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Mediclaim: What you should know before you buy

Kripananda Chidambaram

Fintotal Insights and Resources


Medical insurance has come a long way from the simple Mediclaim policy that people used to earlier take primarily for tax benefits. Even from the same insurance company, there are different types of medical policies, offering different features and benefits. To top it all, there are a set of riders which you find hard to understand and choose from. Some of these may seem (and indeed be) overlapping in their features. But what do you need to ensure your basic concerns on medical insurance are taken care of at the lowest possible premium? How do you ensure you arent buying unnecessarily overlapping features? Read on, to understand the basic things you need, the merely good to haves and the unnecessary ones.

Features:
The Basic Mediclaim policy is a reimbursement of treatments that require hospitalization - anything where you are admitted for a day or more. For such a disease or accident, it covers all expenses even before and after the actual hospitalization period. For some treatments (like cataract operation) that are nowadays done without needing admission, the Mediclaim is still valid. The minimum age for entry is usually 5 years and the maximum is capped at 60 years but the proposer must be over 18 years.

Today, several Medical policies come with additional features and riders thrown in, often only to confuse the customer. But in its simplest form, Mediclaim usually has the following features:

  • It only reimburses expenses or pays for expenses directly to your hospital including charges for doctors & nurses, OT charges, medicines, blood, oxygen, diagnostic materials and x-ray, chemotherapy, radiotherapy, pacemaker, donors expenses towards organ transplant, and so on for 30 days or so (you cannot make a financial income from the process).
  • Certain pre hospitalization and post hospitalization charges are reimbursed. They may in addition provide assistance in availing emergency services and local ambulance services.
  • It needs hospitalization for at least a day to become effective. Only a few procedures like cataract are reimbursed without hospitalisation.
  • The Mediclaim is an annual contract that is renewed, and premiums rise as you grow older (since you are more likely to fall sick).
    Many providers offer cash less mediclaim which means the insured can get treatment without payment of cash at specified hospitals where the insurance company has tie-ups with. They make the payment directly at the hospital subject to specified terms and conditions. Most providers will also spare the medical test for those below 45 years.
    We would strongly advise taking this policy for every member of your family, including children. A Family Floater is simply the same Mediclaim covering all members under a single policy. Typically, it is the spouse with or without children, who can be covered in one scheme. It gives the entire family a total cover, which could be utilized by one or more members falling ill. You could opt for this as a convenient alternative to taking separate policies for each member. Rs. 3 lakh - 5 lakh of medical cover will keep you free from financial anxiety on the medical front.

The biggest advantage of a family floater is that the total cover may be used by one or more members of the family through the year. For instance, if there is a Rs. 3 lakh Family Floater taken by husband and wife. If the husband has a bypass surgery, the entire  Rs. 3 lakh could be used by him. On the other hand, if they had taken separate policies of Rs.1.5 lakh each, the husband would have had to cough up Rs.1.5 lakh from his pocket towards bypass surgery expenses.

Important Exclusions:
It must not be mistaken that medical insurance gives life cover and nor should mediclaim and life insurance be regarded as substitutes for one another. The person insured needs to live to get the medical reimbursement. The policy becomes valid after 30 days of submitting and diseases contracted within the first 30 days are not covered.

Some conditions and treatments that are permanently not covered are

  • Dental treatment except arising out of accident
  • Cosmetic, aesthetic and obesity related treatment
  • Debility and General Run Down Conditions
  • Sexually transmitted diseases, HIV/AIDS
  • Circumcision, Cosmetic surgery, Plastic surgery unless required to treat injury or illness
  • Vaccination and Inoculation
  • Pregnancy and child birth

Besides these if the disease or condition is as a result of war, ionizing radiation or nuclear weapon it will be excluded. Treatment outside India, domiciliary treatment (medical treatment at home), experimental or unproven treatment, treatment by natural remedies and expenses on external equipments like contact lenses, cochlear implants etc. is excluded. Certain diseases like Cataract, Hernia, Piles, Sinusitis, etc are not covered for a period, usually one year of taking the policy. Other pre-existing diseases are covered only after a specified number of years (4 years for most insurance companies). 

Premium:
Health insurance is generally more expensive than life insurance because health care is expensive and the probability of people falling sick is higher than that of people dying. Premium must be paid once a year during renewal of policy. Premium rates vary from insurer to insurer. Factors that determine premium include age of the policy holder, sum insured, term of plan.

Short term plans which are meant to give a cover for a few months to a year are a little more expensive than long term plans but if some short term plan gives you better coverage you might want to go with one and keep renewing it.
Premiums increase with age as the risk increases too. Premiums may get loaded, i.e. increased, to account for this. Another reason why there could be loading of premium is if you made a huge claim. Most companies charge loading and the product brochure would contain high claim ratio loading table.

Reimbursement:
The simplest thing to do to eliminate chances of claims refusal is to be honest about your health conditions while applying for a policy. When you claim reimbursement the insurer will get their registered doctor to verify the genuineness of claims and also dig out if you had any traces of the disease before.  But as long as you have been truthful in the application form, and as long as your treatments and costs are reasonable for your illness, you should not have an issue getting reimbursed.

When claiming for expenses remember to submit every document that may be relevant. Don’t miss out on collecting the discharge summary and all medical documents with the doctors seal/sign before leaving the hospital. Submit doctors prescription along with the bills and ensure that your name along with the doctors seal is not missing on the prescription.

Health Insurance Portability:
If you already own a Mediclaim policy and want to switch either the policy or insurance company you can do so by opting for portability according to IRDA norms for non-life insurers. There are over 20 health insurance companies in India. You can find the list in Ready Reckoners section in the Knowledge dropdown in this page. For making the switch-over you must apply for portability at least 45 days prior to renewal for the next year. Portability form and the proposal must be submitted along with relevant documents. Like in mobile phone number portability the new insurance company has the right to refuse to offer a policy to you in which case you will be forced to look to other companies or drop the plan of switching. Portability is most beneficial to those under a group insurance plan wanting to avail the same features in an individual plan with the same company, for instance retirees covered under their employer-provided group insurance.

Final Word:
It is important to understand the limitations of a Mediclaim though. It only covers cost of treating an illness. It does not compensate you in case your illness makes you unable to earn. For instance, a disease like cancer can be extremely expensive to treat and it can also make you unable to work for years. For this, we look beyond the Mediclaim to riders like Disability cover and Critical Illness cover.

Take the medical cover as a family floater for every member of your family. If you do not have it (or the life insurance cover) yet, take it now! Critical illness and disability covers are good to have. Next time you get a bonus, you can keep aside some of it to start one of these two policies. All other riders and covers often end up duplicating what you already have, and add to your paperwork and headache- you can avoid them all.

Finally don’t forget to claim tax exemption u/s 80 D up to Rs. 15,000 on mediclaim premiums paid for yourself, spouse and dependent children. In case you are also paying for parents an additional Rs. 15,000 can be deducted and this can be up to Rs. 20,000 if they are over 65 years.

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