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Decoding health insurance

india Updated: Jun 13, 2007 21:17 IST

Health insurance has become a necessity. The galloping medical cost has ensured that a common man cannot bear the burden of a sudden hospitalisation. It is health insurance which comes to the rescue in such circumstances.

People are now aware of this reality and acknowledge this by taking a health insurance policy popularly called mediclaim. But is the prospective buyer aware of the fine print in a typical health insurance policy?

On one hand high claim ratios and a sharp dip in the margins in other corporate insurance products have made the insurers increase the conditions in health insurance policies. Insurers are also doing away with their previous benevolent attitude and are now enforcing the fine print.

On the other hand, insurance companies have launched many new policies with different terms and conditions. In such circumstances it is important that the buyer should understand the fine print of the policy.

Important terms and conditions to understand are:

Health insurance policies start with the condition that they shall reimburse in-patient medical expenses, which are "reasonably and necessarily" incurred for the treatment of a disease or injuries sustained in an accident. Hence, insurance companies have started questioning whether a single bed AC room taken by a person earning a monthly salary of Rs 20,000 is reasonable and necessary.

The condition of reasonability and necessity is fulfilled by the answer to the question that whether the insured person would have behaved in the similar manner had he been not insured.

Insurance companies have started imposing a ceiling on the "room, boarding and nursing expenses" A typical condition would read "Room Rent Limit: 1 per cent of the sum insured per day subject to a maximum of Rs 5,000. If admitted in IC unit, 2 per cent of the sum insured per day subject to a maximum of Rs 10,000".

Insurers now limit the total reimbursement towards room, boarding and nursing expenses per illness. Typically, they are limited to 25 per cent of the total sum insured. This means that if an insured has a sum insured of Rs 2 lakh, then the maximum expenses allowed towards room, boarding and nursing are Rs 50,000. Therefore, an insured should choose a room keeping in mind such limits and the expected duration of stay.

Some companies also limit the per illness reimbursement towards surgeon, doctor and anesthetist’s fee. The reimbursement towards OT charges, consumables like anesthesia, blood, oxygen, surgical appliances, medicines & drugs and diagnostic material & X-Ray is also capped by some insurers. An insured should be well aware of such limits so that the hospital expenses can be planned accordingly.

All insurance policies reimburse in-patient medical expenses incurred in a nursing home or a hospital. However, it should be noted that the policy reimburses expenses incurred in only such nursing home/hospitals which are either registered with the government or have at least 15 beds, a fully equipped operation theatre and qualified nursing staff and doctors who are available round the clock.

Many insured people prefer to get treated by the doctors they trust but it is important to check whether these conditions are fulfilled by such doctors’ nursing home.

All policies cover expenses only if the duration of stay in the hospital exceeds 24 hours. Hence, the treatment of fractures and dislocations many times becomes a cause for dispute. Many policies now explicitly mention that the treatment of fractures is covered even if the treatment is less than 24 hours.

Policies now cover reimbursement of expenses immediately before the hospitalisation and for a certain period after discharge from the hospital. This period is called pre-hospitalisation and post-hospitalisation and varies between 30–60 days for pre-hospitalisation and 45–90 days for post-hospitalisation. A longer period means more benefit to the insured.

Insurers do not cover certain diseases like hernia, cataract, piles etc for a specified period when the policy is first taken. This period varies between one to two years and is called "First Year Exclusions" in the insurance parlance. The insured should confirm the diseases which are not covered as they vary from company to company.

Different insurance policies take different stand on the reimbursement of expenses incurred on "external medical equipments" like crutches, belts, collars, splints, slings and braces etc. While some policies explicitly deny coverage, others are silent on it, which leads to confusion and dispute at the time of a claim. It is better to have this clarified while taking the policy.

A health insurance policy is a legal contract between the insured and the insurance company. A Third Party Administrator will treat the claim within the confines of this contract. Hence, it is important the buyer is aware of the terms and conditions of this contract. A buyer should either go through the contract thoroughly or should enlist the services of a knowledgeable broker to help him take a suitable health insurance policy.

(The writer is CEO of Optima Risk Management Services Pvt Ltd)