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Monday, June 6, 2011

A few disturbing facts

A few disturbing facts:

80% of healthcare costs in India are paid directly by the people, ie outside of health insurance and govt support
It is estimated that every year, healthcare pushes back 3.9 crore people back into poverty
Every year, an average Indian pays Rs 3000 annually towards healthcare costs. Our per capita annual income is  about Rs 55,000. That is nearly 6% of the annual income of the average Indian!
The government spends only 1.1% of the country's GDP on healthcare. We spend more than 2% of our GDP on defence

While the average Indian struggles with healthcare, medical tourism is expected to become a USD 2.3 BN industry in India.

Life Insurance for Women

Unconfirmed reports suggest that about 15% of the lives covered in India through a life insurance policy are for women. Given the population of women in the work force and thus having an income and thus there being an insurable interest, is the 15% number a fair representation. We are not sure. But it brings us to another question: is there an insurable interest in a housewife with no income. Some people would argue that there is definitely a replacement cost for the work done by a housewife, and thus there is an indirect insurable interest. But how does one take care of malintention- where a policy is taken with the housewife as the insured, but payment made by the husband. Sadly, it opens itself up for a lot of misuse.
As an aside, is there a marketing opportunity in bringing out a policy with special focus on the woman...some companies have done that, but the scale hasnt been impressive.

Comments are welcome!!!

New India announces Policy Portability across countries

While we in India await Health Insurance portability across companies, New India Assurance has started health insurance portability across Oman and India. Policyholders who have a New India Policy in Oman under the family health scheme or group health scheme can now seamlessly enrol in a New India health policy when they return to India, without any preconditions. This would be helpful to a large section of NRIs stationed in Oman when they return, especially for the older set. As of now, we do not know if the reverse holds: that is a New India Assurance health policy holder being able to get insured through the company's policy in Oman under the same set of conditions.

Comparison of Health Insurance Schemes for Senior Citizens

It is absolutely vital that as one approaches old age, one has a substantial health insurance cover. The probability that one’s health care expenses would increase substantially is almost a given. In this piece we look and compare the different health insurance plans that are available in the market for senior citizens. While every health insurance company wants to insure the young (and almost by definition, more healthy), there are very few plans which provide health insurance to people beyond 60. Another interesting thing to note here is that most of the health insurance plans for senior citizens is offered by the public sector general insurance companies.

The health insurance plans available for senior citizens are:

  1. Varistha Mediclaim by National Insurance
  2. Senior Citizen plan by Oriental Insurance
  3. Mediclaim for Senior Citizens by New India Assurance
  4. Senior Citizen Plan by United India Insurance
  5. Red Carpet Plan  by Star Health Insurance

Varistha Mediclaim by National Insurance: This policy can be bought by anyone between 60 and 80 years of age. Renewals can be done upto the age of 90. Between the age bands of 76-80, premiums have an added factor of 10% and between 80 to 90 years of age, premiums are grossed up by 20%.  The sum insured under this policy for hospitalization is Rs 1 lakh. For critical illness, the sum insured is Rs 2 lakhs. Under the critical illness cover, diseases such as cancer, renal failure, stroke, organ transplants etc are covered. If the person has already been insured for 3 years through a health insurance policy, then he or she does not have to undergo a medical test, else there has to be a medical test under the prospective customer’s costs. For domiciliary treatment, the maximum claim is fixed at 20% of the sum insured. Ambulance charges upto Rs 1000 are covered under this policy. For a mediclaim cover of Rs 1 lakh and a critical illness cover of Rs 2 lakhs, the premium varies between Rs 6200 (for a 60-65 year old) to Rs 9200 (for a 75-80 year old). One interesting feature of this policy is that pre existing hypertension and diabetes are covered from the 1st year itself of the policy by paying 10% additional premium for each of the two diseases. Pre existing is of course not available for the critical illness policy. Other pre existing diseases are covered after 1 policy year. Dialysis, chemotherapy and radiotherapy for preexisting ailment is never covered. Claims are paid only for events that occur within India. Claims which occur within the first 30 days of the commencement of the policy will not be covered, unless in the case of the person being insured with an Insurance Company without break for the past 12 months. For the purpose of this policy, pre existing diseases such as cataract, piles, fistula, hernia, benign lumps, joint replacement etc will not be covered in the first 12 months. War related medical claims, vaccination, spectacles cost, plastic surgery, corrective dental surgery, venereal disease, vitamins and tonics which are not part of the treatment, nuclear disaster related health claims, alternative treatment like homeopathy etc are excluded.

Opinion: We think it is one of the best policies for senior citizens, except that the sum insured is low. They are quite generous as far as the norms for entry age and pre existing diseases are concerned.

2. Senior Citizen Specified Disease Plan by Oriental Insurance: In this plan, the policyholder has the option to choose sum insured of Rs 1 lakh, 2 lakhs, 3 lakhs, 4 lakhs or 5 lakhs. One restrictive feature of this policy is that 20% of any claim amount has to be co-paid by the insured. Cashless payment through TPA is restricted to Rs 1 lakh.  This plan covers 10 specified diseases: cancer, renal failure, heart diseases, liver related diseases, COPD (lung ailment), stroke, prostrate, orthopaedic disease, ophthalmic disease, accidental injury and knee replacement. The amount that one can claim for a particular disease is restricted as a percentage of the sum insured (for e.g., 50% of the sum insured can be claimed for cancer, while 20% of the sum insured can be claimed for stroke). A sum insured of Rs 1 lakh will cost Rs 4500 for a 65 year old, while it will cost Rs 6400 if one is eighty years old or beyond. While this may seem cheaper than National Insurance’s Varistha medical scheme, it is less wide in scope. This policy has an interesting refund of premium clause if one withdraws from the policy: if the policyholder gets out of the policy within the first month, 75% of the premium is returned and if he opts out between 3 to 6 months of the policy, 25% of the premium is returned.  In this policy, pre-existing diseases are not covered for a period of 2 policy years. Other exclusions are very similar to those of National’s Varistha medical scheme.
Opinion: a good scheme in terms of the level of sum insured and price, but the scope of diseases covered is restrictive. Another issue is that pre-existing is covered only after 2 policy years.

Mediclaim for Senior Citizens by New India Assurance: This policy is available for senior citizens between 60 and 80 years, and the sum insured can be Rs 1 lakh or Rs 1.5 lakhs. Pre existing diseases are covered after 18 continuous months of coverage , while for diabetes and hypertension to be covered,  additional premium needs to be paid. Pre hospitalization is covered for 30 days, while post hospitalization is covered for 60 days. An insurance of Rs 1 lakh for a 65 year old will cost Rs 3850 while it will cost Rs 5150 for an 80 year old. Thus, premiums are very competitively priced. If one wants to extend beyond 80 years, then loading of 10% or 20% has to be paid. For pre existing diabetes or hypertension, an additional premium of 10% each has to be paid. One interesting feature is that there is a 10% discount if one’s spouse is also covered under this policy. This policy also has the same partial refund norms on cancellation as Oriental’s Specified Disease Plan. Claims would be paid only for medical treatment in India. The exclusion conditions are standard, and are very similar to National’s Varistha  Mediclaim.
Opinion: Attractively priced. Sum insured ceilings are low. The product brochure is silent on co-pay, and thus there is no co-pay requirement in all probability.

United India Insurance’s Specified Disease Plan: In this policy, sum insured of Rs 50,000 to Rs 300,000 is available to people between 60 to 80 years of age.   Sum insured of Rs 1 lakh will cost Rs 3715 for a 65 year old, and Rs 8613 for an 80 year old. So while it is cheaper for the younger age bands, it is a bit expensive for the older age groups. An interesting feature of this policy is that there is a hospitalization cash payment from the 3rd day of hospitalization on payment of a particular additional premium. While other exclusion features of this policy are comparable to that of the previous 3 policies that we have discussed, the biggest problem of this policy is that this has a pre-existing waiting period of 4 years.
Opinion: Pre –existing waiting period of 4 years is restrictive

Star Health’s Red Carpet Plan: This plan has been a good marketing success. While one barely gets to hear about the reasonably broad, well priced schemes of the 4 nationalised companies, the market is quite excited about Star Health’s Red Carpet scheme. The sum insured under this policy can be for Rs 1 lakh, Rs 2 lakhs, Rs 3 lakhs, Rs 4 lakhs or Rs 5 lakhs. Age of entry is restricted between 60 and 69 years. Pre existing diseases are covered from the 1st year itself, except for those preexisting diseases for which the insured received payment in the preceding 12 months. Subsequently, these pre-existing diseases are covered. There are sub limits under this policy wherein different diseases have different limits as a percentage of the sum insured.  Sum insured of Rs 1 lakh will cost Rs 4900 at entry, while a sum insured of Rs 5 lakhs will cost Rs 20000.. The biggest catch in this policy is that there is a 50% co-payment for pre existing diseases and 30% co-payment for other diseases!! Other exclusions are very similar to what is there for the nationalized companies.

Opinion: Simple, well marketed claim. But the co-payment terms are a huge negative! The ceiling for maximum age at entry is quite low (69 years), though the guaranteed renewal feature is a big positive. Also, the sum insured levels of Rs 5 lakh is quite high and attractive in these days of escalated medical costs.

In summary, we feel that National’s Varistha Plan is the widest in scope. The only issue with the plans of the Nationalised Insurance companies is that the sum insured levels offered might not be adequate for today’s high healthcare costs. On the other hand, they are at least offering senior citizen health plans. It is very difficult to locate any meaningful health insurance scheme for senior citizens offered by any private health insurance company, except Star Health. The only problem that we see with Star Health’s Red Carpet plan is that of the Co-pay restriction.

Friday, June 3, 2011

Exclusions in a Health Insurance Policy

What does a health insurance policy not cover i.e exclude?

The moment of truth in an insurance policy is at the time when a claim arises. One of the most common reasons for a health insurance claim not being paid by an insurance company is when they say that the particular disease is not covered by the policy and is an “exclusion”. It leaves a bitter taste in the mouth of the policyholder and can sometimes put the policyholder in great financial difficulty. Thus, it is very important to know in detail about the exclusions in a health insurance policy before purchasing it. In our opinion, it is a far more important variable than price. A policy might be 10% cheaper than a competitor’s policy but might have many more exclusion clauses-in such a case, the policy with the lesser number of exclusion clauses would be the better choice for the policyholder.

In this article, we deal with some of the common exclusion clauses in a health insurance policy. Of late, we are seeing some innovation in this area with the new companies not excluding certain ailments which had traditionally been within the exclusions area

  1. Maternity: In most cases, maternity and maternity related expenses are not covered in an individual or family floater health insurance policy. Maternity is typically covered in a group policy. In certain cases, we are seeing maternity being covered after 5 years into the policy.
  2. Diseases or illness contracted within the first 30 days of the policy. The insurance company does this to safeguard itself against customers buying a policy immediately after a disease has been detected
  3. Cataract, Prostrate, Hernia, Piles, fistula, gout, rheumatism, kidney stones, tonsils and sinus related disorders, congenital disorders, drug addictions, non allopathic/alternate treatments, self inflicted injuries,  hysterectomy, fertility related treatments, etc are normally not covered under a health insurance policy. Dental treatment and cosmetic surgery is also typically excluded.  Contact lenses cost is also not covered. HIV/AIDS is excluded, which has been a subject of great debate and criticism in the last few weeks. Some insurance companies do not cover treatment incurred outside the country, so you should check once before buying the policy
  4. Pre existing diseases are not covered in a health insurance policy. Preexisting means a disease that you have had prior to joining a health insurance policy. The policyholder may or may not have been aware of the pre-existing disease. Further complications which arise due to the preexisting disease are also not covered. For example, renal problems which arise due to a person having diabetes at the start of the policy would not be covered. This can sometimes lead to a lot of confusion and heartburn. Someone gets admitted for a kidney related treatment, and the insurance company turns down the claim saying the kidney problem has arisen because the patient had diabetes, and rejects the claim. It can get a little grey here as medical science cannot sometimes clearly pinpoint the root cause of a particular disease outbreak. In most cases, preexisting diseases are covered after 3 or 4 consecutive policy years. This is the single biggest reason why one should buy a health insurance policy at a young age, and continue with the same insurer. Because if you shift to a new insurer, you lose your previous credit and a disease that was being covered by the old insurer might be treated as a pre-existing disease by the new insurer. We have noticed that insurance companies start facing more claims from the health insurance customers from their 4th or 5th policy year, as pre existing begins to get covered and the profitability of the portfolio goes down
  5. Most policies do not cover day care, but a few  like Max Bupa cover daycare, although the premium is higher in this case
  6. War related health insurance claims are mostly excluded from the policy coverage
  7. Abortion related health expenses are not covered in a health insurance policy

Pl do note that with competition heating up, some of the exclusions mentioned above will begin to get covered by a company or two so that it can be used as a selling point. Thus, the lists mentioned above are subject to change. The moot point here is that 10 minutes spent to read the exclusions list of the policy you are considering to buy could save you a lot of headache buyer. Be an informed buyer- there will be no else to blame but yourself