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How Does Health Insurance Work ?

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Are you spending a significant part of your savings on healthcare every year? You must cover yourself and your loved ones under health insurance! A health insurance policy is an important financial tool that covers the medical bills of the insured. With this insurance product handy, you can reach out to your insurance provider during medical emergencies. Therefore, if you are not covered under health insurance, it is wise to invest in this insurance product at the earliest. If you are wondering how does health insurance work in India, we will tell you in this article. Let’s get started with it.

What is health insurance?

Health insurance is an insurance product that provides financial assistance to policyholders during medical emergencies and planned procedures. It covers a range of medical expenses, including hospital bills, pre- and post-hospitalisation expenses, home healthcare, daycare procedures and alternative treatments. However, the scope of coverage can vary from policy to policy.

When you have adequate health insurance handy, you can opt for timely treatment at a reputed healthcare facility without worrying about paying huge bills from your pocket. Therefore, health insurance makes healthcare affordable, especially now when medical costs are rising rapidly.

Key components of health insurance

The key components of health insurance are —

1. Coverage:

Policy coverage is one of the most important components of health insurance. It tells you about the inclusions and exclusions of a health plan and helps you file claims accordingly.

2. Premiums:

A health insurance premium is the amount you must pay to the insurer to cover your risk. Depending on policy terms and conditions, you can pay premiums annually, semi-annually, quarterly, or monthly. Since these premiums renew your health plan, they are also called renewal premiums.

3. Copayment:

Copay or copayment is an important clause in health insurance that helps reduce policy premiums. According to this clause, the policyholder must bear a pre-decided percentage of their health insurance claim amount, and the insurer will pay the remaining.

For example, if your claim amount is INR 1 lakh and the copayment is 10%, you must pay INR 10,000, and the insurer will pay the remaining INR 90,000.

4. Deductible:

This is an important health insurance component that helps divide the risk between policyholders and insurance companies. However, if you take health insurance with a deductible, you must pay the deductible against your health insurance claim before the insurer starts to pay for your medical expenses. Deductibles also help reduce health insurance premiums.

5. Coinsurance:

The term coinsurance refers to the claim amount you must pay after paying the pre-decided deductible.

For example, you have taken health insurance for INR 10 lakh. The policy has a deductible of INR 1 lakh and a coinsurance of 10%. If you file a claim for INR 3 lakh, you must pay the deductible of INR 1 lakh from your pocket. Once you have paid this, the coinsurance of 10% will be calculated on the remaining claim amount, i.e., INR 2 lakh. Therefore, you must pay another INR 20,000 from your pocket, and the insurer will pay the remaining claim amount of INR 1,80,000.

6. Sub-limits:

These are the monetary caps insurance companies place on certain expenses, such as hospital room rent, ambulance charges, and medical expenses.

7. Waiting period:

This is the initial period you must wait before you can start filing health insurance claims. While the initial waiting period is up to 30 days, the waiting period for pre-existing conditions and specified diseases can be up to 3 years.

Types of health insurance plans

The following are the main types of health insurance plans in India —

1. Individual health insurance:

This policy covers the medical bills of the insured individual.

2. Family floater:

This health insurance policy is suitable for families. It can cover the immediate family members under one plan, i.e., husband, wife, children and parents.

3. Senior citizens’ health insurance:

This policy is suitable for individuals over 60 years of age.

4. Group health insurance:

This is a health plan offered by employers to their employees.

5. Critical illness insurance:

This is a special insurance policy that covers life-threatening conditions, such as cancer, heart disease, and kidney disease.

In addition to these, insurance companies may offer the following health plans:

• Personal accident cover

• Top-up health insurance

• Maternity health insurance

• Disease-specific plans

Coverage and benefits of medical insurance

The coverage and benefits of a healthcare policy are —

1. Hospital bills:

If you get hospitalised for a covered medical procedure, the insurer will reimburse the bills. Hospital bills can include the following —

• Doctor’s fees

• ICU or intensive care unit charges

• Hospital room rent

• Cost of diagnostic tests

• Surgery charges

2. Pre- and post-hospitalisation expenses:

In addition to your hospital bills, a health insurance policy covers the expenses that you incur before and after hospitalisation. Pre-hospitalisation expenses may include doctor’s consultation fees and the cost of diagnostic and imaging tests. Post-hospitalisation expenses may include the cost of medicines and follow-up treatment.

3. Daycare procedures:

Health insurance also covers daycare procedures or important surgeries and treatments that require less than 24 hours of hospitalisation.

4. Home healthcare:

If your doctor advises home healthcare due to the non-availability of rooms in the hospital or some other reason, the insurer will cover the bills.

5. Alternative treatments (AYUSH) :

If you opt for alternative treatments, such as Ayurveda, Yoga, Unani, Siddha or Homeopathy, the insurance company will reimburse the bills. However, the coverage may be subject to policy terms and conditions.

6. Road ambulance charges:

Insurance companies also cover road ambulance charges during medical emergencies.

7. Organ donor expenses:

If the insured is to receive a major organ, the insurer will cover organ donor expenses or the cost of harvesting the organ from the donor’s body.

8. Preventive health check-ups:

Many insurance companies offer complimentary preventive health check-ups to policyholders. The frequency of these check-ups can vary from insurer to insurer.

9. Lifetime renewability:

Choosing an insurance cover with lifetime renewability will save you from the hassles of buying health insurance at a later age.

10. No-claim bonus:

If you don’t raise a claim during the policy period, you can earn a no-claim bonus in the form of reduced policy premiums or increased sum insured.

11. Income tax rebate:

Under Section 80D of the Income Tax Act, 1961, you can earn a tax rebate of up to INR 25,000 or INR 50,000 (senior citizens) annually on the premiums you have paid toward your health insurance policy.

Claim process of health insurance

Now, during the term of your coverage, in the event of hospitalisation of an insured person, it’s evident that you will make a claim for your healthcare needs. Now, the insurance company, in case of a claim, first checks whether the treatment that is required by the insured is covered under the insurance policy.

If it’s covered by the plan, the next step the insurer does is to find out if the hospital where the insured is getting his treatment is in its network. If you’re getting your treatment with a networked hospital, then congratulations, you’re eligible for a cashless hospitalisation and the TPA (Third Party Administrators) are the ones responsible for settling your hospitalisation bills. TPA’s will verify the details of your Mediclaim policy, and if it has a deductible clause or if the total amount of your bills exceeds the amount of your sum insured, you just have to pay your share of the bill, and the rest will be taken care of by your insurer. And if no such clause applies, you walk out of the hospital as if nothing ever happened to you without paying even a single penny. Yes, that does feel good!

Now, let’s assume your hospital is not on the list of the insurer’s network, then there’s a different procedure where you have to collect all your medical bills that also includes pre- & post-hospitalisation bills and submit them to your insurer collectively. Again, the TPA will check the clauses of your policy and calculate the total amount to be reimbursed after deducting the copay amount (if any) or the amount that exceeds your insurance coverage. The balance or the entire amount of your bills - whichever is applicable, will be directly reimbursed by the insurance company and in any case, the insured walks out happily.

How to renew health insurance

You can easily renew your healthcare policy either online or offline. Here’s how:

Online Renewal

• Visit your insurance provider’s official website and tap on the health insurance renewal option.

• Enter the policy number or registered mobile number and the required details.

• Select a suitable payment option, such as debit card, credit card, or net banking, and make the payment.

Offline Renewal

You can also renew your health plan offline by paying premiums via cheque or demand draft. If you are paying through cheque, fill in the payee and premium amount correctly. You must also write your policy number on the back of the cheque.

Make sure you renew your health insurance before or within the grace period to prevent policy lapse.

Factors affecting health insurance premiums

The following are the factors that affect health insurance premiums —

1. Sum insured:

The higher the sum insured of your health insurance policy, the higher will be the premium amount. Therefore, it is important to choose the right coverage amount to keep premiums affordable.

2. Age:

Health insurance premiums increase with age as older people are prone to health conditions. Hence, it is advisable to buy health insurance at an early age to cover your medical bills by paying nominal premiums.

Curr3. ent health:

If you enjoy good health and have no pre-existing conditions, the policy premiums will be quite affordable. On the other hand, if you get diagnosed with a pre-existing condition before the policy purchase, the insurer will charge higher premiums to cover the risks.

4. Family history:

Having a family history of health conditions, such as cancer, heart disease, diabetes, or high blood pressure, will also increase your health insurance premiums by a significant percentage.

5. Profession:

If you have a high-risk job, insurers will charge higher premiums to cover the risks.

6. Smoking status:

Smoking poses several health risks and increases the chances of hospitalisation. Therefore, smokers must pay higher premiums for their health insurance policies.

7. Geographical location:

If you reside in a city where healthcare costs are high, you may have to pay higher health insurance premiums.

Tips for choosing a healthcare policy

If you are planning to buy health insurance, the following tips can help you choose a good plan.

1. Policy coverage:

Look for a health plan with more inclusions and fewer exclusions. Make sure the policy covers hospital bills, pre- and post-hospitalisation expenses, home healthcare, daycare procedures, organ donor expenses, AYUSH treatments, and more. Opting for a comprehensive health plan will ease your financial worries during medical emergencies.

2. Sum insured:

Although a high sum insured will ensure better financial protection during expensive medical procedures, it will increase policy premiums by a significant percentage. Therefore, calculate the premium amount and choose an affordable sum insured.

3. Policy type:

If you want to cover yourself and your loved ones under health insurance, it is wise to choose a family floater instead of individual health plans. This will save you from the hassles of maintaining separate policies. Moreover, a family health insurance policy will be more affordable than individual health insurance. However, it is wise to cover senior citizens under a separate plan.

4. Network hospitals:

Choose a reputed insurance provider with a long list of network hospitals, with some good ones in the vicinity. If there is a medical emergency, you can reach the nearest network hospital without worrying about paying the bills from your pocket.

5. Waiting period:

All health insurance policies come with an initial waiting period of up to 30 days. In addition to this, you may have to serve a waiting period of up to 3 years for pre-existing conditions and specified diseases. Therefore, when you are buying health insurance, choose a policy with a shorter waiting period for these conditions.

6. Claim settlement ratio:

This is an important thing to consider while buying health insurance. The claim settlement ratio is the percentage of claims settled by the insurance provider out of the total claims received in a financial year. It is wise to opt for an insurance provider with a high claim settlement ratio as it offers reassurance that the insurer will settle your claims.

7. Lifetime renewability:

It is always wise to choose a health plan with the lifetime renewability option for continuous coverage.

8. Sub-limits:

While sub-limits may help reduce policy premiums, they may also prevent you from making the most of your health plan. Therefore, look for sub-limits at the time of policy purchase and, if possible, opt for insurance coverage without sub-limits.

9. Copayment clause:

Some insurance policies come with a copayment clause. According to this clause, policyholders must pay a certain percentage of the claim amount, and the insurer will pay the remaining. Although copayment helps reduce health insurance premiums, it can increase your financial liabilities during expensive hospitalisations. Therefore, check the copayment clause and choose health insurance with low or no copayment.

FAQs

1. I am young and healthy. Do I need health insurance?

Yes, it is important to stay covered under adequate health insurance for financial protection during medical emergencies. Accidents and illnesses can happen at any age and take away a part of your savings. Therefore, it is wise to stay prepared for the uncertainties with the right health insurance policy.

2. Should I take separate health insurance for my parents?

It is advisable to cover your parents under a separate health insurance policy. The premium for a family floater depends on the age of the oldest member covered. Therefore, covering your parents under the same policy will increase policy premiums by a significant percentage.

Moreover, when you cover senior citizens under a separate health insurance policy, they can use the entire sum insured to cover their medical bills. You can also claim tax deductions of up to INR 50,000 on their health plan and INR 25,000 on your individual health insurance or family floater.

3. What is a no-claim bonus in health insurance?

A no-claim bonus is an important benefit offered by insurance companies to policyholders. If you don’t make health insurance claims in a policy year, the insurer will give you a no-claim bonus in the form of an increased sum insured or a discount on policy premiums. You can earn a maximum no-claim bonus of up to 50% after 5 consecutive claim-free years.

4. Can I buy more than one health insurance policy?

Yes, you can buy more than one health insurance policy for better financial security during medical emergencies.

5. Can I add an immediate family member to my health plan?

Yes, you can add immediate family members, like your spouse, children or parents, to your health plan at the time of policy purchase or renewal.

Conclusion

We hope we have answered the question — how does medical insurance work in India. In short, health insurance is a valuable investment that can secure your finances during medical emergencies. With this insurance product handy, you can choose the finest treatment without burning a hole in your pocket. The insurance companies in India offer different health plans to meet customer requirements and budgets. Therefore, shortlist some policies and compare their coverage, premiums, and other features to zero in on the best option.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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