POSTED BY August 4, 2011 COMMENTS (57)ON
Health Insurance sector is such a new thing in India that a lot of people have dozens of health insurance myths regarding various things and because of that they feel that this whole thing is so complicated. Today I will burst some of your long-term medical insurance myths which will help you choose right products and also build right expectations from health insurance policies.
This clause always reminds me of an incident. A little over a year ago, we were having our weekly meetings, when a doctor friend who owns a hospital in Mumbai frantically called us. A woman was making a ruckus in this friend’s hospital, insisting doctors continue hospitalization of her son and discharge only after 24 hours, as her “advisor” had informed her that they would get the claim only if the hospitalization is over 24 hours. This incident brought to light the magnitude and the level of fallacies customers have about Health Insurance. Advisors, Representatives, Telemarketers, and even hospitals and customers have frazzled their throats out on the 24 hours clause, while explaining or even using the product.
Though, the policy does mention this as one of the clauses, the 24 number in real world of claims holds lesser importance. The clause, in spirit, requires the hospitalization to be “necessary” more than it to exceed “24 hours”. This was purely from the general understanding that most hospitalizations less than 24 hours are treated under “Out-patient” (treatment at the Doctor’s Dispensary) not covered under a Standard Mediclaim. Hospitalizations (like Cataract), though required 2-3 days earlier, which are now possible due to advancement in medical science in less than 24 hours are covered, while, hospitalization by an insured for more than 24 hours for getting his routine diagnostic tests done, while no active treatments are being carried out, would not be payable under Mediclaim.
The thumb rule of a whether a claim is payable is not 24 hrs hospitalization but whether the hospitalization was medically “necessary” or not?
This is a clause that most people looking for a Mediclaim are confused about (17 Most asked questions in Health Insurance). I speak to many customers whose requirement with mediclaim is that they do not want a waiting period for pre-existing ailments. This, in spite of their entire family being completely fit, without any ailment, whatsoever. Somehow, the clause again being so popular has brought in its own confusions for customers. In reality, the 4 year Pre-existing exclusion on ailments is applicable to ailments existing at the time of applying for the policy, and not any other ailments. If you do not have any ailments or conditions, you have no pre-existing waiting period.
When applying for a Mediclaim, if you are completely healthy, the Pre-existing exclusion clause is not applicable to you
Ever since it was introduced as a value addition to Mediclaim, Cashless has remained a buzz word. To a level, that for a lot of people, Cashless became a prefix, or, even synonymous to Mediclaim. The reason for the cashless concept getting popular was obvious; it was a great value add, which helped customers tide away the burden of large payments on their bank account, documentation and of course, the stress of waiting for the claim cheque. Yes, Cashless can do all this, but expecting it to work when there are emergency funds required for Hospitalization is asking for too much.
You should understand the Cashless mechanism as a concept to know why it cannot be depended on at the time of emergencies. Cashless is an arrangement between the Health Insurance Company/TPA and the Hospital where, the Hospital agrees, under contract, to grant credit facility to the Insurance Company/TPA against authorized claims. Such an arrangement is only for authorized Claims, and not for all claims. TPAs/Insurance Companies, hence, need to assess every claim received, against the policy terms and conditions, to authorize payment. Such an authorization could require additional information as well as documents and hence can take anywhere for 4 hours to 2 days of time. In their role, the TPA or the Claims Team at the Insurance Company would have to do its job of evaluation of the claim, irrespective of how urgent the medical admission or treatment is. Cashless will help you save the burden of processing a reimbursement claim, but it cannot provide you the convenience of on-call emergency funds.
Moreover, one should also note, unlike the hospital cashier, Insurance Desks in hospitals (which coordinate for cashless claims) have fixed work-hours from 10.00 AM to 7.00 PM. Cashless process and approvals after 07.00 PM are processed by the Hospital the next day. Hence, though the TPA provides 24/7 service, the cashless process may not move, once the Hospital stops working on it.
Expecting Cashless to work as an on-call Emergency Service is foolish. You should plan your emergency medical fund, as well as ensure you have good unutilized credit card limits, always.
Most Insurance Companies (specially the Private ones) flaunt a large list of more than 100 Day Care Procedures being covered under their policy. In fact, it is a highlight of their product pitch. The truth is comparison of such numbers can be very misleading. One company could list every procedure, while another could list macro-level treatments, including the listed procedures of the former. For instance, a person who compares Apollo Munich’s Easy Health Insurance which covers 140 Day Care procedures, with an Oriental Happy Family Floater which covers only 26 procedures would feel that Apollo has wider cover on Day Care Procedures. Believe me, but it could actually be the reverse. How? Oriental promises to cover Eye Surgery (a broader definition) in its daycare list, compared to say an Apollo which lists 15 specific eye treatments, which results in a larger number. Now, if the treatment being carried out is an eye surgery, which is day care but not a part of the 15 specific treatments, Apollo or many other Private players may not pay, whereas, in the case of Oriental it would get paid in the broad definition of eye surgery. By providing a specific list of surgeries instead of a macro area of treatment, the coverage under Apollo may actually be more restrictive in the long run than Oriental’s wide area of treatment wise list.
A short list of procedures could be wider than a long one. Do not compare the no. of Day Care Procedures.
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Many customers, we have interacted with demand Hospital network lists. They select the mediclaim product depending on whether their preferred hospitals are part of that Insurance Company’s list. What they fail to realize is that a Hospital Network is ever-changing. Insurance Companies regularly blacklist defaulting Hospitals. Hospitals blacklist or refuse cashless of certain Insurance Companies/TPAs for delayed payments. What is clear from this is that there is no fixed or contracted list of hospitals between your Insurance Company and you – which means there is no assurance that the hospital name in the list, which you are depending when you buy the policy, would exist in the network when you have a claim, say 4 years down time.
Network List of Hospitals are not fixed or contracted through policy terms. Do not depend on the network hospital list to decide a suitable product for your family. The list could change even tomorrow, in fact it could change any moment.
Public Sector (PSU) Mediclaim products and their current terms and conditions are evolved from experiencing and analysing millions of claims spread over more than 20-25 years. Hospital Rooms are classified into various categories like General, Shared, Private and Deluxe Rooms. Earlier without the room rent limits, for the same treatment, a person with a sum insured of 1 Lakh paying a measly premium of say Rs. 2000, would have access to the same category of room, as a person who pays 5 times the premium, and takes a Rs. 5 Lakhs cover for himself. The 1% and 2% Room Rent Limits in Mediclaim brought a clear sync between the kind of premium one pays and the eligibility of room. With such cappings, an individual who pays a high premium gets a better room, than one who pays a smaller premium, for the same treatment, which is fair. It’s like any other product with categories, like Indian Railways, providing you better facilities/services, as you move from 2nd Class to 3rd AC to 2nd AC and so on. In my opinion, sooner or later, Insurance Companies would either have to hike premium for lower sum insured or bring in a capping of some kind. For instance, the newest health insurance company – Max Bupa, has a restriction on the type of room according to the sum insured selected, instead of a “no capping on room rent” feature.
Cappings are good for Health Insurance as a community fund. Cappings could actually be helpful to customers in the long run.
The highly advertised Health Plans from LIC are Defined Benefit Health Insurance Plans, sold as “hassle free” alternatives with guaranteed payments. These plans should not be considered as a substitute to Standard Health Insurance plans sold by General Insurance Companies. These plans provide fixed benefits against no. of days of hospitalization and/or surgeries. These plans do not take care of healthcare inflation. For instance, with 18-25% healthcare inflation, a fixed benefit for Angioplasty at say, Rs. 1,50,000/- would miserably fall short in 10 years. Defined Benefit products are actually supplementary plans which provide a cover over allied costs of hospitalization including loss of earnings, if any, but such products surely cannot be a substitute to the good ol’ traditional mediclaim. Read more about the difference here.
Beware of what you buy. A Traditional Mediclaim should be the first product you buy to cover the financial risk of healthcare expenses of the future. Defined Benefit Products are supplementary and not substitute to Traditional Health Insurance.
A large Healthcare expenditure can severely affect your financial planning for the future. The goal when you buy Health Insurance should be to financially insure your family against such large scale healthcare expenditure. Buying a health insurance product blindly, for the 80D tax benefits, is a wide-spread fallacy, which has left a large no. of people underinsured or insured with products which are not suitable. The worst part is most of them are unaware of this.
Health Insurance at its core is not a Tax Saving Instrument. It could save you much more than your tax, if you invest wisely.
Expect changes in your product, terms. Don’t be surprised. The Health Insurance companies and other stakeholders in India are going through a mindset change. Losses in Health Insurance are no longer acceptable by key stakeholders at Insurance Companies. A lot of streamlining and normalizing in premium, terms, benefits and procedures, which have already begun, is expected in the next 5 years. Group products would turn expensive, and restrictive. Parents would be out of most Sponsored Employee Mediclaim Covers. Large and small tweaks are expected in Retail/Individual products and processes, especially from new and private players who are till experimenting and understanding how to make a long term sustainable (read profitable) product for the Indian market.
For instance, last year, PSU Insurance companies tightened the procedure of intimation and submission of reimbursement claims. Customers who were not aware of such a change faced harsh action of denial of claims, and lost good money.
Ensure you are updated with changes in the terms and procedures of your Mediclaim Product. Ensure you have recruited a good advisor who keeps you posted on such changes.
Don’t know how many of you have observed at the time of renewals, but PSU companies and their divisions are infamous in the industry for changing their TPAs year over year. With TPAs being the custodian of claims, change in TPAs could result in scattered claims information amongst various TPAs across years of continuous renewals. Hence, when there is a claim, the TPA in all probability won’t have information regarding how long you are continuously covered, an essential data point to approve claims, especially, and those treatments which had a waiting period at entry into the policy. TPAs for evaluation of continuity may demand policy copies of past 3 to 4 years. Hence, destroying policy copies records have cost many customers lot of stress in proving continuity of cover. Yes, we know that it is ridiculous for the Insurance Company or its representative to ask for their own record from the customers, but then this is how it is. A good health insurance advisor knowingly would keep a repository of all policy copies, to ensure such queries do not create roadblocks in a smooth claim settlement.
In addition to the current one, keep copies of at least 3 previous year policy copies. Ensure your advisor also records them.
No offence to agents, but in our interaction with Customers, we have noticed time and again, that most customers, who were found with a wrong health insurance product, bought these either from a friend, a friend’s relative, or a relative, or a relative’s friend. Most of these customers did not spend enough time in selecting an advisor, and relied on pure reference. Most of these agents selected were Life Insurance agents, who did not have a detailed understanding of mediclaim products, neither were they providing any real expert assistance (beyond picking of forms, and providing the TPA’s no.) at the time of claims. The advisor selected should have the capability and the intention to provide unbiased advice, the advisor should forever own the product they sold you, and provide services across the Health Insurance service cycle, including Purchase Assistance, Records management, Claims Assistance and Renewals. A good advisor would be able to hand hold you through the dynamic transformation that the Health Insurance industry in India, is witnessing and will continue to witness for the next 2-3 years.
Conclusion on Health Insurance Myths
Select an advisor on merits and the services he demonstrated, and just not merely on reference.
What was the biggest and most valuable learning for you out of this article ? How many of your health insurance myths were really broken ? Please share it on comments section .