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Finer Nuances To Consider When Buying Health Insurance

In last week's post Finer Nuances To Consider When Buying Life Insurance, I discussed subtle nuances involved when buying life insurance that go unnoticed. Similarly, there are a number of subtle nuances that go unnoticed when buying health insurance. So today's post is going to cover those nuances. I have already covered the basics of buying health insurance in earlier articles. So those aspects would not be up for discussion here.

The first thing to understand about buying health insurance is that it is a form of income protection. It is meant to outsource the responsibility of paying medical bills on to the insurer. In other words, health insurance protects the income we earn against the risk of paying hefty medical bills. In effect, this means our health insurance policies must provide the core benefit of coverage against 2 major costs :

  1. Cost of hospitalisation

  2. Cost of major day care procedures (Dialysis, Chemotherapy and so on)

Any benefits beyond these two are incidental but not essential to the purpose of health insurance. Therefore benefits such as No Claim Bonus (NCB), Restore/Recharge benefit, maternity benefit, AYUSH benefit and so on are fringe benefits at best. All these features do is to unnecessarily drive up the premium. This is especially true in the case of the AYUSH benefit. AYUSH treatments rarely require hardcore hospitalisation, if at all. So the AYUSH benefit actually makes very little sense.

Having a health insurance policy does not guarantee immunity against paying medical expenses out of pocket. There are two circumstances where we may need to pay medical expenses out of pocket, even with a health insurance policy in place. The first of these is having to pay non medical expenses. These are ancillary expenses incidental to a period of hospitalisation. These expenses are not covered by most insurers. We would therefore have to pay them out of our own pocket. An indicative list of such expenses as taken from the policy document of a health insurer are given in the graphic that follows.

The second situation where we may have pay medical bills out of pocket is when cashless settlement of our claim is denied. To understand how cashless settlement works as against reimbursement look at the graphic below. (Here, 'we' refers to the insurer and 'you' refers to the policyholder)

Cashless settlement of claims is a right of the policyholder. But it is not an obligation of the insurer. So it is well within the rights of the insurer to deny cashless settlement as per the facts of the case. In such a case we would be obligated to first pay the bills out of pocket and claim reimbursement later.

Then there is always the question of corporate health insurance policy Vs personal health insurance policy. Today most people realise that a personal health insurance policy is essential over and above corporate coverage. But two questions that are still commonly asked are :

  1. Do I need personal health insurance coverage if I plan to stick with my current employer for a number of years to come?

2. I have the option of porting my corporate health insurance plan to an personal plan upon leaving my current employer. Do I still need a separate personal health plan?

The short answer to both these questions is yes. Detailed answers to each question are given below :

  1. We may plan to stick with our employer for a long time. But layoffs have become common in the corporate world today. So we may be forced out of our job at any time. In such a case we would have zero health insurance in absence of a personal plan. Also we must remember that corporate health cover is offered as part of a tie up between our employer and a health insurer. We may be happy with the terms of our current corporate plan. But there is always the possibility of our employer tying up with a different insurer in the future. In such a case we would be forced to accept the terms of the new insurer regardless of whether or not we are happy with them. We would also not have any health insurance coverage post retirement, when we need it the most.

2. Portability is a benefit offered by very few insurers. When the option to port is exercised, it has to be with the same insurer in most cases. It also comes with a number of restrictive conditions. These include increased premiums and inability to increase sum assured, among others. Exercising the option to port therefore gives us very little control over the features of our personal health plan.

Then there is the question as to whether to buy an individual policy or a family floater policy. The answer would vary depending on the facts of each case. Young individuals who are unmarried can purchase an individual health cover for themselves. In the case of young couples without children, each partner can purchase individual cover for themselves. The same can be done for our parents and in laws.

Couples with one or two kids can look at family floater policies. If all members are healthy, a simple floater policy would suffice. The answer becomes slightly nuanced when one of the members has a major disease. In such a case, the member who has the disease can purchase an individual cover for themselves. A floater cover can be purchased for the rest of the family.

Finally, we must remember that it is impossible to choose the best health insurance policy. But we can definitely choose a policy which is the best fit for us. We can do this by listing out the features that are important to us in a health insurance policy. An indicative list of such features is given in the graphic below.

These features can be set as filters in an online health insurance comparison portal. This would help us zero in on a shortlist of 2-3 policies of our choice. From there we would need to study the policy documents of our shortlisted policies. Doing this is absolutely necessary. Then we can pick the policy that convinces us the most, and follow through to complete the purchase. And that concludes this discussion on the finer nuances of purchasing health insurance.

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