Namrata Singh, CFP & Chaitali Shah, MA (Economics)

 Health insurance is a type of insurance that covers medical expenses that arise due to an illness. These expenses could be related to hospitalisation costs, cost of medicines or doctor consultation fees.

Importance of Health Insurance

As per government statistics over 70% of health care is paid from personal savings. Medical expenses have the capacity to wipe out one’s lifelong savings. A lot of people have seen their friends and family going through distress because of high medical expenses triggered by the current Pandemic. The company provided health policies can fail  in case one changes jobs. An independent health insurance policy is recommended even when one’s company covers your medical expenses.

Health Insurance Plan Types

• Individual Health Insurance
• Family Floater Health Insurance
• Group Health Insurance
• Critical Illness Insurance
• Top up Health Insurance

 (Please note that Critical Illness Insurance can also be taken as a rider/ add on. We would be covering Critical Illness in details next week)

 Important considerations for inpatient coverage for  treatment at the hospital are as follows:

1. Room Entitlement per day: Some health insurance policies may cap room rent to 1-2% of the sum insured. Example : For a Sum Insured of INR 3 lac , with the room rent capped at 1%, one would be eligible to take a room that costs Rs. 3,000 a day. If a policyholder exceeds the room rent limit, the insurance company pays the partial payment of the claim,  and the balance expenses would be taken care of by the policyholder. There are some plans which have no capping on room rent.
2. Surgeon, Anaesthetist, Specialist fees: All health insurance policies will cover reasonable and customary charges pertaining to the Surgeon, Anaesthetist and the specialist.
3. Listed Day Care Procedures: Day-care procedures are those treatments that require hospitalisation for less than 24 hours like Chemotherapy, Radiotherapy, Dialysis, etc. Please note that some health insurance policies do not cover day care procedures.
4. Pre Hospitalisation Expenses: Pre-hospitalisation expenses are medical costs incurred by the insured before getting admitted to a hospital. Some health insurance policies cover such costs for anywhere between 15–60 days before the policyholder is hospitalized.
5. Post Hospitalisation Expenses: Post hospitalization expenses are expenses that are covered after the insured has been discharged from the hospital. Most insurance companies provide coverage for up to 10- 90 days post-discharge.

Some of the common Exclusions / Restrictions are below:

1. Pre – existing diseases: A pre-existing disease is any health issue that the proposer has been facing prior to purchasing the health insurance policy. The pre-existing conditions include all the health issues ranging from high blood pressure, thyroid, diabetes, asthma, etc. People with pre-existing health issues often have to undergo various procedures. This could mean refusal from the insurer to pay the bill, cancellation of coverage of the  medical insurance policy. It is extremely important to disclose your pre-existing conditions before buying a policy to ensure that claims are processed seamlessly.
2. Waiting Period: Waiting period is the amount of time you need to wait to avail benefits of health insurance policy benefits.

There is an initial waiting period for all health insurance policies is generally 30 days. The waiting period for pre-existing diseases ranges between 2 to 4 years. There can be specific waiting periods for certain types of medical conditions including Cataract, Hernia, Maternity benefits, etc.

1. Standard Exclusions: Most health insurance will not cover elective or cosmetic procedures, beauty treatments, dental treatments, Alternative medicine, etc.
2. Ailment Sublimit: All hospitalisation expenses admissible in respect of the condition/ ailment will be restricted to the specified limit during the policy period.

For example for a cataract surgery the insurer may pay 10% of Sum insured or Rs.50,000 whichever is higher per eye.

1. Co – Pay:  This refers to the percentage of the claim amount that has to be borne by the policyholder under a health insurance policy. Few insurance policies come with a mandatory clause for co-payment, while others offer policyholders the option for voluntary co-payment, which allows them to reduce their premium payment.

1. Pre Insurance Health Check-up:. Pre-policy medical examination refers to the medical examination requested by health insurers before providing coverage to a person. This is to minimise their risk in covering a person. This is required only for applicants over a specific age.

Insurance Claims can be settled in the following ways:

Through a Third party administrator (TPA). A TPA is appointed by the insurer. A TPA is an intermediary which helps in  the settlement of a health insurance claim.

In House claim settlement : Some insurers set up an entire department within their company to act as in house  claim processing department. They do not have a TPA.

Cashless hospitalisation access: In  Cashless claims, insurance companies pay directly to the hospital. In case of emergency, one can get admitted without worrying about finances.

Some Health Insurance Plans provide the following additional benefits:

Daily Cash Benefit: Some policies provide a daily cash to the insured during the hospitalization. The money can be utilized to meet the additional expenses that health insurance does not cover for compensating any loss of income during the hospitalization period.

Renewal Benefit: In the event of no claim, the insurer may increase the sum insured for every claim free year.

Restoration Benefit: Restoration benefit is a benefit wherein the insurance company restores the original sum insured after it gets fully exhausted for the treatment of the illnesses. So, even if one consumes the entire sum insured, the insurance company can restore the entire amount and one can use it in the future. Please note that not all insurers provide restoration benefits.

 

Taxation:

Section 80D of the Income-tax Act, 1961 provides income tax deduction for health insurance premium and select health expenses. Health insurance premium can be claimed as deduction up to Rs. 25,000/- for persons under 60 years and up to Rs. 50,000/- for those aged above that. One can claim deduction for premium paid for their spouse, dependent children and parents.

 

Please note that Health Insurance premiums increase with age. There can be health issues which will make one ineligible for a health insurance cover.  Young people get health insurance at a lower premium.

The Health Insurance Policies offer the insured individuals financial assistance during any medical emergencies.  Buying Health Insurance will help one deal with medical uncertainties in a much easier and a better way without putting any burden on one’s pockets.

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Namrata Singh is a Certified Financial Planner with more than 14 years of experience in banking and wealth management. (namrata@asinvestment.in)

Chaitali Shah, MCom & MA (Economics) was a Financial Economics – Faculty at Wilson College, Mumbai (info@wealthron.com)

(Please note all views are personal)

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