Hospitalization can be financially devastating; A comprehensive, step-by-step guide, for choosing the right health insurance policy

Healthcare is becoming expensive and if it involves hospitalization, it can be devasting for a family’s finances. Relying solely on employer provided medical insurance may not be a good idea because it exposes you to medical expenses risks once you quit your job.

Considering today’s lifestyle and increasing cost of hospitalization, it is a huge risk to not have a comprehensive medical insurance. Agreed, the premiums for a decent medical insurance policy are unreasonably high but are nothing compared to astronomical cost of a hospitalization.

There are many health insurers offering a variety of medi-claim policies. Thankfully insurance business in India is highly regulated and the Insurance Regulatory Development Authority of India (IRDAI) ensures that all companies comply with its stringent requirements, safeguarding the interests of medical and non medical policy holders.

However, even with IRDAI watching your back, it pays to be a little more proactive and informed while choosing the right medical insurance policy. Buying medical insurance is a big decision and besides a large outflow of money at the time of purchase, this decision can have far reaching ramifications at the time of medical emergencies. A little investment in terms of your time to do a background research will come handy during the crisis time when you will actually need to activate your medical insurance cover. Given the emotional trauma at the time of medical emergency, you don’t want any more troubles, especially with finances!

Step-by-Step Guide to Choosing Health Insurance Policy

We have divided this guide broadly across three steps, namely; choosing the right insurer, choosing the right policy and exploring additional features.

1. Choosing the Right Medical Insurance Provider

While evaluating insurers to choose the best medical insurance provider, look for the following points;

Track Record: An insurer who has been in the market for 10 or more years is your best bet. Proceed with caution with insurers having a track record of less than 10 year but up to 5 years. Any insurer with a track record of less than 5 years should be avoided. Not that they may be bad, but for your personal safety, it is better to go with an insurer having a longer track record.

Networked Hospitals: The insurers usually provide cashless medical insurance benefits at their networked hospitals, saving you the hassle of having to pay upfront during medical emergencies and then following up with the insurer for reimbursement. Any insurer with over 8000 networked hospitals should give you peace of mind as there will always be a networked hospital nearby in case of an emergency. Any insurer having between 5000 – 8000 networked hospitals is decent but anything less than 5000 networked hospitals should be avoided.

Complaints Volume: Look for at least last three years’ complaint volume for insurers that you are evaluating. The lesser the number of complaints, the better. This data can be found in IRDAI annual reports and mandatory public disclosures by insurers to IRDAI.

Claim Settlement Ratio: Claim settlement ratio is the ratio between the number of claims filed and the number of claims settled. A higher claim settlement ratio means the claim rejection rate of an insurer is less and vice-versa. Anything between 80-90 percent claim settlement ratio is good, while anything below that must be avoided. This data is available on every insurer’s website or ask your agent.

Incurred Claim Ratio: Incurred Claim Ratio (ICR) refers to the proportion of claims paid by a health insurance company against the total amount of premium received during a financial year. If an insurer’s ICR falls within 55 to 75 percent, it means the company is settling claims, while making profits as well. This points to the future stability of the insurer. Anything above or below this window of ICR is an indication to avoid.

2. Choosing the Essential Features in Medical Insurance Policy

Avoid Co-Pay: Co-pay feature, though reduces your premium, but requires you to share the hospital bills in a certain proportion, putting you in fix at the time of claim, especially if the bill amount is large. Better to avoid this feature.

Avoid Room Rent Restriction: If your medical insurance policy comes with a room rent restriction, you might have to pay the difference amount if the room rent exceeds the mentioned maximum room rent allowed. This could become a problem if a room as per your policy’s slab is not available and you have to take a more expensive room. In this case, you will have to pay the difference from your pocket.

Avoid Disease Wise Sub Limits: Many medical insurance policies specify expenditure limits for different diseases. In that case, you are leaving yourself vulnerable to spending from your pocket if the limit for the disease in question gets exhausted. Go for a medical insurance policy that does not come with a disease-wise sub limit.

Pre-Existing Illnesses: If you are changing your insurer or taking a new medical insurance policy, there will be a clause that specifies a waiting period for pre-existing illnesses at the time of taking the policy. Nowadays, many insurers are giving very competitively low pre-existing illnesses waiting period. Try to look for a reasonably low pre-existing illness waiting period.

Pre and Post Hospitalization Expenses: Some medical insurance policies only cover the hospitalization expenses, where as others cover the pre hospitalization expenses for the illness leading to hospitalization. These can be the OPD expenses, medical tests and other investigations. Similarly, after discharge, there are post hospitalization expenses such recuperative medication, follow up visits, confirmatory tests etc. Look for an insurer that covers the pre and post hospitalization expenses. If you are not covered for these expenses, they can burn a pretty big hole in your pocket even if the hospitalization was covered by your insurer.

Family Floater Cover: A family floater cover ensures that there are no individual limits per member in the medical insurance policy. This helps you to arrange appropriate medical care to your loved ones without worrying about exhausting their invidual limits. In family floater cover, the entire sum assured is available to every member insured in the policy.

Domiciliary Hospitalization and Day Care Procedures: Domiciliary hospitalization means providing medical care at the patients’ residence as decided by doctors. In this case, a nurse or a paramedic administers the prescribed medical care. Most of the insurers these days cover such expenses. Day care procedures, on the other hand, are those medical procedures that require no or less-than-24-hour hospitalization. Examples of such procedures are cataract surgeries, some dental surgeries and keyhole surgeries. In such cases, if otherwise stated in the policy wordings, the insurer can reject the claim as the hospitalization is either not happened or is less than 24 hours. Check for Domiciliary Hospitalization and Day Care Procedures coverage before buying a medical insurance.

Cover Restoration Benefit: Normally, if you make a medical claim, the sum assured reduces by the claimed amount for the rest of the policy duration, exposing you to financial distress in case another hospitalization happens during the policy duration. Nowadays however, many insurers offer policy cover restoration benefit wherein, if a claim is made, the insurer will restore your sum assured to its original level for the rest of the policy duration, giving you a tremendous peace of mind.

3. Additional Must Have Features

We have already covered the most essential features to be looked at while buying a medical insurance policy. However, there are some optional features that make your medical insurance policy even more attractive.

Alternative Treatments: The government is promoting Ayurvedic and other traditional forms of medical treatment and hospitals for alternative medicine and therapies are being opened. Explore, if your insurer covers the expenses of alternative forms of treatment.

Wellness Benefits and Free Health Checkups: Many insurers provide free health check up coupons for all the insured members in a medical insurance policy. Similarly, companies provide various benefits to acknowledge loyalty and wellness form of discounted premiums, additional sum assured etc. Look for these benefits as they make your medical policy more productive.

This guide is a comprehensive collection of information, helping you to evaluate the insurance provider, the essential features your medical policy must have and some good to have features. If you take a little time to explore and evaluate these features before deciding to buy a medical insurance policy, it surely will be beneficial in the long run, worthy of the time spent!

Disclaimer: This article is for informational purposes only and does not promote or demote any particular medical insurance company. Talk to your financial planning advisor and healthcare provider before taking any decision, based on the information provided in the article.