradun.
A person living in a smaller town would in all likelihood undergo most of the regular treatment locally and only consider going to a Tier 1 metro city for any advance treatment or surgery. Whereas a person living in Tier 1 metro city will take all his treatment in the Tier 1 metro city itself and hence would need a higher sum insured.
Which stage of life am I in?
An elderly person approaching retirement will need a higher sum insured compared to a millennial who is just starting her or his career. Similarly, a married person with a family will need a higher sum insured compared to an individual with no dependents. Moreover, like any other insurance product, starting early is key to enjoying all the benefits. If you buy a health plan before 30, you will make the most of embedded offers of the policy, including the benefit of accumulating no-claim bonus over initial years.
Will my health insurance cover the future cost of hospitalisation?
Historically Medical Inflation has always been more than General Inflation. Owing to this, the cost of treatment has been increasing rapidly every passing year. Therefore, you will not only have to revisit your requirements and disease progression from time to time, but also have to evaluate the prevalent cost of medicare over the years. Accordingly, you must keep increasing the health cover to match up with the current times. At any given point in time, you must have a sum insured which should be adequate for the next few years and not just suffice for present day needs.
While there are many policies in the market that give you the option to enhance your sum insured to be in tune with the rising inflation, one must also note that the option to increase the sum insured at standard terms and conditions may not be available to customers at all times. Most health insurance companies are happy to offer you a higher sum insured at standard terms and conditions when you are relatively young and healthy. However, when one wants to increase the sum insured at a later stage in life, after having some or the other pre-existing condition, then in that case insurance companies either may not allow the increase in sum insured or do so at a higher premium.
Therefore, you must buy a health insurance policy keeping in mind the future cost of hospitalization. If you already have a policy, you can increase the cover by buying a super top-up policy, which is activated when your hospital bills exceed a specific limit, also known as deductible. The policy covers the amount exceeding the deductible amount. However, it is extremely important to have an adequate cover in the base plan itself and treat the super top up plan as a protection against extremely high value treatments or costs.
Select the Right Health Insurer
Once you have analyzed your health cover requirements it is time to choose the right health insurer. While selecting the company ask the following questions to ensure you get the best quality of service, and easy claims settlement.
Is Claim settlement ratio the only point to consider?
The biggest moment of truth for any policyholder is at the time of servicing claims. It, therefore, expectedly tops our list of parameters to consider while doing the due diligence for a health insurance product. However, while the claim settlement ratio is an important criteria, one must also find out whether the company is well-funded or not. Being a part of BFSI segment, the financial health of the health insurance company is an important criterion which will determine whether or not the company is in position to honour future claims requests. A tenured health insurance company which has been consistently in loss after many years in the business may suggest that it is perhaps not well managed and such a company would have to increase the premium prices of their products in future to sustain itself in the market.
Moreover, claim settlement ratio may not always give an accurate representation of company’s claim settlement experience. Since all health insurance products have built-in waiting period for certain pre-existing conditions, it is likely that the claim settlement ratio may be lower in the initial years of the launch of the product but increases gradually once the customer’s waiting period is over and the renewal book becomes larger.
Therefore it is important to note that while claim settlement ratio is an important point to consider, it does come with its sets of limitations and should not be the sole criteria while choosing your health insurance company. Company’s financial stability and brand value should be given as much weightage as one gives to the claim settlement ratio.
Is it a Brand you can trust?
All health insurance companies are a brand in themselves. Brands build a perception over a period of time by consistently communicating what they stand for. Their core philosophy is reflected in all their product and service offerings.
Customers should opt for brands that evoke a feeling of trust and are known for their track record of product and service innovation. Brands which demonstrate customer centricity through their policies and action should be preferred over others.
Does the insurer cover major hospitals in my city of residence?
Often insurance companies boast of a large network of hospitals. But, instead of going by the numbers, check how many hospitals in your area and city have a tie-up with the insurer. This will ensure that you don’t end up running from one hospital to another during an emergency. Also, look for whether or not the large and reputed multispeciality hospitals are in network or not. This would be helpful if ever a need for high-end care or treatment arises.
More often than not people tend to head to the nearest specialty hospital when a health emergency strikes. If the hospital where you are most likely to get admitted to when the need arises is on your insurance provider’s list of network hospitals, then you are sorted.
Important points to consider before buying a health insurance policy
Once you know how much cover should be bought and identify the insurer that best suits your requirements, you need to focus on the health policy you want to buy. To shortlist the right policy, one should ask the following questions:
1) What are the different types of health insurance policies?
Primarily health insurance plans are of two types:
Indemnity plans – are those health insurance policies where the insured is paid for the actual hospitalization expenses up to the sum insured. It is meant to provide for the unforeseen medical expenses.
Fixed benefit plans - pays a fixed amount of funds (the sum insured) to cover expenses for a predetermined illness or condition that has been insured. These plans provide financial support to the affected person due to the impact of the illness / condition on their income and occupation. The lump sum amount paid as part of these plans are meant to maintain lifestyle and provide any incidental benefits which are otherwise not covered under indemnity plans.
Large part of the market consists of indemnity based plans which are hospitalization centric where cost incurred on the treatment is payable to customer up to the sum insured. In addition to these, there are also disease specific plans for critical illness plans which allows customers to enhance their coverage amount for any particular concern they may have. Then there are critical illness policies, also known as income replacement plans, covering a list of critical illnesses. These are paid in lump sum once the diagnosis of the critical illness happens.
2) Is there any capping?
While choosing a standard indemnity plan, the customer should focus on key benefits that the plan offers. Many policies have limitations such as capping on room rent charges, OT charges, diagnostics or doctor’s consultation fees. This means that even if you have a higher sum insured, you will only be paid up the specified limit under these heads. Any expense over the specified limit will need to be borne by the customer himself. One should therefore look for policies which offer minimum or no capping.
3) Are there any sub-limits?
Additionally many policies have treatment- specific sub-limits in place for specific conditions such as cataract, knee replacement, maternity, etc.
As a customer one must be aware of these sub-limits in his/her policy to ensure you do not get any surprises at the time of settlement of claims.
4) Does it have a co-payment clause?
Co-payment is the percentage of cost which you need to share with insurers in the event of a claim. Many policies have a co-payment clause in the policy which is designed with the intent to reduce the premium amount to be paid by the customer upfront. While purchasing the policy, customers should be aware of the percentage of co-pay applicable on the policy and should also check if there are any options to vary the co-payment percentage.
5) How long is the waiting period?
Insurers mandate an initial waiting period before a policy covers pre-existing illnesses and you can make a claim against it. Besides, there are certain illnesses for which there is a time exclusion even if they are not pre-existing. In other words, your policy does not go live for pre-existing or certain specified illnesses on Day 1. The waiting period in such cases could be a minimum of two years and could go up to four years. Before investing in health insurance policies, it’s advisable to check the waiting period and opt for the one offering minimum waiting time.
It is of utmost importance to always declare every ailment you may have had at the time of purchasing your health insurance policy. Any undeclared condition or aliment amounts to non-disclosure which may have implications on the claim settlement later on.
6) What are the standard exclusions?
There is a separate section on exclusions in every health insurance policy. It always pays to know about them beforehand so that you have a clear idea about what all it excludes. Exclusions are standardized by the IRDAI as well as the TPA (Third Party Administrators) to promote uniformity, keeping the customer in focus. However it is important to check which policy has how many number of exclusions.
For example, expenses related to any treatment necessitated due to participation as a professional in hazardous or adventure sports, including but not limited to, para-jumping, rock climbing, mountaineering, rafting, motor racing, horse racing or scuba diving, hand gliding, sky diving, deep-sea diving is not covered in the policy. Similarly, expenses for cosmetic or plastic surgery or any treatment to change appearance is not covered unless it is for reconstruction following an accident, burn(s) or Cancer. For this to be considered a medical necessity, it must be certified by the attending Medical Practitioner. Likewise, expenses related to the treatment of any illness within 30 days from the first policy commencement date shall be excluded except claims arising due to an accident.
It is important to note that as per the guidelines there are certain diseases such as Hepatitis B, Alzheimer's disease, Parkinson's disease, HIV & AIDS which are allowed to be permanently excluded in the policy as per the regulator.
7) How much No-claim bonus does the health policy offer?
For every claim-free year, you get an additional sum insured at no extra cost. The range of annual no-claim bonus varies from 5 percent to 50 percent with some maximum limit depending on the number of years you have been insured under a policy.
Always watch out that non claim bonus in some products may be named differently.
Typically, no-claim bonus in claim free year ranges from 5-10%. However, there are certain products available in the market which offer up to 50% no-claim bonus in a claim-free year.
8) Are there any add-on covers?
Many times policyholders are offered add-on covers or built-in riders without proper knowledge and understanding of the finer details. So, before finalizing the product, one should ask whether the policy includes any add-on covers, and then decide whether or not you require them in the first place.
9) Are there Wellness benefits in the policy?
Today many health insurance policies also offer innovative wellness benefits. These include but are not limited to regular health check-ups, online doctor consultation, incentives in policy renewal premium for maintaining a healthy lifestyle, etc.
10) Is the policy document easy to understand?
The policy document received by the customer should be in simple and easy to understand language. Many policy wordings are full of jargons and complicated medical & legal terms which are not easy to comprehend. A policy document which is easy to understand eliminates confusion and drives transparency.
One should evaluate their needs and ask all the right questions before selecting the right policy for oneself. While health insurance policies offer a plethora of benefits, the ones that you need would be dependent on your life stage and other factors. While maternity benefit would be required for someone in the early stages of their life who is just planning on starting a family, a policy which doesn’t have any capping on common condition treatment such as knee replacement and cataract would be more useful for someone at a later stage in their life. Likewise, a standard policy which assures that you never run out of sum insured should be preferred over a policy which offers a host of benefits which you may never use.
So, don’t be in a hurry. Take your time, once you tick all the boxes, you can sit back and enjoy the benefits of your health insurance plan.
The author, Bhabatosh Mishra, is Director Underwriting, Products & Claims at Niva Bupa. The views expressed are personal
First Published: IST