Should you buy cashless or reimbursement health insurance?

Deepak Yohannan
MyInsuranceClub.com

As you begin the exercise of purchasing health insurance, a number of questions will arise. One of these is whether you should buy a cashless health policy or a reimbursement plan.

A cashless health insurance policy is one wherein the insurance company directly settles bills with the hospital; the patient is not required to make any payments at all. On the other hand, a reimbursement policy requires the patient or policyholder to pay the medical bills upfront, the insurer reimburses these costs later after a claim is filed.

Which of these is the better option? Let us evaluate the two types of health insurance plans under different heads.

1. Choice of Hospital – A cashless health insurance policy limits you in terms of the hospital you choose. To avail of the cashless benefit, the patient must be admitted in a hospital that comes under the insurer's network. Seek treatment at a network hospital and your insurer will settle the bill directly without requiring any payment from your end. However, go to a hospital outside this network and you will have to pay the bills upfront and seek reimbursement later. A pure reimbursement policy, on the other hand, allows freedom of choice regarding the hospital or healthcare provider.

2. Need for Emergency Cash – A cashless policy is a great option for people who are low on cash. If your cash reserves are relatively low, a reimbursement policy would burden your already limited finances. This is because a reimbursement policy requires you to pay the hospital bills upfront. You then have to file a claim and wait for the reimbursement money to arrive. A cashless policy does away with the need for emergency cash. As long as you are using a hospital that comes under your insurer's network, you will not have to pay at all.

3. Rise in Premiums – One problem with cashless policies stems from their requiring no payment from the policyholder. As a result, the policyholder tends to go not merely to a good hospital, but to an expensive one. The idea is that since he is not required to make any payment, he might as well get the best (or most expensive) treatment. The disadvantage is that this could lead to the insurer saddling the insured with higher premiums in the future. This risk does not hold for reimbursement policies, where the insured chooses affordable healthcare providers because the initial payments come from his own pocket.

4. Claim Settlement – A policyholder with a reimbursement plan has to retain all bills, test reports and doctor's prescriptions and then approach the insurer as soon as possible (usually within 30 days) for effective claim settlement. Thus, there is a considerable waiting period between payment and reimbursement. Under a cashless policy, the insured simply has to walk into a network hospital with his cashless card to be admitted and receive treatment. The third-party administrator (TPA) mediates between the insured and the insurer to ensure smooth claim settlement. Emergency cases should be cleared within six hours and all other cases within four days. Smoother settlement is possible if cashless policyholders inform their TPA in advance when going in for pre-planned medical procedures.

As must already be clear, both cashless and reimbursement policies have their pros and cons. Which one you choose will depend entirely on your specific health cover needs. Make an informed choice!

The author is CEO of MyInsuranceClub.com and can be reach at deepak@myinsuranceclub.com