Health insurance– Part 2
2016-07-21 17:10:00 UTC
In part 1, we discussed the various kinds of health insurance plans, benefits, add-ons and riders. Here, we discuss how to go about picking a health insurance plan that suits you and your family.
Screening the various options and picking a health insurance plan can be a complicated and tedious process. Moreover, there is no magic bullet cure for a wide range of situations or individual circumstances. However, being aware of what to look for, when you compare plans, can ease the decision making process. The choice typically depends on several factors such as your age, number of dependents, medical condition, costs, medical history (hereditary disposition), hospital preferences, location and existing insurance coverage, if any.
Here are some guidelines to help you whittle down the options and zero-in on the apt plan.
Understand Your family Needs
The most important thing is to finalize the family health insurance requirements. This entails making a list of family members, number of children and adults, taking stock of the medical / hereditary problems affecting the family, etc. This will give you a fair idea about how much cover you and your family actually need. If for example, the children are young and healthy with no history of any chronic illness, you may not need health insurance for them just yet or maybe you feel it is required. Furthermore, if you have aged and dependent parents that have poor health or medical history, then you have to evaluate your needs carefully. Including aged parents in a family plan can increase the cost of cover for the whole family, as the premiums for the family floater plan are set by the age of oldest family member being insured. Moreover, including aged members with frail health as part of your family floater plan could potentially leave the rest of the family without any cover when they need it.
Based on family medical history and genetic pre-disposition, if there is a need for a health cover for health conditions like heart ailments, diabetes, etc, ensure that you have a plan to address this.
Buy when you are young and healthy
It is important to buy at least a basic health insurance cover early in life for both spouses. Health Insurance policies once issued are life-long by law and insurance companies cannot increase premiums during renewal based on your claims history. As a result, the premium stays relatively low forever for early entrants.
On the other hand, middle-aged people, who acquire health insurance in their forties or fifties represent a considerable risk to insurers, are subject to a thorough scrutiny, and charged a hefty premium in exchange for a suitable health cover. In addition, most health insurance plans have a waiting period of 2-3 years for pre-existing ailments. When you buy health insurance early in life, you are able to enjoy the full benefits of your health insurance plan without any strings attached.
What does the plan cover?
If you indeed want a comprehensive policy that covers a wide range of critical illnesses as well as maternity, surgery, etc, then you have to read the exclusions, exceptions and sub-limits carefully to ensure you are not shortchanged. Since not everyone can afford these comprehensive plans, it is important to decide what you want your plan to cover.
If you need supplementary coverage over your basic healthcare plan, add- ons like Maternity Cover, Critical Illness, etc. are available to cater to such specific requirements. Maternity coverage reimburses medical expenses incurred during pregnancy and childbirth. You can obtain Critical illness coverage either as standalone policy or as a rider. A combination of a basic health cover along with add-ons can ensure that you and your family enjoy comprehensive health coverage. You also have to worry about your future needs and a top-up plan as already explained in part-1 can be a cost-effective option. However, a basic medical insurance cover together with a Critical illness cover( to know more read part-1 and part-2) and a personal accident insurance coverage(to know more read part-1 and part-2) for the spouses should be good enough for most families and this will obviate the need for a top-up plan or a comprehensive plan.
Sum assured is the amount that a person or a family (in the case of a family floater plan) is covered for under the plan for a policy year. It is very important to choose an adequate sum assured, taking into consideration the escalation in medical costs, but the premium should be affordable as well and hence you have to strike a balance. For example, if the limit under the plan for a hospital bed / day is one percent of the sum assured, then your sum assured should be reasonable to cover this cost, without you having to pay the difference between costs incurred and costs allowed in the plan.
As a minimum, a young person below the age of 34 should opt for an indemnity cover in the range of ₹ 3 lakhs to start with, while a married individual should explore the family floater option for coverage of ₹ 5 lakhs for both spouses. Of course, the amount depends on where you live because, medical expenses in metros/tier-1 cities are considerably higher than tier II / tier III cities.
To keep up with the inflation in medical costs it is a good idea to review and revise the sum assured each year upon renewal.
It is important to ensure that your health insurance policy has a wide network of hospitals and includes in particular the better ones in your neighborhood especially if you are particular about using cashless facility. In the event of a medical emergency, it helps to have access to the best hospitals in the vicinity, as you are more likely to visit them in emergency. It is important to pick an insurer that has a strong presence in the city or part of India you live in.
Another important aspect that merits attention is the inclusion of hospitals with varied specialties i.e. the policyholder should have a choice when it comes to certain illnesses instead of having to visit the same hospital that may not be able to provide you with proper care. Although, there is no guarantee that the list of network hospitals will not change in future, a strong network gives you enough confidence in the tie-ups and the infrastructure the insurance company has in place. Many insurers, notably PSUs and some private insurers have a higher co-pay clause for treatment in hospitals that are not part of their network. Choosing a plan with a wide network will help you avoid additional costs.
Understand limitations, sub-limits and exclusions
It is important to understand the terms and conditions of a health insurance policy as the details are often buried in fine print. This is particularly important if you have opted for a comprehensive medical cover for the entire family to take care of all your health problems.
- To offer a cost effective health insurance cover, all insurers have certain exclusions along with waiting periods. Please make sure you understand these and are fine with such exclusions.
- Read the exceptions carefully to understand the illnesses not covered by the policy like pre-existing illnesses..
- Read the terms and conditions to understand the disease specific or treatment specific sub- limits in your policy. Many plans impose Sub-limits on hospital room rents, hospital expenses, specific diseases, treatments, surgical procedures, doctor fees, ICU charges and medicine costs. It is preferable to select a plan that does not have such sub-limits, if you can afford this. This is usually not possible in the case of senior citizens, but is possible for people in the 30-35 age groups. Sub-limits can be a pain if the room rent is quite high where you live. Mumbai, Delhi, Bangalore and Chandigarh are some cities that belong in this category. However, there is a trade-off and if you cannot afford the premium for policies without sub limits there is not a lot you can do about this. If the room-rents are reasonable as in Chennai for example, a policy with sub-limits is certainly the way to go to keep premiums low.
- Don’t sweat over minor aspects like free medical checkup, ambulance charges, domiciliary treatment and hospital daily cash, etc as they are either rarely used or priced in the plan already though projected as free. Make sure the plan does not include what you do not intend to use at all. For example if the plan includes maternity cover and you do not need it, make sure you select another plan as maternity cover is probably priced in already and you are paying for this. Maternity cover is a one- time expenditure for which you may not want a cover.
- Pick a plan with minimum exclusion period for pre-existing health conditions.
- As already explained in part 1, a high no-claim bonus will provide you additional coverage and protect you against cost inflation. Please ensure this is explicitly stated in the plan.
How much does the plan cost?
The health insurance cost has two components. One, the annual premium you pay for the plan and other the out-of-pocket expenses you pay when you receive medical care in the form of deductibles, coinsurance and co-pays.
As a rule, if you know you have an expensive medical condition requiring frequent visits to the hospital, pick a plan with a higher premium to cover most of your costs.
The following are situations when a higher premium and lower out of pocket cost is desirable
- Planning to have a baby and you have opted for a maternity cover
- Planned surgery, like a knee or hip replacement
- Increased volume of care due to a recent diagnosis
You may want a plan with higher out-of-pocket costs if:
- You cannot afford a plan with lower out-of-pocket costs anyway.
- You and your family are in good health and rarely see a doctor.
- You rarely participate in activities with a high risk of injury.
IRDA has mandated that there should be no claim-based loading or increase in premium costs during renewal. While the insurer can still increase the premium based on overall cost inflation and the policyholder moving into a higher age bracket, premiums cannot be arbitrarily increased based on individual medical or claim history. However, this is worth checking.
Based on the above criteria, you can draw up a short list of 2-3 insurers and make an informed decision. You can buy policies online though, as many insurers give discounts on online policies.
Health Insurance is often overlooked by individuals below the age of 35, as they think it’s something they don’t need, but given the rising cost of healthcare, increased stress and health issues caused by sedentary city life, and the increased premiums/extra conditions for older people to get health cover, buying health insurance before the age of 35 is highly recommended.