tips to pick the right health cover to suit your needs

8/12/2019 Tips to Pick the Right Health Cover to Suit Your Needs

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Tips to pick the right health cover to suit

your needs

Sanjay Kumar Singh, ET Bureau May 27, 2013, 08.00AM ISTTags:

healthcare cost|

Healthcare|

health insurance|

Health cover|

ET Wealth

(Given the rising cost of)

It takes an agent several days, even weeks, to convince a customer to buy health insurance. Yet,10 minutes at the billing counter of a hospital were enough to persuade Avinash Sharma (see

picture).

When the Delhi-based professional visited a friend, who had undergone a minor surgery in a

private hospital last month, he was shocked to see the bill at the time of discharge.

"A simple operation and one night's hospitalisation cost him Rs 1.4 lakh. The cover from hisemployer covered only Rs 50,000 of the cost," he says.
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We are not surprised. Healthcare costs are rising at a fast clip. According to a survey by

insurance consultancy firm, Towers Watson India, healthcare costs in India increased by 13.25%

in 2011.

The rate of increase in 2012 is estimated to be roughly at the same level. The culprits:

introduction of new medical technologies, over-prescription by doctors, and a general rise in

medicine costs.

Says Antony Jacob, CEO of Apollo Munich Health Insurance: "The treatment protocol for

angioplasty today is vastly different from that followed five years ago. Many of these advancedmedical technologies and procedures cost more."

Sharma is now looking for a health insurance policy for his family. However, the vast array of

choices before him is confusing.

There are individual policies and family floater plans, policies that restore the limit after theclaim and plans that cover critical illnesses or offer cash benefits on hospitalisation. How does

one pick a suitable plan from this clutter?

The answer is that your needs should define the type of policy you buy. Each type of health

insurance policy fulfils a certain need (see graphic).

The choice depends on the buyer's age, family size and structure, and existing insurance cover.


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ET Wealth looks at various situations and the health insurance policies that are best suited to

these circumstances.

Young nuclear familyIf you have a nuclear family, a family floater plan will suit you best. In these plans, the cover is

shared by the entire family. The premium per Rs 1 lakh may be higher compared with anindividual policy, but the premium per person works out to be lower.

It's a calculated risk you can safely take. It is unlikely that all the members will requirehospitalisation in the same year.

For newly married couples, who intend to start a family in a few years, it makes sense to planaccordingly. Though most health insurance policies do not cover maternity costs, some do.

However, these costs are covered only after a waiting period of 2-3 years.


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Buy a policy that covers maternity costs immediately after marriage.

Covered by employer

Some people believe that if they are covered by their employer, they don't need to buy a separate

policy. This can be a costly mistake. While such covers are useful, they may not be sufficient. Ifyou lose your job or switch to another company, you may be rendered uninsured. Even if youbuy a fresh cover immediately, keep in mind that there is a mandatory 45-day cooling period

during which certain claims will not be paid.


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Besides, there is a 2-3 year waiting period for pre-existing diseases. This is where the employer-

provided cover is very handy, points out Roopam Asthana, CEO and wholetime director at

Liberty Videocon General Insurance. The waiting period for a pre-existing diseases cover istaken care of by the group cover.

While supplementing an existing cover, you can either buy a normal policy or a topup plan. A

top-up policy is cheaper because it will cover expenses beyond a certain initial threshold. For

instance, Sharma, his wife and child already have a Rs 2 lakh health cover from their employers.

They should ideally supplement this cover with a top-up policy. If they buy a normal cover of Rs5 lakh, their premium will be at least Rs 10,000 per year. However, if they buy a top-up cover of

Rs 5 lakh with a Rs 2 lakh deductible, it will cost them only Rs 4,100 a year, a saving of Rs5,900 per year. Their existing policies can take care of the initial Rs 2 lakh, which won't be

covered by the top-up plan. Let us look at some other situations.

Self-employed or businessperson

Health insurance is especially important for people not in formal employment. For them, asimple indemnity plan that covers hospitalisation expenses will not be enough. They also need to

insure themselves against loss of income due to hospitalisation.

Most salaried people get paid medical leave, but if your company does not offer this benefit, a

fixed benefit plan comes to the rescue. Self-employed professionals should supplement the base

cover with a fixed benefit policy, which pays them a certain amount for the period that they areout of action.

Living with dependent parents


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The family floater plan is not a good option if you want a cover for an older relative as well. This

is because the premium rates in these plans are determined by the age of the oldest member. If

you live with aged parents, it is advisable to go for individual policies rather than a familyfloater. Buy individual plans for them so that the premium for the rest of the family does not

shoot up. Also, there is a greater likelihood of making a claim for an older person. So the floater

plan will miss out on the no-claim bonus it might have otherwise received.

While buying a policy for your parents, study its features in great detail. Most health insurancepolicies don't offer coverage beyond the age of 70 years, but some policies now offer a lifelongcover. "If the cover ceases at the age of 70, no other insurer will provide you one at that age. Opt

for a policy that provides a life-long cover," advises Pankaj Mathpal, managing director of

Optima Money Managers.

However, do the math when you buy a health cover for someone over 70 years. The premium is

prohibitively high and you could be paying Rs 24,000-30,000 a year for a cover of Rs 1.5 lakh.


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Some may find that putting away the premium money in an emergency fund for medical

expenses is a better idea than buying insurance at that age.

If you still want to buy the cover, check out the clauses relating to renewability. Irda guidelines

state that an insurer is bound to renew a policy except in case of evidence of fraud, moral hazardor misrepresentation. An insurer cannot back out because of the advancing age of the insured

person. Insurers are also required to disclose upfront the terms of renewal, including the scope of

coverage and the likely premium for future renewals.

Swapan Khanna, co-founder of insurance tracking firm i-Save, says renewability should be

among the most important factors governing the choice of a health policy. Look for disclosures

regarding renewal of premiumsare they guaranteed on the basis of age slabs? According tothe latest Irda guidelines, insurers cannot raise the premiums (called loading) arbitrarily on the

basis of a claim in the previous year. It has to be based on the claims in the preceding three years.

Besides, the company not only has to inform the policyholder of the rise three months in advance

but also justify the increase.

Choosing the right policy

While choosing a policy, don't be guided just by the premium being charged. The policy'sfeatures are more important. Almost all policy documents are available on the Internet today.Download brochures and read the terms and conditions of policies carefully before making a

choice.

Sub-limits:Many policies come with sublimits on the sum assured. Besides room rent, there are

sub-limits on surgeries, ICU charges and other procedures. The policies without sub-limits are

better but charge higher premiums.

Co-payment:Depending on how you look at it, this can be a boon as well as a bane. Copaymentmeans the policyholder will bear a specified percentage of the claim amount, while the insurance

company will foot the rest of the bill. This brings down the overall cost of insurance but also

means you don't get full coverage.


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Service ratings based on Irda data for 2011-12. Where a company has recently commenced

operations, service scores have not been considered for rating. i-Save ratings are not meant asfinancial advice or guidance. It is not a recommendation to purchase, hold or terminate anyinsurance policy or contract. Data as of 5 May for individual plans and 10 May for family

floater plans. Detailed methodology on i-Save.com.


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There are various co-payment plans, including those that apply above a certain age or kick inwhen treatment is undertaken in a non-network hospital. The co-payment clause applies to plansthat have differential premiums for metros and nonmetros. If you paid the lower premium

applicable to a non-metro but get treated in a metro, the insurer may ask you to pay a part of the

cost.

Network of hospitals:Check if the hospitals you would prefer to go to are on the insurer's

network. Unless these hospitals are in the network, the cashless facility will not be available. A


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company may have 3,000 hospitals in its network and another may have only 2,000. Opt for the

insurer which has tie-ups with reputed hospitals that you would prefer to go to. It's even better if

these hospitals are close to your house.

Exclusions: Different health plans have different rules regarding exclusions. These are diseases

and procedures that a policy will not cover, either for a specified time period or for the entireterm. For instance, cataract or knee replacement may not be compensated for in the first two

years. Insurers apply this rule to avoid having to pay in cases where people buy insurance covers

after they have been diagnosed with a disease. Stay away from policies that have too manyexclusions or where the cooling-off period is very long.

Day-care procedures:Many policies do not compensate you unless you are hospitalised for at

least 24 hours. Day-care procedures are normally not covered. However, nowadays, owing toimprovements in technology, you don't need to get hospitalised for several procedures, including

non-invasive or laparoscopic surgeries. Some of the newer policies recognise this fact. Opt for

plans that cover the maximum number of day-care procedures.

Alternative treatments:Some policies also cover alternative treatments such as homoeopathic,Unani and ayurvedic medicine. But such alternative methods are highly recommended for the

treatment of some diseases. It is better to opt for policies that also cover such alternative

treatments, though these will cost more than the normal plan that covers only allopathictreatment. To make your task of choosing a policy easier, we have provided ratings of health

insurance policies, which you can consult.

How to counter rise in costs

Health insurance premiums are set to go upsoon. PSU insurer New India Assurance

Company has already received Irda's nod for

hiking the premium by 20%, and others arelikely to follow suit. "With a one-time

market adjustment of 10-20% proposed by

PSU insurers, health insurance premiums

may increase further this year," saysAnuradha Sriram, benefits director, Tower

Watson India. One contributory factor is the

fragmented and unorganised nature of

India's healthcare industry. If it was well-organised, diagnostic procedures and

treatment protocols could be standardised

and there would be uniform pricing. "Sinceexamination and treatment costs are not

standardised, there is limited scope for

controlling costs. Healthcare providers oftenengage in excessive treatment and then overcharge, which results in higher bills," says Khanna


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of i-Save. Insurers also have to bear the burden of the administrative costs involved in dealing

with a vast network of healthcare providers.

The pharma industry chips in with high R&D costs and expensive drugs. Once a new molecule

has been created and successfully clears several rounds of clinical trials, the drug manufacturer

gets a patent for a limited number of years. It is during this period that the manufacturer tries torecover the R&D cost and make a profit. When the period ends, competition from generics

comes in. Hence, prices of new drugs tend to be high. India has the Drug Price Control Order

(DPCO), under which prices of several drugs are capped. Says Vishal Dhawan, chief financialplanner at Mumbai-based Plan Ahead Wealth Advisors: "While the DPCO is meant to benefit

end-users, it has ended up creating a set of distortions in the market." A company that sells both

types of drugsthose that come under DPCO and those that don'toften tries to maximise its

profits by pricing its non-DPCO drugs higher.

There is not much you can do to shield yourself from the rising cost of insurance. However, you

can control costs by making smart choices. Some financial planners suggest that besides health

insurance, you should also set aside a corpus for medical emergencies. This option may notalways be feasible, but an increasing number of people is opting for it. Their reasoning: if there

is an emergency and your policy can't cover the full expense, you have something handy toensure the best healthcare available. "If you don't suffer from any health problem, the money still

stays with you," says Mathpal.

Sriram says that a better way of keeping costs down is to adopt preventive healthcare measures.

In other words, live a healthy lifestyle and exercise regularly. The bottom line, however, is that

in this age of rising healthcare costs you need to protect your family by buying adequate

insurance and spending your money on the right policy.

tips to pick the right health cover to suit your needs

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