health insurance final pro

7/30/2019 Health Insurance Final Pro

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INTRODUCTION

Definition:A contract (policy) in which an individual or entity receives financial

protection or reimbursement against losses from an insurance company. The

company pools clients' risks to make payments more affordable for the insured.

Insurance is the equitable transfer of the risk of a loss, from one entity to another in

exchange for payment. It is a form of risk management primarily used to hedge

against the risk of a contingent, uncertain loss.

An insurer, or insurance carrier, is a company selling the insurance; the insured, or

policyholder, is the person or entity buying the insurance policy. The amount to be

charged for a certain amount of insurance coverage is called the premium. Risk

management, the practice of appraising and controlling risk, has evolved as a

discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively

small loss in the form of payment to the insurer in exchange for the insurer's

promise to compensate (indemnify) the insured in the case of a financial (personal)

loss. The insured receives a contract, called the insurance policy, which details the

conditions and circumstances under which the insured will be financially

compensated.
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Health insurance

Definition: A type of insurance coverage that pays for medical and surgical

expenses that are incurred by the insured.

The term Health Insurance is used to describe a form of insurance that pays for

medical expenses. It is used more broadly to include insurance that covers

disability or long-term nursing or custodial care needs. In simple words, if you are

covered under Health Insurance, you pay some amount of premium every year to

an insurance company and if you have an accident or if you have to undergo an

operation or a surgery, the insurance company will pay for the medical expenses.

It takes just one visit to a hospital to make us realize how vulnerable we are. It is a

tough ordeal if you are diagnosed with an illness and need to be hospitalized, no

matter if you are rich or poor, male or female, young or old. The list of lifestyle

diseases like heart problems, diabetes, stroke, renal failure, some cancers just

seems to get longer and more common these days. Thankfully there are more

specialty 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 5 figures. A

Health Insurance Policy can cover such expenses to a large extent.

Life is full of uncertainties. Risk lurks in every nook and corner of human life. In

short, life is unpredictable. We need to be prepared for such circumstances.Leading a happy life, involves good planning and analysis for your personal health.

Accidents do happen and you need to be prepared for such situations. In times of

high health cost, you need to get covered for health risks.


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Escalating cost of medical treatment today is beyond the reach of a common man.

In case of a medical emergency, cost of hospital room rent, the doctor's fees,

medicines and related health services can work out to be a huge sum. In such

times, health insurance provides the much needed financial relief.

Health insurance in India

Health insurance has emerged as one of the fastest growing segments in the non-

life insurance industry with 30 per cent growth in 2010-11. For the purpose of

regulation, health insurance companies are classified as non-life companies. Health

insurances annual premium collections are over Rs 6,000 crores. Despite the high

growth, the business is a huge challenge for insurers because of the high losses

over soaring medical expenses.

A survey showed massive dissatisfaction with the healthcare system in India. The

interesting find about health insurance in India was how people perceived health

insurance in India. It is seen as an instrument to protect savings. It is not aimed at

protecting the asset that is health. This is probably common to developing markets,

where people tend to place wealth ahead of health. On a macro level, very few

households in India have contingency plans to meet their health expenses. Health

risks in India are perceived differently than the western population. Prior planning

in health issues is yet to be a major priority.

At Nascent Stage

With a reach of just about 2% of the countrys 1.2 billion population, India offers a

huge potential in health insurance market. There are over 30 health insurance

products in the category offered by both life and non-life insurers. While ICICI

Lombard, Bajaj Allianz and Reliance General are some of the prominent general


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insurers in the health insurance space, Apollo DKV, Star Health & Allied

Insurance are the standalone players.

The industry is also becoming tech-savvy with facilities to buy certain types of

insurance products online and payment of premium through Internet. The

insurance penetration level in India is very low when compared with the global

average. This has brought about a plethora of distribution channels such as agents,

brokers, bancassurance (bank insurance model) avenues, soliciting insurance

through Internet or direct mailing. Many banks, financial institutions and insurance

intermediaries saw a huge opportunity in marketing insurance products. Insurance

brokers play a vital role in bringing together insurance companies and the insured,

and their role assumes importance when a claim arises.

The brokers are becoming professional risk managers. There is also a likelihood

that banks would soon be allowed to sell products of more than one company, as

regulations governing bank distribution are being reviewed by the regulator.

The Need for health insurance

Health treatment nowadays is very costly. More than the disease it is the cost of

treatment that takes its toll. To get rid of health worries health / medical insurance

is the answer. But over 70 per cent of these spends are out of pocket which leads to

lot of hardships. According to a survey by NSSO (National Sample Survey

Organization), 40 per cent of the people hospitalized have either had to borrow

money or sell assets to cover their medical expenses.

A significant proportion of population may have had to forego treatment all

together. Hence it is imperative that the health insurance coverage is increased.

Increasing incidence of lifestyle diseases such as obesity, diabetes mellitus,

hyperlipidemia, hypertension and cardiovascular diseases to name a few, and rising


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medical costs, further emphasize the need for health insurance. Health insurance

policy not only covers expenses incurred during hospitalization but also during the

pre as well as post hospitalization stages like money spent for conducting medical

tests and buying medicines. The cover will be to the extent of the sum insured.

Second Biggest Segment

Health insurance premium collections touched Rs 6,625 crores in 2008-09

compared with Rs 5,125 crores in the previous year. Health insurance is now the

second biggest segment after motor which contributes nearly 40 per cent of the

total premium. Health contributes about 22 per cent of the total premium. It is also

emerging as a significant line of business for many insurance companies which

now have products in health insurance.

Apart from increased public awareness the growth in the segment was also being

driven by the Central and State governments taking up large-scale insurance

programmes such as the Rajiv Arogyasri Scheme in Andhra Pradesh and the

Kalaignar Scheme in Tamil Nadu (which has now been scrapped with the new

government introducing fresh health insurance inititatives). Life Insurance

Corporation of India (LIC) is targeting to provide health cover to close to 10

million families in the 1 year of the operation / launch of the product and expects

over Rs 4000 to 5,000 crores of revenues.

An investment in health insurance scheme would be a judicious decision. The

health insurance scheme could either be a personal scheme or a group scheme

sponsored by an employer. Some of the existing health insurance schemes

currently available are individual, family, group insurance schemes, and senior

citizens insurance schemes, long-term health care and insurance cover for specific

diseases.


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There are two major insurance companies in India namely:

1. Life Insurance Company of India.(LIC)2. General Insurance Company of India.(GIC)

The Life Insurance Corporation (LIC) offers:

1. The Asha Deep Plan:

It provides cover for cancer, paralytic stroke resulting in permanent disability,

renal failure and coronary artery disease where by-pass surgery has been done. It

caters to people between 18 - 65 years.

2. Jeevan Asha:

The Jeevan Asha policy is the other healthcare product offered by LIC. It is an

open-ended scheme covering many surgical procedures.

While LIC deals with insurance for life coverage only, the GIC deals with the other

aspects of insurance, including health. Following are the main health policies

offered by the Indian Insurance Companies. These policies are regulated by the

General Insurance Corporation and are marketed by the four big insurance

companies: United India Insurance Co Ltd., New India Assurance Co Ltd.,

Oriental Insurance Co Ltd. and National Insurance Co Ltd.

The insurance policies offered by GIC are:

1. Medicaid.

Insures against any hospitalization expenses that may arise in future. This policy is

designed to prevent the insured from paying for any hospitalization expenses

owing to illness or injury suffered by the insured, whether the hospitalization is

domiciliary or otherwise.


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It covers the expenses incurred on the following:

Room boarding expenses by the hospital nursing home,Nursing expenses,

Operation theatre expenses, Surgeon, anesthetist, medical practitioner, consultants,

specialists fees. Also for any cost of equipment like pacemaker, artificial limbs

and charges paid for anesthesia, blood, oxygen, operation charge, surgical

appliances, medicines and drugs, diagnostic material and x-rays, dialysis and

chemotherapy, radiotherapy, and cost of organs etc.

2. Jan Arogya Bima Policy.

It insures hospitalization or domiciliary hospitalization expenses incurred on

medical or surgical treatment for any illness or disease (contracted after 30 days

from the commencement of the policy) or injury. Any person in the age group of

three months to 70 years can be insured under this. The risk insured include sudden

illnesses like heart attack, jaundice, pneumonia, appendicitis, paralytic attack, food

poisoning or accidents that require hospitalization. This insurance policy was

designed for the lower income group of society and the common masses. The

entire idea was to protect them from high costs of hospitalization.

3. Overseas Mediclaim Policy.

Any person going abroad on holiday, business, study or employment can avail this

policy. Coverage under the medical expense section of this insurance is intended

for use by the Insured person in the event of a sudden and unexpected sickness or

accident arising when the Insured is outside the Republic of India.

4. Personal Accident Policy.


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The policy compensates an individual against death, loss of limbs, loss of eyesight,

permanent total disablement, permanent partial disablement and temporary total

disablement, solely and directly resulting from accidental injuries.

5. Critical Illness Policy.

Critical Illness Policy is an exclusive benefit policy for individuals in the age group

20-65 years covering coronary artery surgery, cancer, renal failure, stroke, multiple

sclerosis and major organ transplants like kidney, lung, pancreas or bone marrow.

6. New India Assurance Bhavishya Arogya.

This caters to persons between 3 to 50 years. This policy is essentially to take care

of medical expenses needs of persons in their old age. The policy provides for

expenses in respect of hospitalization and domiciliary hospitalization during the

period commencing from the Policy Retirement Age selected till survival. This is

selected by the insured for the purpose of commencement of benefits in the policy.


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HEALTH INSURANCE GLOSSARY

Agent: He is a person appointed by the insurer to work on behalf of the insurer.

Assignee: It is that person who gets the benefits of a policy.

Claim: A request filed by an insured to the insurance company to pay for services

obtained from a health care professional.

Certificate of Insurance: The description of the benefits and coverage provisions

forming the contract between the carrier and the customer. Discloses what is

covered, what is not and the cash limits.

Cumulative Bonus: cumulative bonus is similar to no claim discounts. For every

claim free year, the sum insured will progressively increase by 5%. However, the

cumulative bonus is subject to an amount that can never exceed 50 percent of the

Capital Sum Insured and that the policy was renewed continuously.

Deductible: The amount of loss borne by the insured. This loss can be a certainmoney amount or a percentage of the claim amount. Bigger the deductible, lower is

the premium.

Dependents: Spouse and/or unmarried children (whether natural, adopted or step)

of an insured.

Exclusions: These are those conditions or circumstances for which an insured will

not be given any benefit.

Insurer: The insurance company that assumes responsibility for the risk, issues

insurance policies and receives premiums.


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Long-Term Care Policy: Insurance policies that cover specified services for a

specified period of time. Long-term care policies (and their prices) vary

significantly. Covered services often include nursing care, home health care

services, and custodial care.

Long-term Disability Insurance: Pays an insured a percentage of their monthly

earnings if they become disabled.

Premium: The monthly amount you or your employer pays in exchange for

insurance coverage.

Policy: It is a legal document which acts as a contract between the insurer and

insured. It contains conditions of the insurance.

Pre-existing condition: A medical condition of an individual is excluded from

coverage if the condition is believed to have existed prior to obtaining the policy

from a particular insurance company.

Network: A group of doctors, hospitals and other health care providers contracted

to provide services to customers of the insurance companies for less than their

usual fees. Provider networks can cover a large geographic market or a wide range

of health care services. Insured individuals typically pay less for using a network

provider.


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IMPLICATION OF PRIVATIZATION OF HEALTH INSURANCE

The privatization of insurance sector and constitution ofIRDA envisage improving

the performance of state insurance sector in the country by increasing benefits

from competition in terms of lowered costs and increased level of consumer

satisfaction. However, the implications of the entry of private insurance companies

in health sector are not very clear. There are several contentious issues pertaining

to development in this sector and these need critical examination. Role of private

insurance varies depending on the economic, social and institutional settings in a

country or a region.

Critics of private insurance argue that privatization will divert scarce resources

away from the pool, escalate health costs, allow cream skimming and adverse

selection. According to this view, private health insurance largely neglects the

social aspect of health protection. In the contrast, supporters of private health

insurance claim that private insurance can bridge financing gaps by offering

consumers value for money and help them avoid waiting lines, low quality care

and under the table payments-problems often observed when households can use

public health facilities for free or participate in mandatory social insurance

schemes. Both the arguments are correct in the sense, private health insurance can

be valuable tool to compliment or supplement existing health financing options

only if they are carefully managed and adapted to local needs and preferences.

India, with relatively developed economy and a strong middle class population,

offers most promising environment for private health insurance development.

Currently, private health insurance plays only a marginal role in health care

systems but it is gradually gaining importance. Private health insurance is certainly

not the only alternative or the ultimate solution to address alarming health care

challenges in India. However, it is an option that warrants- and already receives-


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growing consideration by policy makers in the country. Thus the question is not if

this tool will be used in the future but whether it will be applied to the best of its

potential to serve the needs of the countrys health care system.

Health insurance products from some private insurance companies:

1. Bajaj Allianz Health Guard

Covers individuals between 5 to 55 years. Children below 5 years can be insured if

the parents are concurrently insured with the company. It provides cashless facility

across various hospitals across India. Herein pre-existing illness and injuries are

covered in the year of cover, if the insured renews his policy consecutively for 5

years.

2. Royal Sundaram Health Shield Gold

Covers individuals between 5 to 55 years. From 91 Days to 75 years and also

persons above the age of 55 years are covered as a part of family and not on

individual basis. All in hospitalization expenses are covered (period of stay in

hospital should be more than 24hours). Pre hospitalization expenses are covered

for a period of 30 days & post hospitalization for 60 days. Under this policy pre-

existing illness and injuries are covered in the 6th year of cover, if the insured

renews his policy consecutively for 5 years. Maternity treatment charges are

covered upto the extent of Rs. 20,000. These include expenses incurred in hospital/

nursing homes as in -patient in India.

3. Birla Sun Life

Birla Sun Life Insurance is the coming together of the Aditya Birla group and Sun

Life Financial of Canada to enter the Indian insurance sector. The Aditya Birla


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Group, a multinational conglomerate has over 75 business units in India and

overseas with operations in Canada, USA, UK, Thailand, Indonesia, Philippines,

Malaysia and Egypt to name a few.

4. HDFC Standard Life

HDFC Standard Life Insurance Co. Ltd. is a joint venture between HDFC Ltd.,

Indias largest housing finance institution and Standard Life Assurance Company,

Europes largest mutual life company.

5. ICICI Pru

ICICI Prudential Life Insurance is a joint venture between the ICICI Group and

Prudential plc., of the UK. ICICI started off its operations in 1955 with providing

finance for industrial development, and since then it has diversified into housing

finance, consumer finance, mutual funds to being a Virtual Universal Bank and its

latest venture Life Insurance.

6. Om Kotak Mahindra

Established in 1985 as Kotak Capital Management Finance promoted by Uday

Kotak the company has come a long way since its entry into corporate finance. It

has dabbled in leasing, auto finance, hire purchase, investment banking, consumer

finance, broking etc.

7. Tata AIG General Insurance Company.

The Tata AIG joint venture is a tie up between the established Tata Group and

American International Group Inc. The Tata Group is one of the largest and most

respected industrial houses in the country, while AIG is a leading US based


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insurance and financial services company with a presence in over 130 countries

and jurisdictions around the world.

8. Max India.

Max India Limited is a multi-business corporation that has business interests in

telecom services, bulk pharmaceuticals, electronic components and specialty

products. It is also the service-oriented businesses of healthcare, life insurance and

information technology.


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TYPES OF HEALTH INSURANCE

There are various types of Health insurance plans, depending upon the need and

requirement of the user. Almost all the insurance companies dealing with

healthcare insurance, provide the following insurance plans:

1. 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

premium is dependent on the sum assured. It is a cover which takes care of medical

expenses following Hospitalization / Domiciliary Hospitalization of the insured in

case of sudden illness, accident and any surgery which is required in respect of any

disease which has arisen during the policy period.

This cover is a hospitalization cover and reimburses the medical expenses incurred

in respect of covered disease / surgery while the insured was admitted in the

hospital as an inpatient. The cover also extends to pre- hospitalization and post-

hospitalization for periods of 30days and 60 days respectively.

Example: If a family has 4 members you can take an individual cover of Rs. 2

lakhs each for each member. Each member is now covered for 2 lakhs. If all the 4

members are hospitalized, all 4 of them can get expenses recovered up to Rs 2

lakhs each. All the 4 policies are independent.

2. Family Floater Policy:

Family Floater Policy is an enhanced version of the mediclaim policy. The policy

covers each family member and the entire familys expenses are covered up to the

sum assured limit. The family floater plans premium is less than the separate

insurance cover for each family member.


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Example: If a family of 4 takes a family floater policy of Rs. 8 lakhs, they can

claim medical expenses upto Rs. 8 lakhs in that policy year. If one person is

hospitalized and claims Rs. 3 lakhs, it will be paid, but they will be left with only

Rs. 5 lakh worth of medical expenses that can be reimbursed in that year. The next

year, the policy will start with a fresh Rs. 8 lakhs. So, in many ways the family

floater plan offers flexibility in terms of utilizing the overall insurance coverage

among the group.

3. Unit Linked Health Plans:

Health Insurance Companies have introduced Unit Linked Health Plans which

combine health insurance with investment and pay back an amount at the end of

the insurance term. The returns are dependent on market performance. These plans

are new and still in development phase. People who can handle market linked

products like ULIP and ULPP are only recommended to take this plan.

For a number of reasons, it is advisable to stay clear of unit linked health plans.

Treat insurance purely as an expense. Opt for an Individual Mediclaim policy if

you are single and opt for a Family Floater policy if you have family. Health

insurance premiums come under tax exemption under section 80D for a maximum

of Rs.15,000/-.

4. Group insurance:

Group medical insurance offers insurance cover to a group with a common traitit

may be employees of a company, members of a club or an association or members

of a co-operative society etc. Many employers now provide medical insurance as a

perquisite to their employees. Premium under group insurance is less than a stand-

alone individual insurance policy. Group insurance is more flexible and provides


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more benefits. It is a quick and effective way to extend cover to a large chunk of

population. Group insurance ensures that all the members of the group are insured

regardless of their health. Thus, even those with health problems, who might not be

eligible for individual insurance, can be covered.

5. Overseas Health Insurance Policy:

An Overseas Health Insurance policy provides cover for medical expenses incurred

abroad for treatment of illness and diseases contracted or injury sustained during

the insured period of overseas travel. Anyone who is traveling abroad for business

or pleasure or for educational purposes should have this policy.


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Classification of insurance

As depicted in the classification chart, health insurance is one of the constituents of

Non-Life/General Insurance sector in India.


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HEALTH PLAN OF GENERAL AND LIFE INSURER

Several life insurance companies have of late plunged into the health segment,

which till recently was dominated by general insurance companies. Among others,

ICICI Prudential has launched Hospital Care and Crisis Cover and Bajaj Allianz,

the Care First plan. Life Insurance Corporation, too, plans to roll out products

soon. But, are these products any different from those offered by the general

insurance companies, popular as med claim policies?

A comparison

between Health

Insurance offered

by a Life and

General Insurer

Nature of the

contract

Life Insurer General Insurer

Period of coverage Contracts are usually made

for a long period.

Contracts are usually,

though not invariably, made

for a short period of one

year or less and at the end of

that period are renewable by

mutual consent of the

insurer and the insured.

Obligation of the

insured

Once the contract has been

made, the insured is generally

At each renewal there is an

onus on the insured to


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under no obligation to report

any changes of circumstances

affecting the risk insured

unless a change in the actual

nature of the contract is

requested by the insured.

observe utmost good faith in

informing the insurer of any

changes in circumstances

which may affect

assessment of the cost of the

risk borne by the insurer.

Premiums The premiums for a life

assurance contract remain

fixed over the term of the

contract

The premiums may vary at

each renewal to reflect

changes in individual

circumstances

Benefit payout Pays a lump sum, irrespective

of whether the policyholder

has incurred those expenses

on his hospital stay

Pays claims according to the

hospital expenses that a

person incurs, depending, of

course, on the amount of

cover that a policyholder has

taken.

Valuation of

Liabilities

A deterministic approach (the

life & morbidity table) may

be adequate for the valuation

of life assurance liabilities

A stochastic approach (with

statistical models more

complicated than the life and

morbidity table) has to be

considered for general

insurance

Taxation Portion of premium paid in

respect of health insurance

covering the assessee as well

Premium paid in respect of

health insurance policies is


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as any member of the family

is deducted from taxable

income under section 80D

deducted from taxable

income under section 80D

Advantages of Health insurance offered by Life insurer:

Because of the long term nature of the plans, the policy holder can plan in advance

his future medical/care expenses. But it is not so under General insurance. Since,

the general insurance policies are subject to renewal every year, if the policy

holder has been making several claims and is considered a risk, the general

insurance company may deny renewal or renew it for a much higher premium.

Advantages of Health insurance offered by General Insurer:

Though a lump sum amount is paid by life insurers and is of long term nature, this

comes with a cost. They charge bigger premiums compare with the General

insurers. In addition, most general insurance companies offer medical charges up

to 30 days before a person is hospitalized and pay the claims if a person has been

undergoing treatment at home - also called domiciliary hospitalization. The life

insurers seem to lack this facility at this point in time.


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DIFFERENCE BETWEEN HEALTH INSURANCE AND CRITICAL

ILLNESS

Basic features: Health insurance is a comprehensive plan that covers

hospitalization expenses however; some Private health insurance providers cover

maternity benefits, OPD expenses also.

On the other hand critical illness policy as the name suggests covers only life

threatening diseases as listed by the health insurance provider. For instance,

multiple sclerosis, cancer, kidney failure, blindness, CABG (Coronary Artery

Bypass Graft surgery etc)

Nature of insurance: Health insurance or mediclaim is an annual contract where

the policy must be renewed every year. On the other hand, critical illness policy is

taken for a long period of time, usually 10 -20 years.

Benefits: Health insurance or mediclaim is a plan where the insured individual can

reimburse the expenses incurred in hospitalization on producing the bills. The

insured individual can also opt for the cashless facility at the network hospital and

the hospital bills are directly settled by the insurance company or the TPA. The

health insurance policy can be renewed every year and the policy continues even

after you have made a claim.

Critical illness is a defined benefit policy where the insurance provider pays out a

tax free lump sum once the insured individual is diagnosed with a pre specified

critical illness.

The advantage of the critical illness policy is that hospitalization is not necessary

for critical illness cover, diagnosis is enough. The insured individual does not have


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to submit original bills and claims can be made with photo copies. The insured

individual receives the entire amount at once and can spend the amount way he

likes. However, the flip side is that it is a one time payment, which results in the

termination of the policy when there is a claim.

Coverage: The major difference between a health insurance policy and a critical

illness policy is that scope of coverage in a healthcare insurance policy is quite

wide whereas critical illness policy is restricted in coverage.

Heath insurance takes care of hospitalization due to accidents or various ailments.

Critical illness policies are restricted in coverage. Critical illness policy covers

around 6 to 12 diseases. However, the critical ailments covered under the policy

differ from insurer to insurer. It usually covers critical illnesses such as cancer,

heart attack, diabetes, kidney failure, multiple sclerosis, major organ transplant

diagnosed after buying the policy. It also takes care of circumstances not covered

under a health insurance such as postoperative care, temporary loss of pay, travel,

and boarding. It is important to note that this plan strictly adheres to the conditions

laid in the policy wordings and offers cover under the specific ailments mentioned

in it.

Waiting Period: Health insurance policies have a waiting period during the first

30 days from the policy inception, except the ones that are accident related. Pre

existing ailments are covered after 1-4 years of continuous coverage with the

insurance company.

Critical illness policy have a waiting period of 3 months i.e. there is no cover for

those diagnosed with any critical illness during the first 3 months of buying the

plan.


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The cover is generally not allowed if the insured individual expires within 30 days

of the illness being diagnosed.

Who should buy the policy? Health insurance policy is advised to everyone

young or old. It is suggested that you buy the policy early in life to derive its

various benefit.

It is advisable to buy a critical illness cover after you cross 35 or earlier if there is a

history of critical illness in your family.

Which is better health insurance or critical illness policy? Both the policies are

different in nature and hence cannot be compared. One policy cannot be a

substitute of the other. However when taken in conjunction they can boost ones

health insurance cover.

While a health insurance helps to foot medical bills a critical illness cover would

shield your finances from any major illnesses.

Thus, health insurance policy as well as critical insurance policies have their own

advantages ideally one should buy a health insurance and a critical illness policy to

avail a wider coverage and secure their future against unanticipated medical

emergencies.


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IMPORTANCE OF HEALTH INSURANCE

The importance of Health Insurance can never be undervalued for the following

reasons:

Provides security to human life which is of prime importance to any individual.

Closely bonds Insurance Companies, Hospitals, Policyholders and TPAs together

for the benefit of Indian masses.

An answer to the solution of uncertainties and risks that is prevalent and ever-

pervading in human life.

Prevention and minimization of unforeseen losses.

Access to quality healthcare.

Means of savings and a safe investment option.

Provides financial stability in life.

A tax-saving instrument that significantly contributes in reduction of tax

deductions.

Reduces tensions and stress caused on account of hospitalization.

Greatly contributes in leading a stress-free life.


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TAX BENEFITS

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

Up to Rs. 15,000 paid for self + spouse + children

Up to Rs 15,000 paid for Parents (Rs 20,000 if parents are senior citizens).

So in total if you pay your health insurance and your parents health insurance

premiums, you can save up to maximum of Rs.35,000/-.

Note: If you take Health Insurance riders with Term Insurance like Critical Illness

cover, the extra premium paid for that will actually be covered under Sec 80D andnot under Sec 80C.


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ESSENTIAL GUIDELINES FOR AVAILING INDIVIDUAL HEALTH

INSURANCE

The following points should be borne in mind while purchasing an individual

health policy:

Understanding the policy coverage:

The policyholder should be able to clearly comprehend the extent of medical

coverage being offered under the particular health insurance policy before opting

for it. The individual should check whether pre-existing diseases and its resultant

complications are covered or not, as well as the extent of the coverage under that

particular policy.

Keeping an eye for medical expenses that are not covered/re -imbursable under

the policy:

Before availing a particular health insurance policy, the prospective policyholder

should note the medical expenses not covered under that Insurance policy. It is

important to note that deductibles are a part and parcel of any insurance coverage

and the expenses incurred as part of the medical treatment need to be borne by the

individual. Generally this list includes aprons, sterilization charges, gloves, Dettol,

gloves etc.

To understand whether it is a co-insurance policy:

Before availing a health policy, the prospective customer should understand

whether it is a co-insurance policy or not. It is advisable to get an individual health

insurance policy with a co-insurance payment option. The maximum amount does

not exceed 15% of the entire medical coverage for a particular disease.


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Understanding and updating oneself about expiry period regarding the policy

cover:

An individual health insurance cover entails regular premium payments on a

monthly, half yearly or annual basis before the expiry of a particular policy. Non-

payment of premium within the stipulated time results in the lapsing of the policy

with subsequent break in the policy coverage of the concerned individual. Even

though the concerned individual holds policy with an Insurance company for many

years together, a break in the policy coverage (which generally does not exceed

more than 15 days) is treated as a fresh policy cover.


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HEALTH INSURANCE CLAIM SETTLEMENT PROCESS

In most cases, the Insurance companies appoint a Third Party Administrator (TPA)

for claims processing. That means once the health insurance policy is sold, the

insurer passes on the complete details to the TPA. In case of a claim, the insured

has to get in touch with the TPA for all verification and formalities.

Two Ways By Which Health Insurance Claims Are Settled:

Cashless:

For planned hospitalization at authorized network hospitals, the TPA has to be

notified in advance for availing cashless treatment or within the stipulated time

limits for emergencies. The insurance desk at hospitals will generally help with all

the paper work. The TPA has to approve the claim amount and the hospital settles

the amount with the TPA / Insurer. There will be exclusions which will have to be

settled directly at the hospital by the insured.

Reimbursement:

Reimbursement facility can be availed at both the network and non-network

hospitals. The hospital bills are directly settled at the hospital after the insured

avails the treatment. The insured can then 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 ones who sell the policy. There are

many cases where the insured had a tough time to claim for his hospital expenses.

So before taking a health insurance policy, check who the TPA is and how good

they are 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.


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THIRD PARTY ADMINISTRATION

The Third Party Administrators are intermediaries who connect insurance

companies, policyholders and health care providers.

The Insurance Regulatory Development Authority (IRDA) selects the TPAs on the

basis of strict professional norms.

The Insurance industry in India has experienced a sea of change since the opening

up of the sector for private participation. With a plethora of companies entering the

foray in the near future, the health insurance sector is surging forward and is poised

for a phenomenal growth.

Health insurance is an important mechanism to finance the health care needs of the

people. To manage problems arising out of increasing health care costs, the health

insurance industry had assumed a new dimension of professionalism with TPAs.

Further, the uncertainty related to a medical condition increases the need for a

health insurance for all the citizens.

Health insurance is any health plan that pools resources up front by converting

unpredictable medical expenses into a fixed health insurance premium. It also

centralizes funding decisions on health needs of a policyholder. This covers private

health plans as well as mediclaim policies.

While call center facilities and personalized financial planning tools are some of

the innovative trends, experienced in the products front, the best thing to happen on

the service front is the introduction of third party administrators as they serve as a

vital link between insurance companies, policyholders and health care providers.


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TPAs were introduced by the IRDA in the year 2001. The core service of a TPA is

to ensure better services to policyholders. Their basic role is to function as an

intermediary between the insurer and the insured and facilitate cash less service at

the time of hospitalization.

A minimum capital requirement of Rs.10 million and a capping of 26% foreign

equity are mandatory requirements for a TPA as spelt by the IRDA. License is

usually granted for a minimum period of three years. Ideally, The TPA functions

by collaborating with the hospitals in order for the patient to enjoy hospitalization

services on a cashless basis.

The specialized functions of the TPA include:

The TPA keeps and maintains all the records of medical insurance policiesof an insurer.

The TPA issues identity cards to all the policyholders. The policyholderswill have to show the identity cards to the hospital authorities before

availing any services from the hospital.

In case of a claim, policyholders will have to inform the TPA on a 24 hrtoll- free line provided by them

After informing the TPA, the policyholder will be directed to a hospitalwhere the TPA has a tied up arrangement. However, policyholders have the

option to be admitted at another hospital of their choice in which case,

payment will be on reimbursement basis.

TPA pays for the treatment; they issue an authorization letter to the hospitalfor the admission of the policyholder in the hospital.

At the point of discharge, all the bills will be sent to the TPA while they aretracking the case of the insured at the hospital.


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TPA makes the payment to the hospital. TPA sends all the documents necessary for consideration of claims, along

with the bills to the insurance company.

The insurance company then reimburses the TPA.The challenges perceived by hospitals and policyholders in availing services of

TPA are

Policyholders mostly rely on their insurance agents Low awareness among policyholders about the existence of TPA. Policyholders have very little knowledge about the empanelled hospitals for

cashless hospitalization services.

In settling of their claims by the TPAs, the healthcare providers experiencedelays as the TPAs insist on standardization of medical services/ procedures

across providers.

Hospital administrators perceive significant burden in terms of effort andexpenditure after introduction of TPA.

Hospital administrators foresee business potential in their association withTPA in the long run though as of now there is no substantial increase in

patient turnover after empanelling with TPAs.

Future role

In the fast developing health insurance sector the TPAs have crucial roles to play

in the future. Some of them are -

Medical examination services for life insurance policies and overseasmediclaim policies

Record verification under adjustment policies


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Documentation and policy issuing. Co-insurance recovery services for both premiums and claims Follow up of recoveries from reinsurance companies Servicing of motor policies Arbitration services Inspection and assessment of risk prior to issuing the policy

Developing viable mechanisms would help TPAs to strengthen their human capital

and ensure smooth delivery of their services in an emerging health insurance

market.


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ROLE OF REGULATOR

As Health Insurance is in its very early phase, the role of IRDA will be very

crucial. It has to ensure that this sector develops rapidly and benefit of insurance

goes to the consumers. It has to guard against the ill effects of privatization. Unless

privatization and development of health insurance is managed well it may have

negative impact of health care, especially to a large segment of rural population in

the country. If it is well managed then it can improve access to care and health

status in the country rapidly. Experience from other countries suggest that the entry

of private firms into the health insurance sectors, if not properly regulated , does

have adverse consequences for the cost of care, equity, consumer satisfaction,

fraud and ethical standards. Some of the areas of concern which the regulator has

to look into are:

Many times the insurance claims are rejected due to small technical reasons.This leads to disputes

Various conditions included in the insurance policy contract is notnegotiable and these are binding on consumer

There no analysis on what is fair practice and what is unfair practice The most important area of dispute and unfair treatment is the knowledge

and implications of pre-existing conditions.

The main danger in the health insurance business is that the privatecompanies will cover the risk of middle class who can afford to pay high

premiums. Unregulated reimbursement of medical costs by the insurance

companies will push up the prices of private care. So large section of Indias

population who are not insured will be at a relatively disadvantage as they

will, in future, have to pay more for the private care.


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IRDA has stipulated regulations for both life and non-life insurance companies in

many aspects of business but the same is lacking in respect of health insurance

business. Given the health insurance is assuming greater significance, it is time for

the regulator to etch a frame work for operating the health schemes.

IRDA will have to evolve mechanism so that the private insurance companies do

not skim the market by focusing on rich and upper class clients and in the process

neglect a major section of Indias population. In a view to ensure that the rural and

less-developed areas do not fall prey to a step-motherly treatment in penetration of

health business, the Regulator may ensure, in line with its rules jotted down for

private life and non-life insurers, that minimum annual targets are given to the

benefit providers so that at any given point in time, a decent portfolio of health

coverages represent the rural sector

IRDA should ensure and encourage different organizations and private insurers to

develop products for the poorer segment of the community and if possible build an

element of cross subsidy for them.

The IRDA will have a significant role in regulating the health insurance sector and

safe guarding the interests of the policy holders by minimizing the unintended

consequences.


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OMBUDSMAN

In 1999, an act was enacted in the Indian Parliament to specifically deal with the

disputes arising in the Insurance industry called as The Insurance Regulatory and

Development Authority (IRDA) Act The mission of the IRDA is to protect the

interests of the policyholders and to regulate, promote and ensure systematic

growth of the insurance industry and other related areas.

For a case to valid, no single individual can complain anything under the sun

whatever he/she wishes. It is important to remember that Ombudsman does have

limitations and complaint can be made only against the items prescribed in the

notification.

Functions of Ombudsman

The main functions of this Ombudsman are as follows:- To specifically deal with the disputes arising out of Insurance cases To dispose the grievances of policyholders in a swift manner To minimize the problems involving redress complaints To help in generating and sustenance of goodwill, faith and confidence

amongst the consumers and insurance companies

To resolve the consumer disputes in an amicable manner which is bindingon the involved parties concerned

To effectively tackle customer grievances in a time-bound frameworkFiling a complaint

There is no prescribed format or a specified format for filing complaints. For an

individual, it is required to give the complaint in writing stating and describing the


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facts along with relevant and sufficient documentary proof to substantiate the

grievance of the claim.

Once the complaint is taken up it is not required that the complainant has to be

present. Presence of the complainant is required only in the mediation stage

wherein it would be mandatory for the aggrieved party to attend the hearing at the

ombudsmans office for presenting the complainants version of the case. Hiring a

lawyer for the case to resolve the disputes arising out of claims rejection is a sheer

waste of time, money and energy.

The process of filing a complaint is simple. Firstly, the complaint must be made in

writing with the insurance company. In addition, complaint must be reported to the

Ombudsman within a year of the repudiation of the claim by the concerned

Insurance Company. It must be noted that Ombudsman intervenes in the case only

if the complainant has not approached any court or any Consumer Forum with

regards to his matter. It must be remembered that the complaint with the

ombudsman must be filed in that region only from where the health insurance

policy was purchased. The complainant or any proxy on his behalf can file a

complaint regarding the grievances or disputes.

Before approaching the Ombudsman, it is mandatory that the complainant should

have made a prior representation to the insurance company and received a reply

which may be unsatisfactory in its contents or there is absence of reply for a period

that exceeds 30 days (a month).

It should be borne in mind that the aggrieved party should not have approached

any other social forum or any community gathering in order for his complaint to be

eligible by the Ombudsman.


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The steps to be followed while filing a health insurance complaint are enlisted

below:-

First and Foremost important point is that records and copies of all relevantdocuments should be maintained.

Make a note of all transactions between yourself (policyholder) and theinsurance agent and the insurance company.

Maintain a file of correspondences in order for easy tracking and retrieval ofinformation.

Maintain a record of the receipts (from the agent and Insurance Company),policy documents and TPA (Third Party Administrator) cards in order.

Approach the Customer Care Department and explain them your grievancesor disputes regarding the claim. Give the Insurance companies sufficient

time or duration to address your doubts and grievances.

If the policyholder does not feel satisfied with the reply, he/she can elevatethis dispute by approaching the Insurance Ombudsman.

If the outcome at the Ombudsman remains unsatisfactory, it is possible toexamine the possibility of taking the legal route i.e. approaching the court or

the Consumer Forum.

If the claim amount involved is high, services of a suitable lawyer or anadvocate can be taken.

Remember that negotiation skills and tenacity to overcome the challenges for the

sake of your rights are essential for resolving the disputes pertaining to the claim.


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HEALTH INSURANCE FOR SENIOR CITIZEN

Any individual aged 60 years or above is called as senior citizen. These citizens

have worked hard all their lives and contributed to the development of the nation

and the community. Though generally ignored and sometimes shunned by the

younger community but there is much to learn from them. Some continue to be

productive and work in various capacities. Most organizations and universities

entertain this skilled manpower up to the age of 65 to 70 years.

The senior citizens need to be cared for and the society and nation owes them a

decent life in their old age. Keeping these sentiments, the Indian Government of

India, has introduced several benefits through its various schemes in for senior

citizens. One amongst such schemes includes health insurance policy.

The schemes and policies are meant to promote the health, well-being and

independence of senior citizens across the country. With numerous tax benefits,

travel and healthcare facilities exclusively designed and provisioned for them,

Indian Government has created sufficient reasons for Senior Citizens to feel

satisfied and elated. The central government of India came out with the National

Policy for Older Persons (or Elderly Individuals) in 1999. These guidelines aim to

encourage individuals to facilitate provisions for self as well as their spouses old

age. It also strives to encourage families to take special care of their elderly family

members who are often dependant on the bread-winners in the family. This policy

has been designed to enable and support voluntary and non-governmental

organizations (NGOs) to supplement the care rendered by the family and provide

care and protection to these vulnerable lots. Healthcare, creation of awareness,

training facilities to geriatric caregivers/service providers and healthcare research


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have also been looked into and implemented under this policy. The main purpose

of this policy is to make elderly people fully independent citizens.

Exclusive Health Insurance Policies for Senior Citizens

Insurance can be considered as a form of long-term savings for senior citizens

especially those who are averse to risk-taking. This money provides financial

stability and also helps such individuals in times of need.

Healthcare insurance enables senior citizens to pay for medical check-ups,

emergency medical expenses and long-term medical treatment. In India, health

insurance policy cover is provided through several private insurance companies

and four public sector general insurance companies. These are:

National Insurance Company

Oriental Insurance Company

New India Assurance Company

United India Insurance Company

The National Insurance Company offers Varistha Mediclaim Policy exclusively

designed for senior citizens. This policy covers hospitalization and domiciliary

hospitalization expenses incurred under Section I as well as expenses incurred for

treatment of critical illnesses, if opted for, under Section II. Diseases covered under

critical illnesses are coronary artery disease, cancer, multiple sclerosis, major organ

transplants renal failure and stroke. Ailments such as paralysis and blindness are

covered at extra premium.


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Senior Citizen is under 65 years of age can avail health insurance cover for

themselves and their dependants. It is advisable that such individuals must not lose

time in purchasing a customized health insurance cover based on their

requirements.

The regulatory body for Insurance industry across India called as Insurance

Regulatory and Development Authority (IRDA) has issued guidelines and

instructed general insurance companies to keep at least 65 years as the upper age

limit for availing a health insurance policy.

Bajaj Allianz and Star Health and Allied Insurance are two such private players

offering Health Insurance policies to the seniors.

What does the Senior Citizen Health Insurance Plan cover?

A senior citizen health insurance plan covers the following:

Hospitalization Cover: Expenses incurred as a patient after admission of more

than 24 hrs. The expenses include room charges, doctor fees, nursing fees, cost of

medicine and drugs, etc.

Day care expenses which arise from use of special equipments or procedures like

chemotherapy, dialysis, etc.

Medical expenses prior and post of hospitalization, the number of days will vary

across insurers.

Ambulance charges for transporting the insured subject to maximum limit.


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Pre existing diseases are also covered subject to terms and conditions of the

insurer.

IRDA Guidelines for Health Insurance for Senior Citizens

The regulator for insurance industry in India - Insurance Regulatory Development

Authority has addressed all problems relating to insurance industry in India

including its policyholders with special emphasis on senior citizens. No insurer or

insurance company in India can refuse or deny a senior citizen with a health

insurance cover or load him/her with extra premium without providing valid

reasons. All such reasons can be scrutinized by regulatory bodies like IRDA,

important as it may be; the current scenario of health insurance markets across

India is arbitrary in nature. For example, while some insurers reimburse the cost of

medical tests to be undergone by a customer above the age of 45 years, few others

insurers do not reimburse the costs incurred on medical test whereas some others

reimburse only a part of it.

A recent amendments made to IRDA Act, makes it mandatory for all insurance

companies to reimburse 50 percent of the total cost incurred on tests, if they agree

to provide insurance coverage to the clients after medical examination. This means

that a senior citizen can make a claim once the insurance coverage is approved.

The new rules and regulation from IRDA ensures that the insurance sector across

India practices more transparency and follows uniform standards. With the entry

age being extended up to 65 years, the prospective customers would have greater

flexibility in choosing a plan that suits their requirements. It has become

mandatory for all insurance companies to see that disclosures are explained upfront

so that an insured individual or the policyholder knows what is in stock for them.


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Most insurance providers pass the discount they may provide to senior citizens to

other categories by increasing their premium by a small amount. Health insurance

policies for senior citizens have been introduced in India keeping the factor of

cross-subsidization in mind. Such insurance policies have a lower Sum Insured

with Greater Premium and are therefore to some extent designed to be self-

sustainable.

Illustrative Policies-

1. Star Health and Allied Insurance Senior Citizen Red Carpet Policy offers to

insure people in the age group of 60-69 years (or senior citizens) without

undergoing a medical test. It also covers pre-existing diseases from the first year

itself.

2. National Insurance's Varistha Mediclaim Policy- medical tests for enrollment of

senior citizens are not made mandatory gives no-claim benefits and incorporates

the coverage of pre-existing diseases after one claim-free year.

However, it must be noted that while Senior Citizen Red Carpet gives a Sum

Insured of up to Rs 2 lakhs, Varistha Mediclaim policy by National Insurance

offers a maximum sum insured of only Rs 1 lakh.


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PREMIUM CALCULATION ON HEALTH INSURANCE

Premiums are calculated based on the insurance product (or plan) purchased by the

individual. These insurance products may be packaged in various ways to either

provide a general coverage or may meet the needs of a particular age group. To

decide on the amount that one would need to shell out, the insurance company

takes all costs into considerations. Some of these factors are enlisted below:-

a) Personal History: It takes into consideration the individuals health, present

health status, past medical history, family history, age of the individual, personal

habits (e.g. smoking, alcohol addiction etc.). For purchasing a health insurance

cover, the insurance companies may/may not conduct an initial medicalexamination of an individual before issuance of health cover.

b) Mortality Rate: These are charges incurred by an insurance company to cover

the risks in case of any eventuality to an individual. The mortality expenses differ

depending on the age and the Sum Assured being availed by an individual.

Important points to be remembered in co-relation with mortality rate are:-

i) Premiums increase, as you grow older.

ii) Premiums increase in co-relation to hereditary or lifestyle ailments such as

Diabetes, Hypertension, Obesity etc.

iii) In principle, premiums increase by availing higher Sum Assured by an

individual.

c) Administration and marketing expenses: Such expenses are incurred by the

organization as part of their operational expenses. These operational expenses are

recovered in the form of premium that a policyholder pays while purchasing an

insurance product.


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Administration and marketing expenses also incorporate the costs incurred on

designing the insurance product, market publicity, advertisements, brochures,

leaflets, booklets, pamphlets etc to create awareness amongst the public regarding

the option of various insurance products and services in the market.

Under this heading, expenses pertaining to payment of monthly salaries to their

employees, commission to insurance brokers, insurance agents, marketing and

sales of insurance products and overhead costs are included, that constitute

payment of premium by the policyholder. It also incorporates the costs required to

meet the operational expenses on daily basis.

d) Savings component: This portion of the premium is invested in various public

investments approved by the Government of that country. Investments in private

sectors are generally not practiced. This is based on the guidelines issued by the

Regulatory Body which is approved by the government of that country.

In India, IRDA (The Insurance Regulatory and Development Authority), at

Hyderabad is the regulatory body and it controls the activities and functioning of

Life and Non-Life (General) insurance organizations.

e) Medical Underwriting: Underwriting of various insurance products is done to

create a balance between an organization and an individual. This is done with a

view to analyze risks from various angles and broad-spectrum factors so as to

contain fiscal bleeding and containment of losses in the insurance sector. It takes

into consideration the number of individuals covered under the health policy and

conducts a review pertaining to any claims history pertaining to that individual or

that group or an entire organization.

Medical Underwriting is done with a view to establish eligibility, set premiums or

deny coverage. For example premiums can significantly increase in case there is an


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individual with a past medical history of any chronic ailment or with a long-

standing prevailing illness or has had a severe Road Traffic Accident etc.

In case, a group or an organization is involved, medical underwriting is done

uniformly for that particular group taking into consideration a host of factors.

f) Adjusted or Modified Community Rating: This factor takes into consideration

the geographical location, topography, physical factors of the region, economic

factors involved in that region, financial stability, political stability, industrial

development, trade activities, lifestyles and other varied factors.

For example developed regions have to shell out higher premium in comparison to

regions with minimal development, for example a village area.. This means that if

you live in metropolitan city like Kolkata, Mumbai, Delhi or Chennai, you have to

pay higher premium in comparison to people living in Tier-II and TierIII cities, as

your risks are higher of falling sick or being injured in an accident.

In addition, recently another method of calculating premium has evolved called as

Experienced Rating. In this method, usage of historical data is used to decide upon

the rates based on the number of claims and the claim amount made during a given

period. As a result, the data that is generated is used to calculate and predict the

probability and potential for claims in the future. With extensive data that is now

available on Internet, the experienced rating method has proved to be a boon for

the underwriters and the insurance companies. The method uses a comparison of

past or historical data. This data forms the ground-work for analyzing the future

premiums.

g) Rating Bands: Under this category, the insurance company fixes a base rate

that can be charged for a particular group possessing the same characteristics. The

case characteristics include factors such as age, gender, geographical region,


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family composition, group size, occupation details, industry etc. For example a

workforce comprising of healthy employees who are in their youth in the age

group of 25-30 years will pay less premium as compared to the workforce who are

in the age range of 45-60 years.

We have given only broad guidelines to educate you about how a health insurance

company is likely to decide what you will end up paying as premium to insure your

health against disease and accidents. Companies that take group insurance are

likely to benefit by getting a group discount, depending on the numbers of the staff

that they may wish to insure.

health insurance final pro

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