Introduction to Health Insurance in India

How many accident you need to realise that you need Health Cover? It takes just one visit to a hospital to make us realize how vulnerable we are, every passing second. For the rich as well as poor, male as well as female and young as well as old, being diagnosed with an illness and having the need to be hospitalized can be a tough ordeal. Heart problems, diabetes, stroke, renal failure, cancer – the list of lifestyle diseases just seem to get longer and more common these days. Thankfully there are more speciality hospitals and specialist doctors – but all that comes at a cost. The super rich can afford such costs, but what about an average middle class person. For an illness that requires hospitalization/ surgery, costs can easily run into five digit bills. A Health insurance policy can cover such expenses to a large extent. Read why Health Insurance is more Important these days compared to Old days

Types of Health Insurance

There are mainly three types of Health Insurance covers:

  • Individual Mediclaim : The simplest form of health insurance is the Individual Mediclaim policy. It covers the hospitalization expenses for an individual for up to the sum assured limit. The insurance premium is dependent on the sum assured value. Example : If you have 3 family members you can get an individual cover of Rs 2 lacs each . In this case each of you are covered for 2 lacs , if 3 members face a need for hospitalization , all 3 of them can get expenses recovered upto Rs 2 lacs . All the 3 policies are independent .
  • Family Floater policy : Family Floater Policies are enhanced version of the mediclaim policy. The sum assured value floats among the family members. i.e  each opted family member comes under the policy, and it covers expenses for the entire family up to the sum assured limit. The premium for family floater plans is typically less than that for separate insurance cover for each family member. Example : In this case if suppose there are 3 family members , you can take a Family floater policy for Rs 6 lacs in total . Now anyone can claim upto 6 lacs in expenses , but then the cover will go down by that much amount for that year . So if one of the family member is hospitalised and the expenses are 4.5 lacs . It will be paid and then the cover will be reduced to 1.5 lacs for that particular year . Next year again it will start from fresh 6 lacs. Family floater makes sense for a family because that way each one in family gets a big cover and probability of more than 1 getting hospitalized in same year is too low untill and unless whole family is travelling together most of the times in a year .
  • Unit Linked Health Plans : Taking the ULIP route, health insurance companies too have introduced Unit Linked Health Plans. Such plans combine health insurance with investment and pay back an amount at the end of the insurance term. The returns of course are dependent on market performance. These plans are very new and still in development phase . This is only recomended for people  who can handle market linked products like ULIP and ULPP . Read who should buy ULIPs .

For a number of reasons, it is advisable to steer clear of unit linked health plans. The best way is to treat insurance purely as an expense. So if you are single, opt for an Individual Mediclaim policy and if you have family, opt for a Family Floater policy. The amount paid (by cheque or debit/ credit card) for health insurance premium provide tax exemption under section 80D for a maximum of Rs.15,000.

What is the Ideal Cover for Health Insurance

As mentioned earlier, the cost of Health Insurance depends on the sum assured , age, current health condition and your previous medical history. Higher the sum assured, higher the premium. So what is the ideal health insurance cover requirement? There is no standard answer or thumb rule for this. If we agree that health insurance is important, one has to look at his/ her own lifestyle, health condition, age/ life stage, family history of illnesses and affordability. Keep in mind that most insurance companies limit the sum assured to a maximum of 5 lakhs. Also note that many health insurance policies “provide additional benefits” such as daily allowance, ambulance charges, etc. for hospitalization. Not only are such “benefits” superfluous, they tend to drive the premiums higher. So it is best to avoid such plans and stick to something basic and simple.

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Health Insurance provided by Employer

Many employers provide health cover for their employees. Isn’t that sufficient? Three aspects need to be considered in such a case – Is that cover sufficient? Is the insurer good enough? What happens if you change your job? Health insurance is provided as a perk to the employees. So it is important to understand the policy a bit more in detail and to check for coverage. The best way is to ask the HR Department for policy details. Get into details , what is covered , what is not covered ? Many times Employees just think that they have health Insurance and are just relaxed only to find later that it does not cover X and covers Y only upto a limit . That can be a painful situation .

Health Insurance for the aged

Till a few years back, health insurance companies were reluctant to provide cover for the aged. But nowadays there are a lot of insurance companies providing policies for the senior citizens. Insurance cover paid for a person of age 65 years and above, can provide additional tax exemption of up to Rs.20,000. But keep in mind that the premium rates are higher for senior citizens. For the employed, another option is to approach the employer to negotiate with the official insurer to provide an option for additional cover to parents. Since the volumes are high, the insurer can provide such added cover at attractive premium rates.

One of our readers Pattu has shared a great calculator which he discussed in his comment is uploaded here , If you want to download it , Click here

Tax Exemption from Health Insurance Premiums

Sec 80D covers Health Insurance . You can get exemptions of

  • Upto Rs. 15,000 paid for self + spouse + cildren.
  • Upto Rs 15,000 paid for Parents (Rs 20,000 if parents are senior citizens)

So in total if you pay your health insuance and your parents health Insurance premium , you can save upto maximum of 35,000 .

Note : If you take Health Insurance riders with Term Insurance like Critical Illness cover , the extra premium paid for that will be actually be covered under Sec 80D , not sec 80C . See Tax Rules

What is TPA (Third Party Administrators) ?

TPA stands for Third Party Administrator. TPA is a middlemen between Insurer and the Customer . Customer can directly deal with TPA at the time of claim and TPA will help with with all the process of claim settlement . A TPA is a specialized health service provider rendering variety of services like networking with hospitals, arranging for hospitalization and claim processing and settlement. The concept of TPA has been introduced by the IRDA (Insurance Regulatory and Development Authority of India) for the benefit of both the insured and the insurer. While the insured is benefited by quicker & better health service, insurers are benefited by reduction in their administrative costs, fraudulent claims and ultimately bringing down the claim ratios. An insurance company can have more than one TPA and a TPA can serve more than one insurance company. Some of the services TPA provides are

  • Maintain database of policyholders
  • Issue of identity card to all policyholders
  • Provide ambulance service
  • Provide information to policyholders about hospitals.
  • Check various investigations
  • Provide Cashless service
  • Process claims

Health Insurance Claims settlement process

A bit on how health insurance claims processing works. In most cases, the Insurance companies appoint a third part administrator (TPA) for claims processing. That means once the health insurance policy is sold, the insurer passes on the baton to the TPA. In case of a claim, the insured has to get in touch with the TPA for all versification and formalities.

There are 2 ways by which health insurance claims are settled:

  • Cashless : For availing cashless treatment (only at authorized network hospitals), the TPA has to be notified in advance (for planned hospitalization) or within the stipulated time limits (for emergencies). The insurance desk at hospitals usually helps with all paper work. The claim amount need to be approved by the TPA, and the hospital settles the amount with the TPA/ Insurer. Typically there will be exclusions and such amount will have to be settled directly at the hospital.
  • Reimbursement : Reimbursement facility can be availed at both the network and non-network hospitals. Here the insured avails the treatment and settles the hospital bills directly at the hospital. The insured can claim reimbursement for hospitalization by submitting relevant bills/ documents for the claimed amount to the TPA.

The TPA mode of claims settling has its own problems. The TPA is incentivized to limit insurance claims and they are not the one’s who sells the policy. There are many cases where the insured had a tough time to claim for his hospital expenses. So before taking health insurance it would be useful to check who the TPA is and how good are they when it comes to claims processing. Internet search and a friendly chat with the hospital staff can give you good insight on the insurer/ TPA. There are also some health insurance providers who do not employ TPAs and does claims settlement directly (this is called Inhouse TPA) .

Comments , What are the best health Insurance policies you are aware of ? Do you feel it makes sense to buy health insurance at early stage or after getting married only ? Please share your views on this .

This is a Guest Article from Ganesh who is an avid follower of this blog and his blog is My Graffiti Page. Please note that this post is NOT intended to promote or suggest any Health Insurance plan. If anyone is planning to take Health Insurance this New Year, the post can possibly provide some useful tips and pointers for selecting a suitable plan. Your comments and thoughts are most welcome.

254 CommentsAdd Comment

  1. Nitesh

    Hi,
    I want to purchase the family floater policy from National Insurance for 3 lakhs. Should this be a good option? Some body suggested me to go for Apollo Munich. Are the claims settled immediately with cashless with National Insurance? I stay in Bangalore. Which one do you suggest I should go for – National or Apollo?

    Thanks,
    Nitesh

  2. Amit J

    Dear Manoj

    Could you please advice on my step forward for Health Insurance. I am opting for Health Insurance from Oriental Health Insurance – Happy Family Floater covering (My Father 64, My mother under 60, Myself, My Wife and my 2 children) without Accidental Cover.

    Am I right in doing so or there are better splits like (For my father Natioanl Varishta and for my rest of family OIC – Happy Family Floater)

    Your help will keep things rolling.

    Thanks,
    Amit J

  3. Viir

    Hi Manish,

    Can we port mediclaim from one bank to another bank?
    Currently i have Synd Arogya mediclaim policy (individual). Can i port it to Canara Apollo Munich ?

  4. Ashish Chavan

    Hi Manish,

    I really appreciate the good work you are doing to help us out of ever so cluttered world of insurance.

    My Query is regarding Health Insurance for me(age 35) and my spouse (age 36) + Kid(currently no kids), I currently have a employer provided health insurance cover for 3 lakhs and I am planning to take an additional health cover (as company provided will only last till my employment).

    I am looking for ….
    1. Coverage on maximum number of critical and non-critical illness
    2. Provide health check up at regular intervals
    3. Easy claims processing (as I don’t expect my wife to run from pillar to post if I am ill)
    4. Long term benefit as I am currently looking at this as backup medical insurance but this will be the only one post my employment/retirement, I am OK if this costs me a little more in premium.

    Please advise.

    Thanks and Regards
    Ashish Chavan

  5. C.M Krishnan

    hi, i just went through all the Q and Ans and your site as well. thanks , it is very informative. I have a query my wife was hospitalised for an Ovarian cyst and hysterocomy, the expenses for which went up to Rs. 1,35,600. I put in all the papers for claim, but the TPA has passed only 1,02,000. Can you expalin this to me because I am at a loss of thought process because of the huge cut put forth by the TPA.

    • I am sure there were few things for which payment was not made and it must be as per terms and conditions . Things like registration charges are not paid by health insurance . Check this with the TPA only /

  6. [email protected]

    Hi Manish,

    Thanks for this helpful article, I am going to buy medi-claim policy for me and my family, but I have following few doubts in it. Please help me to decide.

    I am 29 years old, My wife is 27 years old, expecting baby in next few months. My Mother is 58 years old. Me and My wife are healthy, My mother is having diabetes and hypertension since 2 years.

    Q1. Should I buy Family floater policy or Individual? Or, individual policy for my mother and family floater for my rest of the family? Please suggest.

    Q2. Is it true, that in family floater, If senior most person expires then whole policy lapse and rest of the member need to take policy again?

    Q3. Is it possible to add new member in policy? as I am expecting baby in next few months. If yes, then will it affect pre-existing deseases waiting period and how?

    Q4. I am thinking to buy policy without maternity cost cover because people says that that will increase premium considerably. I am planning to cover this cost from the mediclaim policy offered by my company. Am I doing right thing, Is it correct decision? Please suggest.

    Q5. In my specific case which insurance company you would suggest, which best suite to my requirements? I have few in my list: Oriental ,Star Health, Apollo Munich , Max Bupa.

    Q6. What is good when we renew policy continue for 2-3-4-5 years? (a) Increase in policy cover OR (b) Decrease in premium?

    Thank you,
    Rohit

  7. suryansh gupta

    Well explain manish i got lot of information one more thing if u hv govt co mediclaim calculator in excel please send me

  8. Mandy

    Dear Sir,
    I am 35 yrs old and looking for long term health plan .
    I am very much confused for the following reasons.
    I did some research on the Health Insurance packages available in the MKt right now.
    I observed that maxbupa, Apollo munich and Star health are offering some good plans.
    But Medical insurance plan are of max for 2 yrs term afterwards renewal is required + they have premium based on age band like
    (1yrs – 35) ( 35-45)…. But i observed that at the age of 55-60 there premiums are floating anywhere between ~60k to 1lakh.
    I was in thought what if a person take such health plan and continue to 15-20 yrs with no claim bonus then on attaining the age of 60
    if he would be unable to pay such high premium ( 60k to 1 l) becoz of some reason or other reason.
    then he will be no longer get any benefit from such medical insurance even though he paid a premium for good long length.
    My question :-
    Is there any Plan in mkt (just like general insurance)that offer flat premium let’s say 15k/annum for a term of 20-30 yrs.
    Don’t mind if the medical coverage will be less. At least a person can secure himself by such insurance with less benefits.
    Or what will your suggestion in above scenario.

    Regards
    Mandy

  9. Satish

    Hi Manish,

    Thanks for sharing the knowledge. I got a lot of info from your forum when I took home loan from SBI. Now it’s health insurance turn.

    I realized the importance of health insurance recently when one of my aunt was diagnosed with breast cancer. It was in initial stages and she was operated in Apollo hospital, Hyd. It costed them around 8 to 10 lakhs including many other things. My uncle being a govt. employee, the amount was taken care of. I imagined myself in that situation and realized the effect of future uncertainties. Coming to my current situation, I am planning to take policies for my father and mother aged 53 and 49 respectively.

    (i) Is it better to take individual policy for each of them or single family policy in view of future? Also suggest some policies which are relevant
    (ii) I aged 29, covered by my employer for 1.5 L and I know that it is not sufficient. Suggest some policy for me as well.

    Thanks,
    Satish

  10. Bharti

    Hi, I had purchased LIC health protection plan in 2009/2010. My annual premium is 15000. I would like to know if I should continue this policy. If no, what are my options.
    Thanks so much!

  11. Nirav

    Hi,

    I am 29 yrs old with Type-1 Diabetes. Recently I checked with 1 of the companies for medical insurance for me and my mother (aged 59) and they quoted a premium of about 25000/- for a cover of 5 lacs.
    Now I want to check whether paying such a huge premium makes sense, as within next 20 yrs I would pay 5 lac as the premium amount.

    Thanks
    Nirav

      • Nirav

        Thats true,

        But the thing I wanted to check was whether the 5 lac cover gets renewed every year. Suppose I use my 5 lacs in next few months, then for the rest of the year I won’t be left with any cover available. But will I be eligible for 5 lacs next year again?

        Thanks

  12. Vivekanand S

    Dear Manish,

    What proportion of premium paid goes towards agent commissions (initial/trail)? Is there any way I can take a health insurance directly from the insurer? If so, what are the hazards/pitfalls of the same?

    Cheers,
    Vivek
    PS: Keep up your great work!

      • Vivekanand S

        Thanks for clarifying, can you please address the other queries:
        1) taking a health insurance directly from the company, thereby saving the ~7.5% commission. Is there a way that I can do so in a manner comparable to that of life insurance companies?
        2) If the above is possible, then kindly shed some light on the benefits/pitfalls of the same.
        3) Role of an agent in health insurance. Is an agent really necessary?

  13. raj

    Can there be any difference in Health policy coverage if taken from an Agent vs taken from BANK (AS AN AGENT)?

    Regards and thanks

  14. vivek

    I have an individual policy for my father from NIC (National insurance company ) for SA 2 lakhs, morever i also have covered my father through our group insurance policy from Bharti Axa General Ins ltd (Policy Type – Voluntary Parents – Group Mediclaim Policy) with SA of 1,50,000.
    My fatherwould be undrgoing a bypass surgery in next week which would cost 2.8 lacs, can my claim be settled by both insurers, if yes then could you elaborate the detail process for same. Please help.

  15. Gautam Sarkar

    I am to retire from my job in Nov 2012 at the age of 58. I require a health insurance policy for self,my spouse aged 52 and son aged 20. All of us are in sound health with no medical complications. Could you suggest me the best options. SA should be around 3-4 lacks for all.

  16. for people above 55 yrs old & NRI , wants to move back t India with some health issues are elligible to get health Ins in India ? & are they cover the policy in USA also ?

  17. bimal Mehra

    Hi,
    I am looking for family health insurance which needs to cover my parents (Dad-63 mon-56) as well as wife+myself.I got following queries:
    (1)Is it possible to cover my Dad who is 60+ under the same policy , (he has a sound medical record).
    (2)I’m 30 yrs and planning to have kid in near future , is it possible to pull the young one under the same policy, is there any Min age limit to cover.
    (3)my annual sal. is in 7fig. premium amount shuld not be prob. suggest me good cover amount.
    (4)will it be good if I take “Varishtha Mediclaim Policy ” as mentioned above in your post for my parents and take separate FF for my family.
    Thanks in advance.

  18. Manoj

    Hi,

    First am really surprised and congratulate all the persons for giving such informative inputs.

    My query is as follows:

    I want to take a health Insurance policy which should provide the following:
    1. Economy premium.
    2. Sum insured, 2-3 Lakhs max.
    3. Family Floater of me ( age 30 years), spouse 28 years and Daughter 1 year.
    4. Maternity cover ( good to have but not must)
    5. Initially I will take 2-3 lakhs policy, which I would like to increase to 5 Lakhs after 4 years and at end of 2020, I would make it as 10 Lakhs.
    6. Renewal of policy upto maximum, I read religare covers upto 85 years of age in Health cover.

    I am seeing Max bupa -silver, Oriental happy family policies.

    Please suggest any other option which I should look for.

    Thanks

    • rajendran

      sir, Iwould like to take a medi claim policy for my family , My self aged 58, my wife aged 55, and my son aged 20 years. My wife was undergone a surgery for anurism 4 years back and she is diabetic, and BP patient both controlled with medcine and now she is all right. No complication with her surgery so far . she is healthy, doing his work without any problem. So now I ask you ,whether she is eligible for a mediclaim policy and which is better. thanking you sir

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