As we seem to be tottering out of a horrendous global pandemic, very few of us can forget those dark days in the depth of the crisis. Along with the pandemic came heart-wrenching stories of people struggling to meet hospital bills for their loved ones. Which brings me to the urgent pressing need of the fact that more Indians need to buy health insurance.
Why so serious?
Even before coronavirus, a report released by the National Family Health Survey Round 5 revealed that in 2016-17 out-of-pocket expenses for health care incurred by people amounted to a startling 2.2% of the GDP! Even though dated, the same article mentions that in 2011-12 nearly 55 million Indians were pushed into poverty as they paid for healthcare expenses from their pocket or by borrowing money.
When you look at any article which lists down reasons to take a Personal Loan, generally writers list down fancy ideas like shopping or home renovation or holidays first. But, as Xiaomi found out in this survey and as I remember from my days as a bank marketer, medical emergencies are the number one reason why people end up taking a personal loan.
Most importantly, healthcare costs rise at almost double the pace of inflation. Global insurance broker and advisory Willis Towers Watson releases an annual report to show the measure of average medical trend or the percentage of change in health care costs all thing remaining same. As per their latest report, the gross medical trend in India for 2020 was 12%!
Basics of Health Insurance
The idea behind health insurance is to cover for the financial risk of the healthcare costs incurred by us over our lifetimes. While most of us have grown up watching our parents pay through medical costs, mostly at well-operated government hospitals that sadly is no longer the case.
With a health insurance policy, you end up paying an annual premium to have most of your big medical procedure costs covered when the time comes for it. I have procrastinated on getting one for myself long enough. But since I now stand on higher moral ground having a family floater health policy well and live, I felt empowered enough to write this post.
Breaking some mental barriers
There are enough and more barriers that come between good intentions and final execution. Let’s break down the mental barriers one by one.
1. My employer covers me
Most employers in India beyond a certain threshold are expected to take group health insurance cover for their employees. Generally, bigger the company more beneficial the policy. However, most policies will come with a certain coverage limit to them which is mostly inadequate. Further, you wouldn’t want to be tied down to a job even at the cost of frustration just for the health cover.
2. I am too young
Ah, the naiveté of youth! When we are young we come with that special mindset of invincibility. But, remember that the more you wait the higher the premium. In this case the increase in premium amount is far higher than in the case of life insurance because you are bound to end up using it multiple times rather than the one time use in a life insurance policy. More importantly, most diseases strike as we age. By the time it seems like the perfect opportunity, a lot of things may well get permanently excluded from being covered. Unlike with life insurance, where I have often advocated that it may not be required in the absence of financial dependents, this is something every individual wanting to remain in good health should look at, at the earliest.
3. It is too expensive
Insurance as a subject in India has a long legacy of misunderstanding. Many of us view it as a blanket term associated with an LIC agent pushing high-premium products with low returns and low cover. However, in the case of medical insurance or mediclaim one family floater policy can cover an entire family (usually includes husband, wife and two dependent children). What this means is that if you take a Rs. 5 Lakh family floater policy, every year that amount can be cumulatively utilized for any of the covered individuals. As for the cost, I paid approximately Rs. 32,000 as a 2-year premium for a mediclaim policy that covers my family for Rs. 1 Crore per year! Read on for how I did it.
4. Way too complex
Yes, the jargon can sound intimidating and you must read any policy before signing on the dotted line (even if it bores you to tears). But, that is where this post should help. Also, the process of buying it is now much easier than is often presumed. I bought it online from the insurance company directly and did so without any medical test based on honest self declarations of any health conditions. For instance, I have hypothyroid which had to be specified.
5. Can I trust the insurance company?
Another fear with some people is the idea that what if they keep paying the premiums but at crunch time the insurance company refuses the claim. That is where the claim settlement ratio comes in. You must do your research and read up on industry published numbers for which company is known to honour its’ claims better. Apart from that, know that insurance companies depend on the goodwill of their clients. If they wrongfully deny a claim, they run a much higher risk of legal battle in that case. Also, insurance companies are regulated by a fairly stringent body called IRDA or Insurance Regulatory and Development Authority.
Things that you must check before buying a policy
Now, let’s try and tame this jargon-filled dragon that most of us millennials are happy to run away from.
Individual or family floater
As the name suggests, an individual plan covers one person. A family floater typically covers a couple and two dependent children. In a family floater one premium gives a pool amount that can be used across members in a year. The reason is simple. Most family members would carry a similar risk for the insurer. Also, there will be very rare years when more than one member needs the cover, hence making the fungibility more convenient for families.
This term refers to the total amount that a policy will cover in a single year. So, if you buy an insurance policy of Rs. 5 Lakh, then in a single year the insurance company will pay out that amount as a limit for any medical needs that may arise.
Some insurance policies come with a clause whereby the insured person has to pay some amount of the billing. In case of a co-pay, this amount is a percentage. For instance, it might be said that the insured is a co-payee for 10% of the amount. In case of a deductible, the amount is mentioned in absolute terms. As an example, you might have a policy for Rs. 10 Lakh where you are expected to pay the initial Rs. 1 Lakh of any expense being claimed. Deductibles come handy when you take a base and top-up policy.
Base and top up policy
As mentioned above, I have recently taken a health insurance policy for Rs. 1 Crore. However it is divided into a base policy of Rs. 5 Lakh and a top-up policy of Rs. 95 Lakh. While the base policy has no deductibles (meaning it can be claimed for any admissible amount), the top-up policy comes with a Rs. 5 Lakh deductible. Hence, for any hefty big charge, a claim would be made in both the policies whereby the base would cover the deductible in the top-up.
While it’s true that younger, fitter individuals get health insurance at lower premium or annual payments that doesn’t mean that the amount remains consistent. Check with your provider as to how often or by how much would it increase, even to account for inflation.
Insurance policies pay out claims in two ways – cashless or by way of reimbursement later when you file documentation. In case of big hospitals, most of them have tie-ups with major insurance providers and their insurance desk coordinates to send documents to the company on their own. Before you are discharged, the case is generally settled and you end up paying any part of the bill that the insurance might have rejected. In case of getting the amount reimbursed, there is a list of documents including diagnosis proofs and discharge summary along with the billing that you need to submit. In my experience, I have found cashless to be more convenient. That is where it is important to check for the network hospitals or those with which your insurance provider has a tie up to process cashless claims.
Most big health hiccups are generally latent and brewing in the body for some time prior to showing symptoms. For this reasons, health insurance policies come with a waiting period. Essentially, they see it as a long—term relationship whereby in the first two years the cover is more like an empty bullet. You have it but you can’t use it because this period determines to the insurance company that you were a healthy individual at the time of taking the policy. In our policy, we have a two year waiting period. More importantly, for anything specific there could be a longer waiting period. For instance, my policy does not cover any thyroid related disorder for the first three years as I declared my hypothyroidism. Yes it sounds strange, but you would expect a company managing your risk to first manage theirs properly.
Check for this part very carefully. In this fine print, some policies could conveniently lump in critical illnesses which result in a large expense. A good health insurance policy should cover most diseases that give us sleepless nights. Atleast knowing about anything that is not covered can also help you plan your expenses accordingly. For instance, my policy states clearly that weight loss programs and assisted reproduction, to name a few, would not be covered.
Type of aspects covered
Although I have mostly mentioned hospital in the parts above, policies generally cover pre-hospitalisation and post hospitalization expenses as well. Some policies even provide daily cash in case of a hospital stay. Most policies also cover day processes like cataract surgery whereby there is a significant expense with no need for a hospital stay. However, in this case check for their definition of a hospital. I have had a claim for a septoplasty rejected because the clinic was deemed too small as per their definition of the minimum number of beds required.
One of the most common feature of health insurance policies is the concept of no claim bonus. In a year if you do not make any claim on your policy and continue to pay your premiums, gradually your coverage limit inches up (till a certain limit). For instance, my policy allows for a 20% no claim bonus each year subject to a maximum 100% increase. So, my Rs. 5 Lakh policy will move to Rs. 6 Lakh with the first instance of no claim bonus.
Some policies also come with a refill benefit. In one year, if you exhaust your policy and the no-claim bonus, they allow for a refill to a certain amount. However, it could come with certain conditions like needing to be for a different ailment or a different family member.
Check for any sub-limits in the policy clause. While the overarching limit might be lofty, they should not end up placing limits on aspects like room rent etc.
Like most other types of insurance policies, you get a two-week period to be satisfied with your purchase. If after buying it, you comb through the document and find something that just doesn’t work for you, you can cancel the policy. You get back your net premium amount, excluding the GST paid. Some policies also come with a cancellation policy within the tenure.
As mentioned above, health insurance is a long term relationship. There could be a possibility that after a few years of holding a policy, you realise that some other company is offering a better more comprehensive cover. However, you wouldn’t want to start from scratch with a waiting period or a bigger premium amount for an older age. In that case, insurance policies comes with a portability which allows your record to be transferred for a fair deal.
Where to buy a policy from?
Today, there are many avenues to do so. The good old insurance agents continue to remain an option. If you have a strong relationship with a bank and a good relationship manager, you could very well buy it from there if the policy suits your needs. Else, like me, if you are even slightly internet savvy you can initiate and close your mediclaim policy online. There too, you could either go to a broker like Bank Bazaar or Policy bazaar and expect a barrage of calls. If however, you have decided on the insurer and the product, you could directly go to the company’s website and initiate it as well.
Once you have bought a substantial cover, it can mostly run on auto mode with just basic tweaks like paying the premium on time and adding any family members when the need so arises.