The word “Health‟ was derived from “hoelth‟, which means “soundness of the body‟. In olden days, health was considered a “Divine Gift‟ and illness was believed to be caused due to the sins committed by the person. Ayurveda considered health as a delicate balance of four fluids: blood, yellow bile, black bile and phlegm and an imbalance of these fluids causes ill health. Over a period of time, modern medicine has evolved into a complex science and the goal of modern medicine is no longer mere treatment of sickness but includes prevention of disease and promotion of quality of life.
In India, healthcare is broadly categorized as follows:
1. Primary healthcare – Primary health care are services offered by the doctors, nurses and other small clinics which are contacted first by the patient for any sickness.
2. Secondary healthcare – Secondary health care are services provided by medical specialists. It includes acute care requiring treatment for a short period for a serious illness. It includes Intensive Care services, ambulance facilities, pathology, diagnostic and other relevant medical services.
3. Tertiary healthcare – Tertiary Health care is specialized consultative healthcare, usually for inpatients and on referral from primary/secondary care providers. The tertiary care providers are present mostly in the state capitals and a few at the district headquarters.
It is to be noted that as the level of healthcare increases, the expenses associated with it also increase. While people may find it relatively easy to pay for the primary care, it becomes difficult to spend on secondary care and tertiary care due to increasing cost of healthcare, surgical procedures and medicines. In fact, it is becoming very difficult for an individual even if he is financially sound to bear such high expenses without any health insurance.
Therefore, health insurance is important mainly for two reasons:
- It provides financial assistance to pay for medical facilities in case of any illness.
- It helps in preserving savings of an individual which may otherwise be wiped out due to illness.
What is Health Insurance?
“Health insurance” or “health cover” means buying insurance contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, including assured benefits and long-term care, travel insurance and personal accident cover. Health insurance products available in India are mostly hospitalization products – which cover expenses incurred by an individual during hospitalization.
Health insurance policies in India usually does not include expenses incurred whilst outside India. For this purpose, another product – overseas health insurance or travel insurance – needs to be purchased. Only in recent times, a few high-end health insurance products include overseas insurance cover as part of regular health insurance, subject to certain terms and conditions.
Who can offer Health Insurance?
As per Insurance Regulatory and Development Authority (Health Insurance) Regulations, 2013 – Life Insurance Companies may offer long term health products, Non-Life and Standalone Health insurance companies may offer individual health products.
What are the different categories of Health insurance products?
Health insurance products can be broadly classified into 3 categories:
- Indemnity covers – Indemnity covers pay for actual medical expenses incurred due to hospitalization. Initially it covered expenses only if duration of stay in hospital was 24 hours or more. However, with advancements in treatment procedures – many surgeries do not require hospitalization and are conducted as day-care procedures. These are also covered under indemnity policy. Treatments such as eye surgeries, chemotherapy; dialysis etc. are commonly classified under day-care surgeries.
- Fixed benefit covers – Fixed benefit covers pay for a fixed sum per day for the period of hospitalization. Some examples are products offering fixed amount of cash per day during hospitalization (hospital cash) and critical illness.
- Critical illness covers – Critical illness cover is a fixed benefit plan for pay-out on occurrence of a pre-defined critical illness like heart attack, stroke, cancer etc.
Most commonly purchased health insurance products in India are indemnity covers.
Which health insurance to purchase?
Health insurance basically deals with sickness and therefore expenses incurred due to sickness. Various people with different life styles, paying capacity and health status have different requirements which need to be considered to get a comprehensive health insurance cover. Irrespective of anything, each individual or family, must consider these key points while purchasing a health insurance are –
1. Amount of sum assured – Any person looking to buy health insurance should look at sum assured in the range of INR 5,00,000 to INR 20,00,0000. Personally, I prefer a sum insured of INR 10,00,000 since health service cost is rising at faster than inflation and one will not like to fall short on money while undergoing medical treatment.
2. Various Policy Exclusions – Each and every health insurance provider has their own list of policy exclusions in addition to those specified by IRDAI. This list of policy exclusions needs to be carefully reviewed while purchasing health insurance.
3. Pre-existing diseases – Pre-existing diseases are almost always excluded under health insurance plans since otherwise it would mean covering a certainty. However as per IRDAI – Any pre-existing condition(s) as defined in the policy will be covered after completing 48 months of continuous coverage of the insured person, since inception of his / her policy with the company. There are few health insurance products with reduced waiting period of 2 to 3 years for pre-existing diseases. Thus, it is beneficial for people with pre-existing diseases to purchase them after making full disclosures.
4. Coverage Option – There are two coverage options –
- Individual coverage – Under individual coverage policy – only single person is insured for a chosen sum assured.
- Family floater,Under family floater – an individual insured can cover himself along with family members such as spouse, dependent children, dependent parents, dependent parents in law, dependent siblings etc for a single sum insured which floats over the entire family. Some insurers do not have a restriction on the dependents who can be covered.
Health insurance cover and exclusions under both these policies are similar. Thus, Family floater policy is a better option as the entire family gets coverage for an overall sum insured at a reasonable premium.
5. Sub limits and Disease specific capping – One needs to review all sub-limits and disease specific capping by health insurance provider to determine the suitability of the product for themselves and their family. For example- sub limits on room rent linked to sum insured e.g. per day room rent restricted to 1% of sum insured and ICU charges to 2% of sum insured.
Ideally one should avoid health insurance products with sub-limits and disease specific capping.
6. Cost Sharing with health insurance providers – Cost sharing requirements do not reduce the sum insured. It reduces required premium to be paid by making the policy holder liable to pay a certain portion of the health insurance claim. Common cost sharing mechanisms used by health insurance providers are –
- Co-payment (popularly called Co-pay) – A co-payment is a cost-sharing requirement under a health insurance policy that provides that the policyholder/insured will bear a specified percentage of the admissible claim amount.
2. Deductible – Deductible is also a cost-sharing requirement in a health insurance policy where the insurer will not be liable to pay for a specified rupee amount in case of indemnity policies and for a specified number of days/hours in case of hospital cash policies. Insurer will pay only after these limits are crossed and not before.
Ideally one should avoid health insurance products with any form of cost sharing requirements.
7. Coverage for Day care procedure – Advancement of medical science has seen inclusion of large number of procedures under day care category. However, this list keeps changing with each insurance provider. Thus, check to avail health insurance policies with maximum coverage of day care procedures.
8. Duration of pre and post hospital cover – Duration of pre and post hospital coverage is extended to 60 days and 90 days by most insurers. Few insurers have also capped these expenses linked to certain percentage of claim amount, subject to a maximum limit.
Check to avail policies with minimum capping and maximum limits during pre and post hospital cover.
9. Based on ones need ask for add on covers in return for some extra premium. Some common add on covers which are possible are –
- Maternity benefits are now offered by most insurers, with varying waiting periods. This is a must have for young couples.
- Critical Illness Cover – As one grows older, we become prone to having critical illness. Thus, it is important to have some form of critical illness cover based on family history either as part of health insurance or as part of Life insurance.
- Reinstatement of sum assured in exchange of additional premium and
- Coverage for alternative treatments like – Ayurvedic, Unani, Homeopath up to a certain percentage of hospitalization expenses.
Check for add on covers based on your needs to get more out of your health insurance policy.
10. Value added covers – Few health insurance providers give certain value-added cover benefits like – Outpatient cover, Hospital cash (fixed lump sum payment for each day of hospitalization), Donor ‘s expenses in case of major organ transplant, Reimbursement of ambulance, Expenses for accompanying person whilst attending to insured patient during the period of hospitalization. Check to avail maximum value-added benefits. These value-added benefits are payable up to a certain limit of sum insured.
Finally, you may not get a health insurance policy that meets all the above conditions to your required levels of satisfaction. Thus, one needs to do some cost benefit analysis of various health insurance policy options provided by insurance companies while purchasing health insurance.
Where to buy health insurance from?
An individual or family, can buy insurance from any of the three channels – Online directly from Insurance provider, Insurance agent, or Corporate agent or Broker. However, your purchase should take into consideration the channels ability to handle your queries, their commissions and after sales support during claim handling.
In this article, we from financial planning perspective have introduced you to health insurance and its importance. And, we have detailed out various aspects to consider while buying it. This information should help you in having a more detailed conversation with your financial planner or investment advisor. For more information please feel free to reach out to us via email at – firstname.lastname@example.org or by phone – 91-9515475381.
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