Health Insurance 101

Purchasing insurance can be difficult. It's even tougher to read a policy statement. And even if you make an effort to carefully read this, you'll probably come up blank since you won't understand what half of the terms imply. We've therefore developed a set of straightforward case studies to clarify what some of the most prevalent terminology and features actually imply in an effort to simplify things and educate you on how to understand a policy document. We'll also explain how they affect you and whether or not you might need them.

So let's start with co-payment, which is the most common characteristic in the world of health insurance.

Opt out of co-payment?

You're in the process of purchasing health insurance. The insurance agent presents a policy offering coverage of 5 Lakhs at a reduced annual cost of ₹7000. To sweeten the deal, the agent proposes a 25% discount on premiums, approximately ₹1800/year, if you accept a 20% co-payment provision. You find this offer enticing and agree to it, believing you've saved ₹1800.

Fast forward 9 months, and you experience an accident, requiring extensive hospitalization and care. Fortunately, you recover fully, but the total bill amounts to ₹2 Lakhs. You're covered by insurance, but the insurer only pays ₹1,60,000, requesting you to cover the remaining ₹40,000 due to the 20% co-payment agreement. As you calculate the numbers, you realize that although you saved ₹1,800 on premiums, you now have to pay ₹40,000 because of the co-payment clause. It would take approximately 22 years of premium savings to offset this costly mistake.

This is certainly not a feature you'd want in your insurance policy. Co-payment clauses are rarely beneficial unless they are obligatory or you're purchasing insurance for someone elderly with pre-existing health conditions. In such cases, a co-payment clause can substantially reduce premiums.

Verify sub-limits based on the type of illness

You're presented with an offer: a coverage of 10 lakhs at an annual premium of just ₹6,000. Instead of being immediately delighted, you start to harbor suspicions. The price seems too good to be true, unmatched by any other offers in the market. You hesitate and contemplate for a moment. However, you ultimately decide to proceed with the recommendation, primarily because the person making the offer is a family friend.

Then, your worst fears materialize when you unexpectedly require surgery due to a slipped disk. The treatment proves extensive, and the final bill amounts to a significant ₹4,36,000, inclusive of all expenses. Despite having a 10 lakh coverage, your insurer informs you that they can only cover ₹2,00,000. You're understandably furious and seek clarification. Eventually, they disclose that your policy imposes disease-specific sub-limits, meaning there are predefined maximum coverage amounts for certain illnesses: For cardiovascular diseases: They only reimburse ₹2,50,000. For knee replacements: The limit is ₹2,75,000. For major surgeries like the one you underwent: The maximum coverage is ₹2,00,000. It becomes clear that the company was able to offer you a 10 lakh coverage at such a low premium because they rarely end up paying the full coverage amount in most cases.

Beware of falling victim to this deceptive practice. Always ensure that your policy does not include disease-specific sub-limits, as you cannot predict which health condition may affect you. It's wise to choose a policy without such restrictions.

Look for Low Waiting Periods

The most unsettling aspect of insurance is the uncertainty that arises when purchasing a policy. Once the initial sales pitch concludes, insurers typically delve into your medical history, probing for details on pre-existing conditions such as diabetes, cardiovascular issues, thyroid-related ailments, or any other health concerns - a seemingly endless list. Following this line of questioning, they may request you to undergo medical tests.

Subsequently, they'll inform you that they'll cover your hospitalization expenses as long as they aren't related to your pre-existing condition. But what if you end up in the hospital due to complications arising from a previous health issue? In such cases, they may impose a waiting period, often ranging from 2 to 4 years. While this clause is understandable from the insurer's perspective, it can be an arduous process for you. Here's the core issue: Suppose you have high blood pressure, and you disclose this condition when purchasing your policy. Unfortunately, the very next year, you suffer a heart attack, and you're fervently hoping your insurer will honor your claim. However, there's a possibility that the insurer could deny your claim if they can link your blood pressure disorder to the heart attack. So, if an insurer imposes a 4-year waiting period, you're left hoping and praying that you won't fall ill due to a pre-existing condition during that time - a precarious position to be in.

Waiting periods are a common aspect of most insurance policies. Your best course of action is to select a policy with the shortest waiting period available.

Choose both pre and post-hospitalization healthcare services.

One day, you awaken feeling dizzy and consult your doctor, who initially prescribes a routine blood test. Nothing unusual is detected, and you return home with an ORS pack.

However, your condition worsens, and the following evening, the doctor recommends an MRI after reviewing your symptoms. Upon receiving the MRI results, she advises you to be admitted to the hospital. Over the course of the next three days, the doctor effectively treats your condition, and you are subsequently discharged. The hospital bill amounts to ₹10,000, while the MRI and diagnostic tests conducted before hospitalization total ₹15,000. You hope that your insurance covers both bills, but the insurance company informs you that they do not cover pre-hospitalization expenses. This means they won't cover the costs you incurred leading up to your hospitalization. This situation seems ironic because doctors often prescribe various diagnostic tests both before admitting a patient to the hospital and sometimes even after discharge, and these tests can become quite expensive.

It's always advisable to select an insurance policy that includes coverage for both pre and post-hospitalization expenses, ideally spanning 30 to 60 days before and after your hospital treatment.

Inquire about the restoration benefit.

It's a tranquil Sunday morning, and you find yourself sipping coffee in a hospital bed, reflecting on how a minor heart complication led to a three-week hospital stay. More importantly, you're contemplating the substantial ₹4,88,000 bill you've accrued. Fortunately, your insurance policy is poised to shoulder this financial burden. After all, you possess a ₹5 Lakh coverage, which means you don't have to make any immediate payments.

However, you begin to ponder potential scenarios. You see, you've opted for a comprehensive policy, covering both yourself and your wife. If she were to fall ill in the near future, your insurance wouldn't extend coverage to her since you've already utilized the benefits. But what if your insurance could reset itself to the original coverage limit immediately after a claim, offering another ₹5 lakh cover for either you or your wife if hospitalization became necessary again?

Well, here's the good news: this is achievable with a restoration benefit. While some policies provide unlimited restoration for any illness, others may impose certain restrictions. For example, some policies may specify that you can't claim the restoration benefit if you experience a recurrence of the same illness, such as another heart complication. It's always a wise choice to consider restoration benefits, especially with a combined policy. It can also be a valuable addition to an individual policy.

Just be sure to thoroughly review the policy details regarding how the coverage is reinstated each time, and you'll be well-prepared.

Request coverage for treatments with a duration of less than 24 hours.

You're enjoying a card game with your friends when suddenly, you feel a sharp twinge in your abdomen. Although this isn't the first time you've experienced such discomfort, you initially dismiss it. A few moments pass, and the twinge returns, but this time, it lingers and quickly escalates into excruciating pain. Your friends rush you to the hospital, and after a brief examination, the doctor delivers the diagnosis: appendicitis, requiring immediate surgery. The doctor assures you that it's a relatively minor procedure, and you can expect to be discharged on the same day.

Indeed, after receiving the necessary treatment, you leave the hospital within 24 hours. However, you're shocked when you receive an ₹80,000 bill for the procedure. Hoping your insurance will cover the costs, you contact your insurer, only to be informed that they won't. Frustrated, you seek clarification, and the agent directs you to review the policy document once more. It explicitly states that they do not cover daycare treatments, which are treatments requiring hospitalization but lasting less than 24 hours a category that includes chemotherapy, dialysis, and, in your case, appendicitis.

It's always advisable to prioritize policies that provide coverage for daycare treatments because you never know when a medical issue like appendicitis might arise.

Home healthcare costs

A devastating pandemic begins to wreak havoc, and despite the circumstances, your job compels you to leave your home every day. Then, one morning, you wake up with a severe cold. Your persistent cough initially leads you to hope it will resolve on its own, but as your breathing becomes increasingly difficult, your condition worsens, ultimately necessitating an emergency call for medical assistance.

Unfortunately, the emergency services inform you that they cannot locate a hospital bed for you, leaving you with no option but to receive treatment at home. While some hospitals offer this service, it comes at a significant cost. However, a glimmer of hope emerges when your insurance provider assures you that they will cover your expenses because you are compelled to undergo treatment at home. This might be due to a specific medical condition or, as in your case, because a hospital bed couldn't be found. Such situations are uncommon, but you are grateful to have this coverage.

It's another valuable benefit to have, although in most instances, you don't need to go out of your way to find a policy that includes coverage for domiciliary expenses.

Additional benefit when no claims are made

Insurance providers emphasize the importance of maintaining good health, often offering incentives to encourage it. For instance, consider the prospect of having your coverage increased by 50% each year if you refrain from making insurance claims - an enticing offer, isn't it? Imagine starting with a ₹5 lakh coverage and watching it grow to ₹7.5 lakhs in the first year, then another 50% increase in the following year, resulting in a total coverage of ₹10 lakhs.

Of course, insurers typically impose limits. They often cease increasing coverage once it has doubled in value. Additionally, they may reduce the sum insured by the same percentage (50%) if you file a claim after receiving the bonus. Consequently, your coverage could revert to ₹5 lakhs the following year. Nonetheless, it's an appealing bonus.

The No Claim Bonus is indeed valuable, provided the bonus amount is substantial. For example, anything below 10% may be considered insignificant and more of a marketing tactic.

Annual health checkups at no cost.

Picture this: It's a leisurely Saturday afternoon, and you've been patiently waiting for nearly an hour. Your gaze is fixed on the receptionist, hoping for the moment when he finally calls your name. Unexpectedly, the moment arrives, and you hear your name announced loudly. You proceed to the doctor's room where she guides you to a specific spot, measures your height, checks your weight, assesses your blood pressure, listens to your heart and lungs, and schedules a blood test for cholesterol and blood sugar. Before you leave, she imparts advice on reducing the risk of diabetes, heart disease, and cancer.

The next day, you receive your test results, and everything appears to be in perfect order. No follow-up care is needed, at least not until the next year. What you've just experienced is a comprehensive full-body health checkup. While some individuals might overlook its significance, it provides you with a sense of reassurance. Typically, these health checkups can cost anywhere from ₹1,000 to ₹1,500. If you consistently undergo these checkups, the expenses can add up. Once again, we acknowledge that it's not a significant sum of money, but it's certainly beneficial if you can eliminate these costs entirely. This is why some insurance providers offer to cover the expenses of your health checkups. Granted, they might not cover them every year, but even if they do so every two years, it's still a noteworthy perk, wouldn't you agree?

While it may not be a deciding factor when choosing insurance, having a policy that includes a complimentary annual health checkup is undeniably advantageous.

Insurance for alternative therapies.

Approaching your 50s, you find yourself constantly fatigued. You consult your physician, who reassures you that there's no apparent medical issue and attributes it to possible stress. Although not entirely satisfied, you return home. However, the next day, while chatting with your neighbor, they recommend visiting a government-certified Ayush Centre. Intrigued, you decide to explore the center and meet with the practitioners. They recommend an Ayurvedic Rejuvenation Therapy known as Panchakarma, which entails a duration of 7-11 days and comes with a price tag of ₹25,000. You consider this quite expensive. But then, it dawns on you that your health insurance policy includes coverage for Ayush treatments. With this realization, you promptly proceed with the payment and commence the therapy. It's a good thing you remembered that crucial detail, isn't it?

Ayush Coverage is a valuable feature to have. However, it's essential to note that the policy will only cover such treatments if they are administered within a government-certified Ayush facility while you are hospitalized.

Benefits related to maternity.

You're contemplating the idea of starting a family, recognizing that careful planning is essential. The initial step involves making arrangements for childbirth, including hospitalization for the delivery of your baby. While transportation to the hospital may not be a concern, the potential expenses associated with hospitalization are on your mind. However, what if you could mitigate these costs by opting for an insurance policy that covers this expense? It seems like a sensible idea, but there are some drawbacks to this plan.

First and foremost, insurance providers are well aware that they will inevitably incur this expense if you choose to have children. Since most people become parents at some point, insurers anticipate having to make these payouts. Consequently, many insurance companies simply do not offer maternity coverage. For those that do, they take measures to ensure they are adequately compensated. To offset the potential expenses, they may significantly raise premiums. Alternatively, they might offer only partial coverage of maternity-related expenses. In some cases, maternity coverage is exclusively available through family plans, necessitating coverage for both you and your spouse, even if only one of you will require maternity-related hospitalization. It's important to remember that there's no such thing as a free lunch.

While it's beneficial if your insurer covers maternity expenses, be cautious not to end up paying exorbitant premiums solely to access this benefit. In some cases, the cost may not justify the coverage.

When is it advisable to choose OPD?

Everyone makes a yearly trip to the doctor's office, and the particular doctor you visit happens to charge an exorbitant consultation fee. A routine checkup alone could dent your wallet by thousands of rupees. In a stroke of brilliance, you devise a plan to counter this financial burden. You decide to purchase insurance and select a policy that reimburses all expenses associated with these doctor visits. You actively seek options that encompass outpatient consultation benefits, and it doesn't take long before you find a suitable choice. You jubilantly declare, "Brilliant!" and give yourself a well-deserved pat on the back. However, reality often doesn't align with our expectations.

To begin with, insurance providers are acutely aware that they will likely need to disburse payouts for such visits every year. Just ask yourself, have you visited the doctor this year? Did you pay a consultation fee exceeding ₹1,000? Perhaps even more? Is there any reason to believe this pattern will change? Chances are, it won't. Consequently, insurers may hesitate to offer this benefit altogether. For those that do, they take steps to ensure they are adequately compensated. This often involves substantially raising premiums or stipulating that they will only cover a fraction of the expense. As the saying goes, there's no such thing as a free lunch. While outpatient department (OPD) benefits may seem enticing on the surface, it's entirely plausible that you'll end up paying more in premiums.

Surprisingly, in many cases, opting out of the OPD benefit may actually be the more cost-effective choice.