What is Health Insurance? Why & When should you buy?

• Introduction
• What kind of costs are covered under hospitalization?
• Why cover Hospitalization Expenses?
• When to buy Health Insurance?
• How much does a Health Insurance cost?
• Key conditions in health insurance plans you should be aware of
• Standard exclusions in health insurance plans

By the name, health insurance looks like a cover for all health-related expenses. Unfortunately, it is not.

Health Insurance in India, also called Mediclaim provides a lifetime cover on hospitalization expenses.

Whether the hospitalization required is for more than 24 hours or less than 24 hours (called Day Care treatments like Cataract, Angioplasty, and Chemotherapy), the expenses for these hospitalizations can be covered under health insurance.

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A health insurance policy provides comprehensive coverage of hospitalization expenses. Here is a snapshot of the key expenses covered under a standard health insurance policy, of course, subject to terms and conditions.

1. Inpatient hospitalization

Health Insurance covers the room charges, ICU charges, the doctor fee, specialist or consultant fee, cost of surgery, oxygen, blood, etc. payable to the hospital.

2. Pre and post hospitalization

Medical expenses like doctor consultations, medicines, and diagnostic tests incurred for the injury or illness before you are hospitalized are covered under health insurance. These are called pre-hospitalization expenses.

Similarly, after being discharged from the hospital, doctors recommend follow-up check-ups, consultations, medicines, etc. These costs are called post-hospitalization expenses.

3. Organ donor hospitalization

In the case of organ transplant, the costs of hospitalization and the donor's surgery are covered under most health insurance plans.

4. Hospitalisation at home.

Many insurance plans even cover hospitalization at home. It covers hospitalization where a hospital cannot be used for treatment due to the following two reasons.

1. Non-availability of beds in the hospital
2. when the patient is so ill or injured that it is impossible to move him/her to the hospital for treatments

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You may argue that you are young today, and find hospitalization to be a remote possibility. Here's why you should cover hospitalization expenses through a health insurance policy:

1. The surge in lifestyle diseases.

Modern-day lifestyle has changed drastically. We live sedentary lifestyles burdened with pollution, mental stress, and bad eating habits. Many individuals at a very young age are prone to lifestyle diseases like diabetes, hypertension, high cholesterol, even heart-related illnesses.

Health Insurance is like looking for an emergency loan - you may not get it when you desperately need it. Insurers get very nervous, covering young individuals with a disease or medical history. They also find covering people above 50 years very tricky. They may request a medical check-up and further checks, curb benefits, demand an extra premium, even decline covers.* It is therefore recommended that you start small and gradually get adequate health insurance, while you are young and healthy (say by the age of 35/40) *

2. The increased cost of healthcare

While diseases have become common, healthcare has become expensive. In the financial year 2017-18, India's retail healthcare inflation stood at 4.39%, which increased to 7.14% in the financial year 2018-19. On compounded inflation of 8%, a hospital bill of 3 Lakhs today will rise to Rs. 30 Lakhs in 30 years. Such costs can incur when you are retired or close to retirement. Why would you burn your savings and compromise in your retired life without insurance?

3. Access to Quality Healthcare:

When a family member falls ill, we want to give then the best healthcare. (I vividly remember when my dad was diagnosed with a tumor (non-cancerous) in his head. We looked for the best surgeon available in our city to get him treated. I knew I had enough health insurance to take such a call.) Health Insurance ensures that come what may, you have the financial backing of a health insurance plan to avail the best healthcare.

4. Tax Benefits:

Lastly, to sweeten the deal, health insurance premiums also give tax benefits under Section 80D of the Income Tax Act, 1961. You can claim a deduction of up to Rs.50,000 by investing in health insurance plans. Moreover, if you buy health insurance for your senior citizen parents. In that case, you can claim an additional deduction of up to Rs.50,000.

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You should buy health insurance before you run a risk of meeting with an accident or suffer a chronic disease that requires a major hospitalization.

Insurers find it very tricky and unviable to cover or upgrade the cover for anyone suffering from a lifestyle disease. They may either charge extra premium or put some additional conditions. You should just check out the restrictions in cover Senior Citizens face getting what we mean here.

In short, you should be covered under health insurance as soon as you are born till you die. This cover could be through your parent's policy or your employer's policy, your spouse's policy, your own policy, or your children's policy :)

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A health insurance of Rs. 10 Lakhs for a 30-year-old will cost Rs. 8000 to Rs. 10000/- Health insurance for a family of 3 (2 adults aged 30, one kid) will cost Rs. 15000 to Rs. 18000/-

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All Insurance policies have terms and conditions, and health insurance is no different. Here are some essential conditions which you should look out for when buying health insurance plans –

1. Sum insured

The sum insured of a health insurance policy is the maximum amount that the insurance company will pay in a particular year. If the bills exceed the sum insured, you would have to bear the excess costs.

It's not always easy to upgrade, especially if you cross the age of say 50, or someone in your family suffers from a lifestyle disease like diabetes. Therefore, you should opt for an optimal sum insured for your retirement phase, keeping in mind the increasing cost of treatments.

Sum insured is also crucial since it determines many other important covers in the policy, such as room charges and treatment limits.

2. Floater Cover

Individual health plans cover one individual under a single sum insured. Floater plans cover two or more members of the family under a single sum insured. Such type of coverage is beneficial for protecting your entire family under a single plan. Usually, not more than one member undergoes a major hospitalization in a year; in such cases – the whole cover is available. Ensure you buy a floater cover that is a sum of the individual coverage you would have purchased.

3. Room rent limit

Another critical condition to check in a health insurance policy is the room rent limit. Many health insurance plans cap the room rent payable under the policy. This cap is either expressed as a percentage of the sum insured, usually 1% or 2%, or capping on the category of room you can select.

Concept of Proportionate Deduction:

Suppose there is a room rent limit and you choose a room with a higher rent. In that case, you will not only have to pay the difference but a proportionate deduction on nearly the entire hospital bill!

Here's an example for easy understanding –

Suppose you buy Religare Care with a sum insured of Rs.4 lakhs. Room rent limit would be applicable, and you would be eligible for a maximum room rent of Rs.4000. Say if you choose a room with a rent of Rs.8000, and your inpatient hospitalization claim is Rs.1 lakh. The actual claim payable by the insurer would be proportionately deducted, and you may be paid just Rs. 50000. You may have to shell the remaining 50000 from your pocket. Therefore, the claim is calculated in proportion of the prescribed room rent limit to the actual room rent, which reduces the amount of claim you receive. Ensure you buy a policy that is adequate and future proof - which means ensuring there are no limits or only category limits in a health insurance policy.

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There are medical costs and treatments which are not covered by a health insurance policy. These are called policy exclusions. A study of these exclusions is essential to understand the scope of coverage of your policy. Some of the standard exclusions in health insurance plans include the following –

1. Temporary Exclusions:

A Health Insurance policy usually opens up to a full cover in a phased manner. Here are some waiting periods in a standard health insurance cover for diseases/treatments.

• Accidents are covered from Day zero.
• Conditions that you suffer from at the time of buying the policy (called Pre-existing diseases) like diabetes, hypertension, etc. are covered after 2-4 years.
• A specific list of treatments that are not pre-existing like hernia, fistula, cataract, joint replacement, etc. are covered after 2-4 years.
• Illnesses apart from the ones above are covered 31 days after the policy is issued.

2. Permanent Exclusions:

Some illnesses and treatments are entirely excluded from the scope of coverage of the policy. Listing a few of them here –

• When there is no active treatment carried out. For instance, if the patient is in the hospital only for carrying out medical tests or for monitoring purposes or for recovery, the insurer will not be liable to pay.
• Healthcare expenses that do not require hospitalization, like doctor consultations or costs incurred for treatment in the emergency room, are not covered.
• Illnesses or injuries suffered under the influence of alcohol, drugs or any other intoxicants
• Maternity expenses are not covered in standard health insurance policies. Some do cover after a waiting period.
• Cosmetic surgeries that enhance your appearance are not covered unless there is a medical need
• Any type of non-medical expenses. For instance, the cost of consumables would not be covered. In the case of COVID 19 treatment, Consumables include face masks, gloves, sanitizers, PPE kits, etc.
• Internal Congenital illnesses
• Illnesses or injuries arising due to self-inflicted wounds or attempted suicide

This should be a good snapshot for you to understand health insurance. We will cover a lot more in future articles, which should help to get clarity on coverage and claims.

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