Health Insurance Portability from October 1: Fine Print

Insurance Regulatory and Development Authority (IRDA) had in February 2011 instructed insurance companies to provide health insurance portability from 1st of July 2011.  This was subseqeuntly deferred and now is all set to get implemented from 1st October 2011. 

Health insurance portability will help policyholders to change their insurer without losing any credit or benefit for the period of cover with the existing insurer.  This helps the most in cases of pre-existing diseases since for every new policy; pre-existing diseases are excluded from the health insurance cover for a certain period from the date of commencement of the policy.  With portability in place, the policyholder will get the benefit of the period served under existing insurance policy when he changes the insurer. 

Read more about health insurance portability here

How portability works? 

The final guidelines issued by IRDA states that in case a policyholder wants to change the insurer, he has to apply to the new insurer 45 days before his policy with the existing insurer is due for renewal.  Otherwise, the insurer has a right to reject the offer for portability.  This ensures that the new insurer has reasonable time to verify history of claims which shall be available on common database to all insurers.  This database shall contain two years history of any claims made by the policyholders. 

On receipt of application for portability, the new insurer shall furnish the Portability Form along with Proposal Form and other relevant product literature.  The policyholder has to fill in all the forms and submit the same to the new insurer. 

Within 7 days of receipt of the completed portability and proposal form, the new insurer, if required, can ask to existing insurer additional information about the policyholder in the prescribed format.  The existing insurer is bound to provide such data within 7 days of receipt of such request. 

Based on the information received, the new insurer shall decide to issue health cover to the policyholder.  In case, the new insurer does not communicate its decision within 15 days, then it is assumed that the application has been accepted and later on it cannot reject such application. 

Where on the date of renewal of existing insurance policy, the outcome of acceptance of portability is still pending with the new insurer:

1.     if requested by policyholder, the existing policy shall be allowed to be extended for a short period (atleast one month) by accepting pro-rata premium for such period,       

2.     the existing policy shall not be cancelled until such time a confirmed policy from new insurer is received or if otherwise instructed by the policyholder,

3.     the date of commencement of risk of the policy issued by new issuer shall match the date of expiry of the short period in such cases and

4.     in case, for any reason, the policyholder subsequently chooses to continue the cover under existing insurer, it shall be allowed to continue by charging a regular premium and without imposing any new conditions.

Thus it can be seen that ample safeguards are provided in the guidelines to ensure that the policyholder has adequate options and is not without cover at any point of time while the portability is in progress. 

Treatment of Pre-existing Diseases 

It is important to understand how the pre-existing diseases shall be treated after the portability to the new insurer.  The waiting period to be served for allowing pre-existing diseases to be covered with new insurer shall be calculated after including the number of years of insurance cover with existing insurer.

For eg:  In the health insurance policy of the new insurer, if the pre-existing diseases have waiting period of 3 years and the policyholder has completed two years of insurance cover with existing insurer, he has to wait for additional one year to ensure the pre-existing disease is cover.   The guidelines ensure that such additional waiting period is explained by the new insurer to the policyholder. 

Treatment of No Claim Bonus 

In case a policyholder does not make any claim in a particular year, he is entitled to no claim bonus at the time of renewal.  This no claim bonus can be either by way of reduction of next year’s premium or by increase in the amount of sum assured.  In case of portability, policyholder has the option to club cumulative bonus acquired under previous policy with the sum assured and treat such higher amount as revised sum assured.  However in such cases, it shall lead to high premium charges. 

For eg:  Assume a policyholder having health insurance policy of Rs. 1,00,000.  He has also earned cumulative bonus of Rs. 25,000 over the years.  Now if he decides to change the insurer and opts to club the cumulative bonus of Rs. 25,000 with Rs. 1,00,000, Rs. 1,25,000 shall be treated as revised sum assured and premium shall be based on such higher revised sum assured. 

There is one more thing to be aware of in such cases.  Suppose the new insurer provides the health insurance cover for Rs 50,000 and in multiples thereof.  Then in our above example the sum assured shall automatically stand increase to Rs. 1,50,000, since the insurer cannot provide cover for Rs. 1,25,000.  The premium one pays shall be based on cover of Rs. 1,50,000.  However portability benefits shall be available only up to Rs. 1,25,000 and not on the entire cover of Rs. 1,50,000. 

Group mediclaim policy to individual health policy 

Individuals who are covered under group mediclaim policy, such as one provided by the employer, shall have the right to migrate from such a group policy to an individual health policy with the same insurer.   One year after such migration, they can migrate to any other non-life insurers. 

Thus it can be seen that guidelines have tried to cover all possible scenarios and simultaneously tried to minimize trouble to the policyholder.  We need to wait and see how this is being implemented by the insurers and how much the policyholders are benefited.  But for policyholders who have bad experiences with their current health insurance provider, health insurance portability is a good option to avail of.

One should keep in mind that portability does not means the premium shall remain the same.  The premium applicable to the scheme of new insurer chosen by the policyholder shall be applicable.  Further the new insurer also has right ‘to load’ the premium based on the claim history of the policyholder. 

Do let us know your comments and views on health insurance portability below.

Health Insurance Portability – Another consumer friendly step by IRDA

 

Courtesy: Ted Swedenburg from Flickr

It seems ‘portability’ is the buzzword amongst the regulators this year.  After the much awaited mobile number portability allowing users to switch their mobile operator while retaining the number, Insurance Regulatory and Development Authority (IRDA) has instructed insurance companies to allow health insurance portability from 1^st July 2011.  This is continuation of consumer friendly measures initiated by IRDA which started with modifying structure of ULIP policies last year.

From 1^st July 2011, policyholders can change the insurance companies without losing any credit for the period of cover with the previous insurer.  This is most beneficial in case of pre-existing diseases.

Pre-existing diseases, generally, are excluded from the health insurance cover for a certain period of time from the commencement of the policy.  Depending on the health insurance plan, it varies from one year to three years.  In existing scenario, in case the policyholder changes the insurance company say after 4 years, the new policy will again have the above exclusion and any pre-existing diseases will be excluded from cover for one year to three years depending on the plan. 

This works to the detriment of the policyholder and he is force to stay with the same insurance company even though he is not satisfied with their services.  This also acts as anti-competitive. IRDA has now directed the insurance companies to take into consider the period served with previous insurance company and reduce the same to consider coverage of pre-existing diseases.

For example: Suppose Rahul purchased a health insurance policy from ABC Insurance Company last year.  The said policy excluded pre-existing diseases from coverage for first two years.  Now Rahul, not satisfied with the services of ABC Insurance, wants to discontinue this policy and change to XYZ Insurance Company, whose insurance plan also exclude pre-existing diseases from coverage for two years.  As per the new guidelines, XYZ Insurance Company will take into consideration the period of coverage with ABC insurance and reduce the same to define the coverage for pre-existing diseases under the new policy.  Hence the new policy will only be able to exclude pre-existing diseases for further one year.

One important point to note here is this benefit is restricted to the sum assured (including bonus) under the previous policy.  In case one wants higher coverage, then he again needs to fulfill the criteria of pre-existing diseases.

Had such conditions restricted you to change your insurance company in the past?  Will you now be switching to another insurance company?  Do write your comments and suggestions below.

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Mediclaim: Things to keep in mind before buying health insurance

Rajiv’s dad got hospitalised for sudden chest pain.  Rajiv had a health insurance cover (popularly known as mediclaim) for Rs. 3,00,000 and admitted his dad to one of the best hospitals having cashless facility for treatment.  At the time of settlement of bill for Rs. 2,00,000, he was surprised to know that the cashless claim was passed for only Rs. 1,40,000 and he need to pay the balance Rs. 60,000 before discharge.  On inquiring with the insurance company, he came to know that as per his policy, his room eligibility was twin sharing occupancy of up to Rs. 1,500 per day whereas he had opted for single room having daily room rent of Rs. 2,500.  Rs. 20,000 was rejected for this reason.  Balance Rs. 40,000 was rejected on the basis of ‘co-pay’ condition of 20% in his insurance policy.  Co-pay condition means that the customer needs to bear 20% of the hospitalisation bill and hence in this case, Rajiv have to bear Rs. 40,000 out of his total bill of Rs. 2,00,000.

Let us look at another example.

Sameer had purchased one of the cheapest health insurance policy available from a private company 3 years back.  He was regular in paying his annual premiums and had no claims history.  He was shocked to see that his 4th year premium was increased by 200% by way of ‘loading’.

Above two are not the examples of an insurance company cheating its customers.  The clauses such as co-pay and loading are clearly specified in the terms and conditions of the policy documents given to the customer.  However, Rajiv and Sameer were not made aware of the existence of such terms by their agent at the time of the purchase of health cover.

There is no denial of the fact that every individual should have health insurance cover due to the rising cost of medical treatment and the increasing risk of lifestyle diseases.  However, one should evaluate all the features and conditions of a health cover to help him understand the insurance cover.

Courtesy: Олег Олешкевич from Picasa

Listed below are certain key features, besides the premium cost, one need to look into before purchasing a health cover:

1. Pre-existing disease: If you have a history of disease at the time of taking policy, you need to check how it will be covered.  There are certain policies which do not cover pre-existing diseases at all and there are few policies which covers such diseases after a period of 3 to 4 years.  Needless to say, you should always prefer the second option.
2. Room eligibility:  Room eligibility means the daily maximum amount which the insurer will bear for room charges, boarding and nursing related expenses.  Certain policies will link it to the sum insured (usually per day cap of 0.5% to 2% of sum insured, which may be too low), whereas some will specify the type of room eligible such as twin sharing or single along with a maximum cap for each type of room.  You need to factor this while purchasing the cover and keep it in mind at the time of hospitalisation.  In case you exceed these limits, the insurer deducts the additional expenses incurred above the limits specified.  Do remember that doctor’s fees, operation theatre cost and many other costs are related to the room you occupy.  All such cost will be settled based on your eligibility and any additional expenses will be bear by you.
3. Pre & post hospitalisation cover:  You need to check the number of day’s pre and post hospitalisation expenses you will be able to claim.  Generally it is 30 days for pre-hospitalisation expenses and 60 days for post-hospitalisation expenses.
4. Diseases cover:  Certain diseases such as Hernia, Piles, Cataract, Osteoarthritis may be specifically excluded from the cover or may be covered after certain years of policy existence.
5. Entry Age:  Earlier it was difficult to cover people above 55 years of age under health cover.  This was rather disgusting since that is the period of life when the health problem starts arising.  But now, there are many policies available where one can enter in to a health cover at age of 55 years or above.  Do check with your insurance provider about the entry age limits.
6. Renewal Option:  This is one of the important things to check and it basically means the age till when you can renew your insurance policy.  Certain companies restrict it to 70 years whereas few provide till 90 years.  Definitely, more the better.
7. Co-pay: Co-pay clause reduces your premium outgo, however by choosing this option; you agree to share your hospitalization bill with the insurance company.  Co-pay can range from 5% to 20%.  In 20%, you agree to bear 20% of the total hospitalisation bill, whereas the insurance company bears the balance.  Co-pay usually is not wrong, but you should be aware about it at the time of purchasing the policy and should be reflected through reduce premium outgo.
8. No claim discount and loading: Generally the insurer provides 5% discount on premium (subject to overall limit) for each claim free year.  Hence having no claim during a year may reduce your annual premium outgo.  As a contrary to this, if any claim is admitted during the year, then a loading of 5% or more (depending on the terms) shall be levied on your next annual premium.  In simplest terms, you benefit with reduce premium in case there is no claim during a year or you need to pay increase premium for subsequent year in case of any claim.  However the catch is the benefit of reduce premium is generally restricted (upto 20%) whereas there is no restriction for loading percentage.  There are few policies where loading can be up to 200% to 300% of the premium amount.  Hence it is necessary to clarify loading terms before finalizing a health cover.  There are few companies which do not specify the terms and state that it is based on their scientific model.  However, it is better to have it specified upfront in the policy document.  Certain private companies have started selling policies without any loading conditions.
9. List of Network Hospitals:  You need to check the list of network hospitals covered by the insurance company.  This will be helpful since you can avail the facility of cashless hospitalization in these hospitals.  Few insurance providers requires you to co-pay certain portion of the bill in case the treatment is availed in non-network hospitals.
10. Maternity Benefits:  Do check whether maternity expenses are covered and its limits.
11. Critical illness cover:  There are certain policies which cover only critical illness such as cancer, brain tumor, etc.  While these diseases will also be cover in your normal policy, the cost of such treatment may be substantially higher and may exceed your sum insured.  Critical illness policies helps in such case wherein they cover only specified critical illness.  Since there coverage is specific, if taken at early age, premium outgo is less.
12. Other benefits such as ambulance cost, attendance charges: Policy may cover ambulance cost and attendant charges upto certain limits.  It is advisable to know them.
13. Claim process (TPA or direct):  You need to check how the claim settlement will take place.  Whether will it be through Third Party Administrators (known as TPA) or directly by the insurance company?  Generally, in case it is by the insurance company, the company should pass the benefit of cost savings by way of reduce premiums.  TPAs are incentivized to deduct the hospitalization bill and try to reduce the claim amount as much as possible.  Hence it is important to know the TPA for the insurance provider and check its claim settlement history.

One can opt for family floater policy instead of regular policy, where the sum insured is floating over the persons insured.  With the family floater option, you can additionally cover your spouse, parents or children to the same annual aggregate limit. Since the probability of all of you getting hospitalised is negligible, it reduces the premium outgo without affecting the insurance cover.

Another thing to keep in mind is that it is necessary to have a health cover even though you are cover under your employer’s group mediclaim policy.  This is generally allowed as perk to the employees.  However, the employer has an option to withdraw the same or reduce the cover or in case you discontinue your job, you may be without a health cover and the new cover may come at a higher premium.

There are health cover plans available which gives cash benefits for each day of hospitalisation or which are insurances plus investment plans.  However, as in term insurance, it is beneficial to keep the health insurance cover simple to cover the basic risk of hospitalisation expenses.

 

Were you aware about these features while purchasing your health cover?  Did you face any problems at the time of claim settlement?  Do share the same along with your comments and suggestions below.