What is Health Insurance
03 June 2019
Usually, the first thought that pops up in your mind when you enter a hospital is how much lighter your wallet will be when you leave. In a world of advanced technologies, the field of medicine is one of the frontrunners, and with technology comes cost. It is not uncommon for a routine check-up bill to run into the thousands and a longer stay at the hospital will invariably set you back by a few lakhs. At least when you’re in a hospital for a treatment, a reliable and comprehensive health insurance policy might just save your day, and your wallet.
What is Health Insurance?
When you choose a health insurance policy, your medical expenses will be taken care of by your policy provider and in return, you are required to pay an annual fee, called ‘premium’ which can also be paid in monthly instalments. Depending on which policy you opt for and who provides it, health insurance protects your wallet by covering treatment expenses, hospitalization charges, ambulance costs, laboratory costs and other related expenses. Some policies even cover compensation for lost income.
Why should you have a health insurance policy?
Just to give you a perspective about the growing need of health insurance coverage in India, according to the report by WHO, 68% of Indian health expenses are Out Of the Pocket (OOP) which is alarming. Also, only 18% of urban and 14% of rural population in India is covered under health insurance. Purchasing a health insurance at a young age is a prudent decision since premiums are a lot lower. It is worth noting that many policies do not cover pre-existing illnesses and illnesses occurring within 30 days of purchase of policy, except those incurred by an accident.
If you don’t have a health insurance policy yet, or are thinking about getting one, here’s a list of reasons which will make you aware of the importance of health insurance.
- Cashless treatment: All major health insurance providers have many popular hospitals under their network, called network hospitals. Whenever you enter one of these hospitals for a treatment, all you have to do is flash your health insurance card (or even just your insurance policy number), and everything will be taken care of after filling a few forms, if required. If you choose a non-network hospital, however, you will have to pay for the treatment and claim reimbursement later. So, cashless treatment is one of the biggest benefits of a health insurance policy, as only few of us can arrange large sums at short notice for treatment purposes.
- Rising Medical costs and Health disorders: According to statistics by India against cancer, the number of cancer patients registered every year is 11,57,294 in 2019. Cancer rate has nearly doubled in the last 26 years in India. Along with this, other life-threatening diseases like tuberculosis and diabetes are also on the rise. Add this to the ever-increasing cost of medicine and treatment and you will have to look no further as to why health insurance is a must.
- Free Medical check-up & Additional Benefits: Many insurance companies provide free medical check-up every year as a complimentary benefit for their customers (although, some companies provide free check-up only if you haven’t claimed insurance for the past few years). You will also be eligible for a No Claim Bonus (NCB), that is, the sum insured amount of your policy increases by a certain amount provided you haven’t claimed insurance, except as an outpatient, during the policy period. In addition to this, ambulance charges, pre and post hospitalization charges are some of the other benefits offered by insurance companies.
- Tax benefits: Under section 80D of the Income Tax Act, you can avail tax benefits for the premiums paid towards your health insurance policy. For individuals under the age of 60, a total deduction of ₹50,000 can be claimed if the parents of the individual are below the age of 60 (₹25,000 for Self, Spouse and dependent children and ₹25,000 for parents) and ₹75,000 if parents are above the age of 60 (₹25,000 for Self, Spouse and dependent children and ₹50,000 for parents). If both the individual and parents are more than 60, then a total of ₹1,00,000 deduction can be claimed.
- Peace of mind: Above everything else, having a well-planned insurance policy covering your back is a great relief especially when there is an alarming increase in life-threatening diseases in past few decades. It can save you and your family in times of medical emergencies and above all, in your overpacked daily schedule, you will have one less thing to worry about.
Now that we understand and appreciate the importance of health insurance, let’s have a look at what you need to consider while choosing one.
What to consider while looking for a health insurance plan
- As advised before, it is better to buy a health insurance policy at a young age. Premiums tend to increase with age, as do the risks of health issues.
- Look for a policy which covers terminal illnesses. These are the ones that tend to drain our finances the most, so it makes no sense to not include them in covered list.
- Do not choose a policy with high co-payment clause. Co-payment is the portion of the bill you have to pay from your pocket when a claim arises. The rest is paid by the insurance company, as per the terms of the policy.
- Choose the relevant riders/add-on features along with your health insurance policy, which can add to the overall coverage net of the policy.
Types of Health Insurance
Indemnity Plan: In this case, a certain amount of the hospital expenses is to be paid by you, and the insurance provider will take care of the rest of the bill. You can choose which doctor to visit and the insurance company does not get to decide the hospital or verify whether the visit was necessary. But this autonomy is only to a certain extent. Clearance from the insurance company is still required in case of emergencies, for admission into an emergency room if you are not incapacitated. If you choose Indemnity plan, you will have to pay the whole bill out of your pocket first then claim for a reimbursement.
Exclusive Provider Organization (EPO): Members of an EPO plan will be required to use a defined network of physicians and a Primary Care Physician (PCP) who will provide referrals to network specialists for treatments. However, this condition is not applicable for emergencies. You will be responsible for a small amount of co-payment too.
Point of Service (POS): Just like in EPO pan, POS also provides a PCP to choose from the network providers. In such cases, you will receive higher coverage. However, if you choose a non-network hospital, you may be subject to a deductible (co-payment) and coverage will be less too. Also, you may have to pay up front and then claim a reimbursement.
Add-ons for Health insurance
- Top-ups: A top-up plan combined with a basic insurance plan will provide you sufficient coverage with affordable premiums. Top-up plan is an additional coverage which kicks in when your health expense crosses the amount covered by your basic insurance plan. While top-ups cover the expenditure of a single hospitalization, super top up plans cover the expenses of the entire year over a wide range of illnesses.
- Riders: By adding a rider to your basic health insurance plan, you can expand your insurance coverage by customizing it as per your requirement for an additional charge. There are many riders to choose from- Critical illness rider, maternity rider, personal accident rider etc.,
- Defined benefit plans: Basic health insurance plans generally do not cover non-hospitalization expenses like food, travel expenses of your attendant, medicine expenses and treatment expenses for illnesses which did not cause the hospitalization when you were hospitalized, etc. Defined benefit plans will come to your rescue and provide you an assured pre-defined benefit regardless of your expenses.
What your health insurance policy will not cover
- Illnesses as a result of substance abuse: If it is evident that your illness is a result of excessive smoking, alcohol consumption and other illicit substances, your claim will be rejected.
- Treatment at home: If the patient is not hospitalized, the claim will be void. Although, some policy providers may cover treatment at home, the amount that can be claimed will be less.
- Certain Drugs and medications: Not all drugs used to treat critical illnesses like cancer are covered by the insurers. Some chemotherapy drugs which are taken orally are not covered, drugs falling under immunotherapy are generally not covered too. Some policies do not cover the injections administered intra-artery and intra-lesionally.
- Resident doctor’s charges: If the resident doctor’s charges are mentioned separately in the bill, it will not be covered. However, if it is included in the room charges, it may be covered depending on the policy provider.
- New or Advanced treatments: Unproven or experimental treatments like robotic surgery are not a part of policy coverage. Stem cell therapies are also usually not covered.
- Non-medical expenses: Expenses related to Toiletries and other convenience items are excluded from policy coverage. For the list of all items excluded from coverage, you can refer the circular no. IRDA/HLT/CIR/036/02/2013 released by IRDAI.
- Pre-existing illnesses: Usually pre existing illnesses are either not covered at all, or not eligible for claim until a certain lock-in period decided by the insurance company.
Summing up, the importance of health insurance cannot be overstated. It is imperative that you get a health insurance plan for yourself, your spouse, your children and your parents, as early as possible. You can avail our health insurance plan here.