Health insurance, or Mediclaim as it is popularly known, has become a modern day necessity. Hence, it is vital that we understand how it works to make the best of it.
1. 24 hours: Most health insurance policies reimburse expenses on hospitalisation only if the policy-holder has stayed in a hospital for at least twenty four hours.
2. Read the fine print: If the policy-holder contracts a disease within 30 days of taking a policy, his expenses are not reimbursed. Also any pre-existing diseases that an individual may have are not covered at the time of commencement of the policy and in most cases are covered only after four years.
Other than this certain diseases/ailments like sinusitis, cataract, hernia, etc, are covered only after two years.
3. Go for a family cover, if you are married or have a family: Insurance companies these days offer a family cover. Let's try and understand the usefulness of this option through an example.
A husband and a wife opt for two insurance policies of Rs 2.5 lakh (Rs 250,000) each. The husband meets with an accident and runs up a hospital bill of Rs 4 lakh (Rs 400,000). The insurance company in this case will reimburse only a maximum of Rs 2.5 lakh. The remaining Rs 1.5 lakh (Rs 150,000), the couple will have to meet from own resources.
If the couple had a family cover of Rs 5 lakh (Rs 500,000), then the insurance company would have reimbursed up to a maximum of Rs 4 lakh. Other than this the couple would also have a cover of Rs 1 lakh (Rs 100,000) available for the remaining part of the year.
But a family cover doesn't come cheap. The premium on a family cover of Rs 5 lakh is more than the premiums of two policies of Rs 2.5 lakh put together.
4. Don't change your insurance company every year: Unless the policy-holder has had a particularly bad experience with an insurance company, it makes sense to continue with the current insurance company.
The primary reason for the same is the fact that for every year of no claims, the policy gets a 'no claim' bonus of 5 per cent. Hence, if an individual having a cover of Rs 2.5 lakh in a given year does not make a claim, he gets a bonus of Rs 12,500 and his cover increases to Rs 2.625 lakh (Rs 262,500. Other than this if the policy-holder sticks to an insurance company over the years even the existing diseases get covered.
5. Start early: It makes sense to take Mediclaim as soon as one starts working. Typically what happens is that as an individual starts growing old and his medical expenses start going up, he starts thinking of taking Mediclaim. But with age, the premiums tend to go up and more than that insurance companies are not really enthusiastic about selling Mediclaim policies to the older lot.
And if you are lucky enough to get a Mediclaim policy most of your pre-existing illnesses will not be covered. The advantage of starting early is that as years go by, the diseases that an individual develops over the years will be covered, of course, to the condition that the individual keeps renewing the policies year on year.
6. Cashless policies: In this case the individual taking a policy is issued a health card. The insurance company has an arrangement with hospitals and, in case of hospitalisation, the policy-holder has to be admitted to one of these hospitals to opt for a cashless transaction.
At the time of hospitalisation the health card along with the identity proof needs to be shown. The hospital will then settle the bill directly with the insurance company instead of the policy-holder needing to pay.
But this arrangement is not as smooth as it should be. Most insurance companies work through third party administrators, or TPAs. Before getting admitted, the TPA has to be informed. There are TPAs who handle more than one insurance company and hence do not have enough people on their rolls to attend to each and every policy-holder.
Given this there have been cases where TPAs have not responded to customer calls and cashless policy-holders have had to pay cash before getting admitted.
Also there have been cases of hospitals charging a higher rate to individuals who have cashless insurance, though they are not allowed to do this.
A few others tend to recommend additional tests or medicines to those who have cashless insurance. If a policy-holder feels that a hospital is overcharging he should report it to the insurance company primarily because over time this practice of overcharging will lead to increased premiums for everybody.
7. Tax deduction: Under Section 80 D of the Income Tax Act, individuals are allowed to make a deduction of up to Rs 15,000 from their taxable income. For senior citizens the limit is Rs 20,000. This deduction is over and above the Rs 1 lakh deduction allowed under Section 80 C.
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