Bitter medicine: The fine print on your health insurance policy might not be so fine for you.
Is That So ?
Failure to understand the terms and conditions of your Health Insurance Policy is the reason for any disappointment at the time of claim settlement
Perceptions regarding the utility of Health Insurance vary widely among policyholders based on their claim experience. We may classify the people who have Health Insurance coverage into three categories.
The first category of the people are those policyholders who never had to make a claim and they might experience a state of cognitive dissonance and feel that they have unnecessarily wasted money on their Health Insurance. Some may feel happy with their good health status and feel confident about facing any unexpected financial loss due to ill health with their Health Insurance coverage.
The people of the second category are those who had a satisfactory claim experience. They feel a sense of gratitude toward the Insurance Company and believe that they have taken the right decision in taking the Health Insurance cover.
The third category comprises the people who are dissatisfied with their claim experience. They develop an extreme negative disposition toward the Insurance Company and the subject of Health Insurance per se. They are not inclined to consider the fact that their bad claim experience might be due to their ignorance or lack of understanding of the terms and conditions of their Health Insurance Policy. Some such people may choose to bad mouth the Insurance Company and also the concept of health insurance itself. It is not out of place to mention an article recently published in a reputed newspaper.
On 25th March 2022, The Times of India published an item with the title “Bitter Medicine” by Jug Suraiya. He gives rude thumbs down to Medical Insurance in general based on his insurance claim experience for one day’s hospitalization. While his subtitle – “The fine print on your health insurance policy might not be so fine for you” is quite discouraging to health insurance buyers, his concluding line – “But may be our medical insurance needs a caveat: This health insurance might be injurious to your financial health” is damning of the idea of health insurance.
The author’s problem with the Terms & Conditions of the health policy is quite amusing. He says that he was insured for 25 years by the same company and yet he doesn’t care to know the terms and conditions of the policy till the day of settling his hospitalization bill comes. When the policy terms and conditions come to become operative, he cries foul and chooses to blame the policy Terms & Conditions. The worst part of the narrative is that the author tried to pass judgment on the basic utility of health insurance while he is ignorant of the terms and conditions of his health policy.
Two basic issues regarding claim settlement need to be understood by the policyholder. The first and foremost thing is that raising a claim on the insurer does not make the Insurer automatically liable to make the payment. Only after the liability of the Insurer is established following the terms and conditions of the policy document, the question of computing the quantum of payment arises. The quantum of settlement is always based on the terms and conditions of the policy and not on what the policyholder had claimed as spent or his presumption about the fair expenses under cashless treatment.
The second important aspect of the claim settlement is that the money is not coming from the shareholder funds of the Insurance Company; it comes from the policyholder funds. It means that the policyholders who did not make any claim are footing your claim bill. The implication is that the insurer, as the trusty of policyholder funds, is obliged to scrutinize your claim bill under the most powerful microscope available for the purpose.
The Insurance being a contract enforceable in a court of law, the Insurer has no freedom to deviate from the written terms and conditions of the policy. It is a different matter that the policyholder may find the terms and conditions are not in his favor on the day of reckoning, ostensibly for the reason that he did not read the fine print. Calling the Insurer names and declaring health insurance as something injurious to the financial health of the policyholder makes no sense at all. The policyholder has no choice; he has to read the fine print and understand the terms and conditions of the contract he had entered into with the Insurance Company.
It is very important for the prospective buyer of the Health Insurance to understand the various terms and conditions of the Health Insurance. Such knowledge helps in comparing various Health Insurance products available in the market. When you have a reasonable understanding of the terms and conditions, you will be able to make the right choice while buying Health Insurance online through an Insurance Aggregator. Also, such knowledge helps you in avoiding mis-selling by an agent or any intermediary.
For the benefit of the policyholders and prospective buyers of Health Insurance, I will elucidate the nuances of the health insurance policy concerning certain important terms and conditions.
Pre –Existing Disease (PED):
The first thing that a policyholder should understand is the term ‘Pre-Existing Disease.’ This is an important declaration that a policyholder makes in the proposal form and it has legal implications.
The term ‘Pre-Existing Disease’ refers to any condition, ailment, injury, or disease:
That is/are diagnosed by a physician within 48 months (This period may vary for different insurers and different policies) before the effective date of the policy first issued by the insurer or its reinstatement after a break in coverage, or
For which medical advice or treatment was recommended by, or received from, a medical practitioner, within 48 months before the effective date of the policy first issued or its reinstatement by the Insurer.
The information relating to the pre-existing disease is material to the Insurer for accepting the risk. However, the policyholder alone is privy to this information and he is obliged to disclose it in the proposal form following the principle of Utmost Good faith. When you declare PED in the proposal form, the Insurer agrees to cover the condition and the consequences thereof after a stated waiting period. When you don’t declare PED in the proposal form and when PED is discovered at the time of making claim, the Insurer, by all means, may decline to settle the claim. Who do you blame for your loss?
Now it becomes important for you to understand the different types of the waiting period that forms part of the policy document.
Waiting Period:
The term ‘Waiting Period’ refers to such time till the expiry of which, the Insurer shall not be liable to make any payment of any expenses under the policy in connection with or in respect of (i) the first 30 days after the inception of the policy, (ii) PED, (iii) Specific disease/procedure explicitly stated in the policy document.
First thirty days waiting period:
The Insurer is not liable to pay for any expenses related to the treatment of any illness within 30 days from the first policy commencement date. However, this limitation shall not apply to claims arising due to an accident, provided the same are covered.
Pre-Existing Diseases waiting period:
The insurer is not liable to pay for any expenses related to the treatment of any Pre-Existing disease (PED) and its direct complications until the expiry of 48 months (this period may vary for different insurers and different policies of the same insurer) of continuous coverage after the date of inception of the first policy. This provision makes it very important to renew the policy in time to avoid the break in cover and maintain continuity of coverage to extinguish the waiting period. Any break in the coverage due to non-renewal of the policy will result in the loss of the waiting period that had already run and will restart afresh as the policy would have lost continuity.
It is also very important to note that coverage under the policy after the expiry of 48 months for any pre-existing disease is subject to the same being declared in the proposal form and accepted by the Insurer.
Specific Disease / Procedure Waiting Period:
Here the Insurer lists out specific diseases and procedures in the policy document with specific waiting periods. For example, for cataracts, the waiting period could be 24 months, while the waiting period for Joint Replacement due to Degenerative Conditions could be 48 months. In any case, the Policy Document mentions the Specific Disease / Procedure with Specific Waiting Period without any ambiguity.
The policy document also clearly states what expenses are payable along with the attendant limits if any, and this is termed as ‘Base Cover’. The policy also lists what expenses are not payable and these are explicitly stated as ‘Exclusions’. The policyholder needs to understand both the ‘Base Cover’ as well as the ‘Exclusions’.
Base Cover:
In-Patient hospitalization Expenses Cover:
The Insurer will pay the ‘reasonable’ and ‘customary charges’ for stated medical expenses of an Insured Person in case of Medically Necessary Treatment during hospitalization of a minimum of 24 consecutive hours.
Room rent cap:
The insurer pays the expenses incurred for ‘Room, Boarding and Nursing expenses (all-inclusive) under the head ‘Room Rent’. The policy may restrict this amount to 1% of the sum insured per day and this is known as the ‘Room Rent Cap’. ‘Boarding’ includes diet supplied by the hospital to the patient and ‘Nursing expenses include nursing care, RMO visit charges, IV Fluids/Blood transfusion/Injection administration charges, and similar expenses. If the hospital bills for boarding and nursing expenses separately over and above the room rent, the insurer may decline to pay. Also, when the actual room rent exceeds the ‘Room Rent Cap’, the Insurer will restrict the payment to the ‘Room rent cap.’
It is also important to note that where the hospital charges differentially, for all associated medical expenses, for different grades of rooms, the insurer will deduct such charges in proportion to the excess room rent billed over and above the ‘Room rent cap.’ Such proportionate deduction shall not be applied in respect of those hospitals where differential billing is not followed based on room category.
ICU Charges Cap:
The policy may restrict the charges for accommodation in the Intensive Care Unit (ICU) or Intensive Cardiac Care Unit (ICCU) up to 2% of the Sum Insured per day. If the amount billed is more than this restriction, the Insurer would decline to pay such an excess amount.
Operation Theatre Charges:
The Insurer will pay for expenses incurred for Anesthetics, Blood, Oxygen, Surgical/Medical Appliances, cost of Implants, relevant diagnostic tests, and other similar medical expenses related to Operation Theatre charges.
Professional Fees:
The Insurer will pay the professional fees charged by the Physician, Surgeon, and Anesthetist.
Payment for Daycare Treatment:
The policy essentially pays only for treatment incurred during a minimum hospitalization of 24 hours. However, due to the advancement of medical sciences and technology, it is possible to perform a certain procedure on a person and discharge him on the same day. To accommodate such advanced procedures, the Insurer will pay for such expenses under ‘Daycare Treatment’ wherein the hospitalization is less than 24 hours. However, this shall not be confused with Out-Patient Treatment. Daycare Treatment shall essentially involve a medically necessary procedure involving the use of Operation Theatre leading to the discharge of the Insured within 24 hours of admission.
Restrictions of Specific Procedures:
The Insurer may restrict the maximum amount payable in case of specified procedures. For example, the policy may say that the admissible amount for Cataract surgery is up to 25% of the Sum Insured or Rs 40000 per eye, whichever is less. Similarly, for major surgeries, the policy may restrict the payment to 70% of the Sum Insured.
Lack of understanding of this restriction may lead to a great deal of disappointment when you approach a hospital for cashless treatment. Different hospitals charge different fees for the same procedure. However, the Insurer will pre-approve the expenses based on the procedure and not based on the hospital. This may lead to a situation where the hospital may charge more than the Insurer approved amount. In such a case, the hospital may ask you to deposit the difference amount. Blaming the Insurer is not going to help in such a situation.
Pre-Hospitalization Expenses:
The Insurer will pay for pre-hospitalization Medical Expenses incurred due to illness or injury during the period up to 30 days before hospitalization. However, pre-hospitalization expenses become payable only on the admission of liability by the insurer following hospitalization of the Insured person. Also, the pre-hospitalization expenses should relate to the same illness or injury which results in hospitalization eventually.
Post-Hospitalization Expenses:
The Insurer will pay for Post-hospitalization Medical Expenses incurred due to illness or injury during the period up to 60 days after the discharge from the hospital. The post-hospitalization expenses shall relate to the same illness or injury that had resulted in hospitalization for which the insurer had become liable to pay.
Limitations on Pre-Hospitalization and Post-Hospitalization:
The policy may specify a maximum limit for these expenses such that it shall not be more than 10% of the Sum Insured.
Domiciliary Hospitalization Expenses:
The Insurer will pay for medical treatment, for a period exceeding 3 days, for such an illness/injury which in the normal course would require hospitalization, but is taken while confined at home due to the reason that the patient is not in a condition to be moved to the hospital.
The Insurer also specifies the diseases for which the Insured is not eligible for domiciliary hospitalization expenses. These exceptions may include such diseases as BP, Diabetes, Asthma, Influenza, Arthritis, etc. The Insurer also specifies the maximum annual limit for Domiciliary Hospitalization Expenses in proportion to the Sum Insured. For instance, the annual limit may be Rs 35000 for a Sum Insured of Rs 2 Lacs, while it could be Rs 45000 for a Sum Insured of Rs 3 Lacs.
Policy Exclusions:
While the policy clearly states which of the expenses are paid with the attendant limits, it also clearly specifies which of the expenses it is not liable to pay. These are termed ‘Policy Exclusions’. Such Exclusions are generally listed under ‘Standard Permanent Exclusions’ and ‘Specific Permanent Exclusions’
Standard Permanent Exclusions:
The Insurer is not liable to pay for the expenses such as:
Expenses related to any admission primarily for diagnostic and evaluation purposes only
Expenses related to any enforced bed rest and not for any treatment admissible in the policy
Expenses related to any voluntary and elective procedures such as obesity and weight control, cosmetic surgeries such as Liposuction, Breast Implants, Gender reassignment, Sterility and Infertility, Alcoholism, Drug and Substance abuse, etc.
Expenses incurred at Nature Cure Clinics, Spas, etc.
Expenses incurred for treatment arising from or consequent upon the Insured person committing or attempting to commit any breach of law with criminal intent.
Expenses incurred on Dietary supplements and substances such as vitamins, and minerals that are not prescribed as part of hospitalization.
Expenses incurred in any excluded hospital or under the care of any medical practitioner who has been specifically excluded by the Insurer.
Specific Permanent Exclusions:
The Insurer is not liable to pay the expenses incurred for:
The treatment of any Congenital External Diseases, Defects, or anomalies.
Intentional self-injury or attempted suicide
Treatments that are other than Allopathy and Ayurvedic medicine.
Expenses incurred on a prosthesis and corrective device unless used intra-operatively.
Expenses incurred on artificial life maintenance and life support systems following confirmation that the patient is in a vegetative state.
Expenses incurred on non-medical items that are specifically listed as excluded
It is to be noted that the waiting period, specific limits, and the amounts mentioned above are only indicative and for understanding in the case of Individual Health Insurance. The insurer may relax many of these restrictions in different policies where a higher premium is charged. Another important aspect of Health Insurance is ‘Group Health Insurance’.
Group Health Insurance:
Insurance companies are permitted by the Regulator to issue ‘Group Health Insurance’ Policies to a pre-existing group of people formed for a purpose other than exclusively for availing health insurance. It implies that one cannot form a group only to avail of ‘Group Health Insurance’. Predominantly employers offer this facility to their employees as a welfare measure. It is therefore important for a person who is a member of ‘Group Health Insurance’ to understand the terms and conditions of the coverage.
‘Group Health Insurance’ terms and conditions are generally negotiated between the Master Policy Holder, for instance, the employer, and the Insurer. Due to this reason, the terms and conditions of the group policy vary considerably from those of the Individual Health Policy. For example, the group policy may give exemption for Pre-Existing Diseases exclusion. It may include maternity coverage, while it is generally excluded in individual health policies. The group policies may restrict the treatment only at the ‘Network Hospitals’ and it may have a condition called ‘Co-pay’ which one may not find in the Individual Health Policies.
Network Hospitals:
Insurance Companies directly or through their TPAs enter into MOU with several hospitals at several locations for the convenience of the policyholders. This understanding may include negotiated fixed rates for various medical services and procedures charged by the hospital. Based on this understanding, the Insurer will be in a position to pre-approve the likely expenses of hospitalization and authorize the hospital to provide cashless treatment to the Insured person.
Cashless Treatment:
Cashless treatment, when approved by the Insurer, will facilitate the hospital to provide treatment to the Insured without insisting on the insured for the advance amount to the extent of the pre-approved amount authorized by the Insurer. On discharge of the patient, the Insurer will pay this amount directly to the hospital.
It is absolutely important to note that ‘Cashless treatment’ does not mean zero expenses for the insured. When the actual treatment charges exceed the pre-approved limits or actual expenses include those that are not covered by the policy, the hospital may demand the Insured to deposit such amount before hospitalization. Many people feel disturbed by such demand by the hospital as they perceive that ‘Cashless Treatment’ means that they don’t have to pay anything. This is not true because ‘Cashless facility’ is provided only in good faith and it does not involve the unlimited liability of the Insurer. Also where the group policy has the specific condition of ‘Co-Pay’, it becomes mandatory for the insured to deposit the estimated ‘Co-Pay’ amount before hospitalization in case of ‘Cashless Treatment’
Co-Pay:
This is one important condition agreed upon between the Insurer and the Insured, to reduce the premium amount from the perspective of the Insured, and to limit the loss from the perspective of the Insurer.
Co-Pay is generally specified as a percentage of the admitted claim which the Insured has to pay for all claims made during the policy period. For instance, if the Co-Pay is 10%, then this amount will be deducted from the claim admitted by the Insurer. It is not based on the claim made by the Insured, but on the amount agreed by the Insurer as eligible claim amount. For example, if the Insured makes a claim of Rs 1.50 Lacs and the Insurer admits the eligible claim as Rs 1.0 Lacs, then the insurer will pay Rs 90,000 as the settlement after deducting 10% toward Co-Pay. It is also important to note that ‘Co-Pay’ will not reduce the Sum Insured.
Group health policy limitations:
Many people who have Group Health Insurance feel contended and do not opt for Individual Health Insurance to save on premiums. This approach has certain disadvantages that one may realize at a later date. The first and foremost problem is that when the insured ceases to be a member of the group, the Health Insurance cover automatically ceases. Scrambling for Individual Health Insurance at that time will result in all the waiting periods and restrictions kicking in. Also, if the individual is in the age group where a medical examination is mandatory for issuing Health Insurance Policy, the Insurer may decline to issue Individual health insurance based on any adverse medical report. It is therefore important, for those who have group health insurance coverage, to consider buying an additional Individual Health Insurance Policy.
Proper understanding of various terms and conditions of your health insurance policy will go a long way in optimizing your health insurance coverage. Knowing the terms and conditions of the Health Insurance will help you in buying the right policy. When you buy a Health Insurance Policy because it is cheap, you must remember that such cheapness accompanies many exclusions and restrictions that may ultimately make the policy useless when you need to make a claim. Also, blaming the fine print of the policy terms and conditions is a clear manifestation of laziness to know the legally binding terms and conditions of the Health Insurance Policy.
https://vizzainsurance.com/home
T.D.Prasad., B.E (Hons).,M.B.A.,F.I.I.I
(The author can be contacted at tdprasad53@gmail.com)
