28 August, 2009

Get medical cover to avoid a hole in the pocket

Taxes and death are the only certainties in life - we have heard that before. And one more to that – Medical situations, that include a stay in the hospital, is also almost a given for everyone, at sometime in life. The problem is that we do not know when that may happen. Medical insurance comes in there.
But, which kind of medical insurance is appropriate? Most people go with a medical insurance policy, which again goes by the generic term “mediclaim”, though it a product of the PSU insurance companies. Let’s see what a medical insurance from a General Insurance company covers.
What it covers?
1) Hospitalisation for more than 24 hours, which will cover room & board, doctor’s fees, ICU charges, nursing expenses, surgical fees, Operating Theatre expenses etc.
2) Pre-hospitalisation expenses on medicines. It is typically between 30-60 days.
3) Post-hospitalisation expenses on medicines. Typically between 60-90 days.
4) A number of daycare procedures ( over a hundred in most cases ) – that require less than 24 hours of hospitalization. Due to medical advances many treatments do not require hospital stay and hence would not have been otherwise covered under medical insurance.
5) Most policies also allow complimentary health checkup once in a few years, upto a certain limit, subject to conditions like certain number of claim-free years.
6) Again, ambulance charges are also paid by some policies
7) Some policies give a cash allowance for the days of hospitalization, to cover various incidentals like travel, out of pocket expenses & stay of relatives etc.
Other features & benefits
• Medical insurance is typically a yearly renewable contract. There are however policies which can be taken for upto three years, at a go too.
• No medical tests are required for upto 45 years of age. Application processed based on one’s health status declaration.
• Now Sum Assured of upto Rs.10 Lakhs is available in most policies
• Individual & floater policies are available, with most companies
• Cashless hospitalization is a reality in most cases today, giving unprecedented benefits to the policy holders.
• 5% bonus for claim free years, allowable upto 1.5 times of the Sum Assured opted for initially
• Family discount of upto 10% is applicable
• One can take treatment from a non-network hospital in which case the expenses will be reimbursed. But, most companies impose a co-pay option of between 10- 20%, as in these cases the insurance company would not have the advantage of negotiated, better rates like in a network hospital.
• Claim settlement has now been taken over by the companies themselves in many cases, to ensure better service & exercise better control. In others, it is done through a Third Party Administrator ( TPA).
Exclusions & conditions
• There is no-claim period of 30 days ( typically ) when one goes for a policy.
• Pre-existing illnesses are not covered in the first year. Most policies cover pre-existing illnesses only after 2-4 years
• Only Allopathic treatment will be considered for claims
• Certain conditions ( like hernia ) & surgeries/ procedures which can be planned ( like Angiogram etc. ) are excluded for a much longer period – typically a year. There are policies which have upto 4 year waiting periods for specific conditions – like joint replacement surgery
• Only treatments within India are covered
• In some policies, there are sub-limits on how much can be claimed as room rent, ICU expenses , doctor’s fee etc. This can limit the amount of claim, even though the expenses are well within the Sum Assured
• Renewal of policy till a certain age. This can be between 70-80 years, depending on the policy.
Policy renewability
Policy renewability was a contentious issue for Medical Insurance policies. However, IRDA has issued a circular that a company cannot deny renewal or force the policy holder to move to another policy, just because there was a claim in the prior years. This is com
Income tax benefit
Premium paid for medical insurance comes under Sec 80D ( as a deduction). Upto Rs.15,000/- pa can be claimed by an individual and Rs.20,000/-pa can be claimed by a Senior Citizen. Additionally, a medical insurance premium paid for ones’ parents, upto Rs.15,000/-pa can also be claimed under the same section.
For most people, this kind of policy will be good enough, since it covers hospitalization, pre & post medications, daycare procedures & other facilities. Policy renewability is a positive development. When taking a policy one should not go by the premium alone. A proper understanding of the benefits offered is a must – for instance, if one policy covers pre-hospitalization of 60 days & post hospitalization expenses upto 90 days, it may be better suited over a cheaper policy that covers these for a lesser number of days. One needs to look at the offering in totality, before deciding.
There are however certain things a typical medical insurance may not address. A) If one wants to enhance the coverage, it may still pose a problem ( due to claim history ). B) Also, if the policy term is only till 70 or 75 years, it poses a problem - as beyond that period one has to remain without any cover at all and be vulnerable. This is probably the time when medical attention will be most required. C) In many diseases and conditions, medication and attention will be required on an ongoing basis. In extreme cases, it could diminish the person’s ability to earn.
The other aspect that is quite common is the overcharging by doctors & hospitals, which is detrimental to the insurer & insured. It is detrimental even to the insured as the coverage amount in real terms diminishes. Many insurance companies have addressed this by entering into a contract with their network hospitals and fixing rates. However, the doctors, surgeon, anesthetist charges vary and in such situations they are prepared to engage only if the patient is from the first / premium class room. So, issues exist even today which would probably get sorted out in future. As of now, one needs to be alive and aware of all the benefits a medical insurance offers, limitations & the problems.
Could some of these be eliminated? Can it be addressed through some other product? Will some other type of offering be more cost effective? There are many other insurance options available today – for Critical illness, senior citizens accident related, hospital reimbursement , top-up. How will these help? Watch this space.

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