INDIAN HEALTH INSURANCE SCENARIO by: Shri Jagendra Kumar, Corporate Head (Trg.), Shriram General Insurance, Jaipur. The Chairman of the Insurance Regulatory and Development Authority (IRDA) has said that low consumer awareness and insufficient healthcare infrastructure are the major hindrances to widen the reach of healthcare insurance in India. Health care costs have witnessed a phenomenal rise in the current times; this has led the customers to insure not only themselves but their family members for any future medical expenses and other related requirements. The need to insure assumes even more importance with older generations who are either retired or will be retired in the near future. In times of high health cost, one needs to get covered for health risks. A good insurance policy should cover Doctor's visit, Lab tests, Hospital stays and Diagnostic tests. There are quite a few companies covering health risks with good Insurance policies. Health Insurance (popularly known as Mediclaim) offers protection in case of unexpected medical emergencies, in India. In case of a sudden illness or accident, the health insurance policy takes care of the hospitalization, medical and other costs incurred. Leading insurance companies are coming out with new plans to meet the requirements of their customers. Health care insurance plans especially target customers in the higher age group. It is necessary for younger people to start planning for their future after they retire, at an early age, so as to lead a financially stable life in later years. Medical expenses are sky high these days. Even a small treatment or an appointment with a doctor might consume a lot of money. Health insurance is a must; it saves money and covers unexpected calamities. Health insurance comes in handy to meet emergencies of severe ailment or accident. Sometimes it is associated with covering disability and custodial needs. Life is unpredictable, insurance can make it safe and secure from bearing huge loss. Health insurance is affordable and carries the assurance and freedom from insecurities that threaten life now and then. Provision of healthcare by the Public Sector is the responsibility shared by Central, State and Local Governments, but over the years the National spending on Health under five year plans has decreased from 3.3% in the first plan to 0.7% in the eighth plan. Approximately 6% of GDP is spent on Health care out of which only 1.3 % is in Government Sector. Even then the Life expectancy has increased from 50 to 61 and infant mortality has decreased from 137 to 74 per 1000 births. SPECIAL FEATURES OF INDIAN HEALTH INSURANCE COVERS: ICICI Lombard provides EMI payment plan on health insurance. Family floater is also available but the limit on family floater is Rs. 3 lakh only. Cholamandalam MS General provides a health cover upto Rs. 10 lakh subject to meeting income criteria and also covers the highest number of 140 day surgeries. IFFCO Tokio General provides normal products at normal pricing however they allow Ayurvedic treatment under their health policy. New India Assurance have started product for senior citizens and have raised sum assured for normal policy to Rs. 10 lakh. They are also planning to raise this limit to Rs. 25 lakhs. New India has recently come out with premium rates where India is divided into three zones; Zone 1 Mumbai (highest rates) Zone 2 Delhi/Banglore and Zone 3- Rest of India (lowest rates). They have a highest list of 4082 hospitals for cashless arrangements. Oriental insurance has done away with No Claim Bonus concept for new policy holders however they provide a discount of 5% on premium if you do not opt for cashless settlement option. Reliance General has the lowest premium rates for those who are below 45 years. They provide on the spot handing over of 99 2
The Journal policy with activation on phone. Reliance is not keen on group health products but provides family floater on their health policy. Royal Sundaram provides payment facility by credit card but do not issue policy for individuals on stand-alone basis. They allow no claim bonus at 15% in comparison to 5% of others. Star Health & Allied which is the first stand-alone health insurance company of India, is issuing policy to Senior Citizens without medical test. However, those submitting medical tests get 10% discount. Star Health is making in-house settlement of claims and not using TPAs. They have introduced the concept of Co. pay, limit 30% to 50% for senior citizens. They have special product for senior citizens with higher premium and Micro Insurance concept for low income group. TYPES OF HEALTH INSURANCE COVERS: Normally following kind of insurance products are available in any insurance market: 1. Basic Medical expenses insurance 2. Major Medical Insurance 3. Disability Income Insurance 4. Medicare Supplement Insurance 5. Long-term care Insurance 1. BASIC MEDICAL EXPENSE INSURANCE: Medical expense insurance policies historically provided coverage only when the insured was hospitalized. Not most policies cover outpatient treatment. Some policies pay benefits directly to the service providers after the medical bills are submitted to the insurer by the hospital or physician. Other insurance companies pay the insured or allow the insured to assign benefits to the provider. Basic medical insurance policies often have no deductible provision and salespeople often call this insurance firstrupee coverage because the insurer pays covered losses from the firs rupee onward. For example, if Rajesh incurred Rs. 2,000 in expenses having an arm set in the emergency room, basic medical insurance would cover the entire bill. Insurance company will provide 'reasonable and customary' payments for the care provided; however, amount limitations may apply. Some contracts provide benefits paying a specific amount for example, Rs. 200 per day, that can be substantially less than the amount the hospital charges. If an insured wants a contract specifying larger payments, the premium is increased. Contracts can provide various benefit periods, including 90 day, with the premium increased accordingly. In purchasing the coverage, a consumer should consider the trade-off between the larger daily coverage limit and the longer length of coverage. 2. MAJOR MEDICAL INSURANCE: Major Medical Insurance policies provide coverage for potentially large medical expenses rather than paying for the first rupees of loss. This coverage provides valuable family protection but can be expensive, costing families a higher premium. The following three characteristics distinguish major medical coverage from basic medical plans: a. Major medical policies have a substantial deductible provision. These policies cause insured to pay an amount of medical bills equal to a substantial deductible, perhaps Rs. 500 or so. This deductible lowers the insurer's costs because the first rupees of all losses are not covered, and these are the most likely to be incurred. Second, in marginal cases where treatment may not be necessary, the insured has strong incentives to avoid overusing medical care. Some polices apply the deductible to each illness or accident but limit the total amount deducted to some annual maximum. If Rajesh has a Rs. 2000 medical bill with a Rs. 500 deductible, the insurer would only pay Rs. 1500/-. b. Major medical policies have participation provision. With a major medical policy, the insurer agrees to pay only a percentage of the insured's bill; the insured must pay the difference. This sharing of costs is called the participation provision. Typically the insurer pays 75 to 80 percent of the bills after the deductible requirement is met. The insured pays the remaining 20 to 25 %. c. Medical Expense and Disability Income Insurance Major medical insurance plans have high limits of liability, such as Rs. 50,000 or Rs. 1,00,000, or even larger. As an example of a major medical plan, assume that Naresh incurs Rs. 28.000 in medical expenses while being 100
treated in a hospital. Assume he has a Rs. 1,00,000 medical policy with a Rs. 5,00 deductible and an 80% participation provision. Under these circumstances, Naresh collects Rs. 22,000 from his major medical insurance, calculated as follows: Rs. 28,000 medical expense Rs. 500 Deductible Rs. 27,500 Covered expense 22,000 covered expense X covered percentage 80% equals the ins. Payment (0.8 X 27,500) = Rs. 22,000 Rs. 5,500 covered expense patient's co-payment percentage equals the patient's responsibility ( 0.2 X 27,500) = Rs. 5.500 Some major medical policies place a cap on the insured's payments. In the proceeding example, Naresh collected Rs, 22,000 from the insurer but he also paid Rs, Rs. 6,000 (Rs. 500 deductible plus Rs. 5,500 in participation payments). If his major medical policy capped the insured payments at Rs. 3,000 for example, his participation payment responsibility would have needed after he paid Rs. 2,500, because at this point the deductible (Rs. 500) plus his participation payment equaled the cap ( Rs. 3,000). 3. DISABILITY INCOME INSURANCE Disability resulting from illness or accident may be an even greater peril to a family than premature death because disability not only cuts off income but also may create large medical expenses. Moreover, a six month or longer period of disability is a more likely of cause of loss to people in their working years than is premature death. Disability income insurance replaces income not earned because of illness or accident. Disability income insurance policies are designated as either short or long term, depending on the period for which coverage is provided. Short-term policies provide a specific number of weeks of coverage, after a brief (for example, one week) elimination period. An elimination period also called a waiting period is a period that must pass before an insured is eligible to receive insurance payments. The purpose of the elimination period is to exclude payments for minor illness. The elimination period is consistent with the purpose of insurance to cover severe losses but not expenses. This provision also helps keep premiums affordable. Longer term disability income insurance policies provide a number of years of protection after a substantial elimination period has elapsed. Coverage typically ends at the age 65, the age when many people retire. The definition of disability is one of the most important contractual features. Some contracts have an 'own profession clause while others have an 'any profession' clause. Even among these categories, different insurers can vary contractual language. Consider the following clause defining the term 'totally disabled. The insured is totally disabled when he is unable to perform the principal duties of his occupation. After the initial period, the insured is totally disabled when he is unable to perform the principal duties of his occupation and is not gainfully employed in any occupation. Insurers generally state temporary disability benefits as a % age or amount per week or month, for a stated number of weeks, months or years. Disability contracts also vary according to the length of each benefit period and the amount of each monthly benefit. Benefits may be paid for any practical length of time, including life say 1% of the sum insured or maximum Rs. 30,000/- per week. 4. MEDICARE SUPPLEMENT INSURANCE Medicare supplement insurance, also known as Critical illness insurance, is designed specially to supplement benefits provided under the Health insurance policies. This coverage typically pays for such illnesses the various health policies exclude. Insurers base the premiums for critical illness cover on the insured's age when the policy is issued and the amount of coverage provided. Policies do not cover ordinary illness and normal hospitalization. 5. LONG TERM INSURANCE: Many insured could benefit from insurance policies covering lengthy stays in long-term care facilities. Among the different types of conditions that can create a need for long-term care are paraplegia, arthritis, mental illness, mental retardation, and respiratory disorders. These 101
The Journal conditions affect both of young and old people, which argue against the common misconception that only older people require long-term care. As our society ages and healthcare costs increase, long term care facilities will become more necessary. Demographic factors also point to a great need for long-term care facilities and for innovative methods to finance people's stay in such facilities. Certain demographic factors lead to the conclusion that the need for nursing homes will increase in the next few decades. Many women now work outside the home and cannot provide care for elderly relatives. Many families have fewer children than preceding generations, making care of elderly parents by family members more difficult. The mobility of families means many children no longer live close enough of their parents to provide care if it is needed. Among the many issues long-term care insurance policy designers must address, are: the trigger of coverage, the benefits provided, and the limitations of coverage. A fourth concern is premium. The general pattern for insurers is to require level premiums payable for life using merged-gender rates that increase rapidly with age. Some policies specify medical certification of need as the trigger of coverage. More modern policies specify the insured event as an inability to perform a specified number of activities of daily living. A few policies mention the loss of cognitive capability, thus covering mental impairment. Two types of benefits are most common. One type of longterm care policy provides a specified daily amount limit of coverage say Rs. 200, Rs. 500 or more, that is paid regardless of the expenses incurred. Another type of policy provides a percentage reimbursement of the costs incurred. Naturally, the higher the percentage covered, the higher the premium. PREMIUM TREND OF PRODUCTS: India's health insurance market is growing. In order to reduce the public burden of healthcare costs and address issues with the healthcare system, the government is incentivizing health insurance off-take in the country on both the customer and the manufacturer ends. Consequently the country is seeing heightened activity in the health insurance domain resulting in some very notice interesting developments in the sector. The manufacturers of insurance products have to sit up and take notice of how the consumer is behaving and responding to stimuli in this market. General insurers of India have the pricing freedom and can rate their products according to their suitability. The rate variation of various insurers is visible here: Co's Name Product Name Coverage Premium Amount Apollo DKV Easy Health Individual - Rs. 1,00,000 Rs. 1,095 Standard Plan STAR Health Medi Classic Rs. 1,00,000 Rs. 1,200 New India Mediclaim policy Rs. 1,00,000 Rs. 1,270 Oriental Individual Mediclaim Rs. 1,00,000 Rs. 1,310 National Mediclaim Rs. 1,00,000 Rs. 1,377 IFFCO Tokio Individual Medishield Rs. 1,00,000 Rs. 1,384 Bajaj Allianz Health Guard Policy Rs. 1,00,000 Rs. 1,453 STAR Health STAR Medi premier Rs. 1,00,000 Rs. 1,488 The penetration of health insurance in India has been low. It is estimated that only about 3% to 5% of Indians are covered under any form of health insurance. In terms of the market share, the size of the commercial insurance is barely 1% of the total health spending in the country. The Indian health insurance scenario is a mix of mandatory social health insurance, voluntary private health insurance and community based health insurance. Even if there is a marginal increase in the type of healthcare insurance services, we will find our physical capacities insufficient. Therefore, there is an urgent need to build alternative systems to take care of the deficit in healthcare infrastructure. There is a need of building up investment in infrastructure and adequate training along with focus on improving the traditional systems of government and public hospitals. Affordable Indian health insurance policies provide financial cover for routine and critical illness. Although the affordable Indian health insurance sector is in its infancy, it has great growth prospects. In the insurance sector, the presence of an increasing number of private international players will prove beneficial. Most Indians are benefitted and covered by group insurance policies as these are typically sponsored by employers. IRDA Chairman has said that Indian health industry is a buoyant sector with lots of potential and scope for expansion. Requiring the third-party administrators 102
(TPAs) to build their IT systems and infrastructure for speedier claim processes, encouraging insurers to make their systems robust and embarking on wide consumer awareness programmes are the various measures undertaken by IRDA towards the growth of the health insurance in India. However, things are improving gradually. It is time to take major steps in bringing good health to all people. Affordable Indian health insurance policies cover hospitalization expenses including nursing, diagnostics and medicine costs. Most of these policies exclude healthcare expenses during the first month of the policy. Treatment expenses for certain diseases are also not covered in the first year span of the policy. These diseases are listed in the healthcare policy document. Some of the insurers offer reimbursement only for medical facilities that are availed at designated medical institutions. With increasing focus on healthcare and availability of several attractive plans by large number of players, health insurance coverage in India has picked up in recent times. Young professionals are also focusing on proper planning to take care of any future emergency. 103