From exclusions, premiums to policy terms, Coronavirus has led to insurers rethinking the policy structure for health covers.
For the past two months, Chennai-based financial consultant Ananya Sethuraman has been struggling to buy a health insurance policy for her parents aged 60 and 62 years. While two private general insurers refused to issue a product saying the prospective customers have risks of ‘co-morbidities’ considering the age, one health insurer said the proposed failed the health test.
“My parents don’t have any underlying health condition. But the insurer said that their body weight is higher than normal. Considering the coronavirus outbreak, I believe that they are avoiding providing covers to senior citizens,” she told Moneycontrol.
Till now, insurers have been open to offering covers to senior citizens, with just the condition that premiums charged will be 30-50 percent higher. But COVID-19 has forced them to reconsider even this.
Health insurance covers will see a slew of changes due to the COVID-19 outbreak. On the one hand, underwriting norms will get tougher, on other pre-existing conditions may see stringent terms. Product prices have also been sharply hiked by 25-40 percent during renewals.
Moneycontrol spoke to both public sector and private general insurance companies who said changes are underway in the policy structure. However, the insurers were not willing to go on record since they are awaiting regulatory approvals for the changes.
Is COVID-19 the cause for changes?
Partially, yes. COVID-19 has resulted in 78,003 reported positive cases in India and 2,549 deaths so far. Insurance companies have so far received 1,700 medical insurance claims amounting to about Rs 45 crore.
The insurance regulator had made it clear that any hospitalisation case due to COVID-19 would need to be covered under health insurance that covered admission to a hospital. This meant that individuals who tested positive and were undergoing treatment would be eligible to get claims under their health policy.
“Initially we saw patients being taken to state-owned hospitals where the government would pay for the treatment expenses. However, from April onwards, there was a flurry of patients moving to private hospitals as well. This automatically translated to higher claims costs for insurance companies,” said the head of claims at a private general insurer.
Since insurance works on a pool concept, premiums collected go into a common pool from which claim settlement is done. If the pool is exhausted quickly, the immediate action taken by insurers is to hike the health premiums.
In FY21, premiums under retail health insurance products have gone up between 25-40 percent for policyholders. This is not only because of the rising cost of healthcare but also a result of the COVID-19 scare.
Globally, reinsurers are also seeing a rise in medical expenses and related claims. So, when an insurance company buys a cover to protect itself from the sudden claims, these entities are also making a higher premium payment to the reinsurer. When an insurer faces a triple whammy of hike in reinsurance rate, steep rise in claims and medical cost hikes, the premium hike is passed on to customers.
But why is it tough to buy medical covers?
Individuals above a certain age and those with existing ailments like diabetes, blood pressure and asthma would be more prone to coronavirus. At a time when a vaccine for COVID-19 is still at a development stage, insurers are worried about risk costs going up.
“While we may not explicitly reject a health product to someone who smokes or has diabetes, a detailed medical screening will be done to understand what his/her ‘body age’ is,” said the underwriting executive at a state-owned insurer.
Here, body age will determine how old the individual’s vital organs are and this will be done through a series of tests including treadmill tests, chest X-ray and detailed blood examination.
So, if you smoke or drink heavily impacting your lungs and liver, a health policy will be tougher to procure. Even if the proposal form is not rejected, the waiting period for claims will be increased.
For instance, a healthy 35-year-old female non-smoker may get a lower waiting period of 12 months than a smoker who may get 24-30 months. Only after the waiting period is over does a health insurance product start paying claims. This is to ensure that policyholders do not claim for pre-existing ailments.
Similarly, for senior citizens, general insurers said the underwriting teams would be very selective in both coverage and pricing.
“Certain policy features like expenses related to diabetes fluctuation hospitalisation or cardiac care may be offered to those above 62-65 years based on their lifestyle and past medical history. This is to avoid claims piling up,” said the vice president of claims at a health insurer.
Further, premiums would see gaps widening between senior citizens and those below 60 years of age. Costs of medical tests prior to issuing a product may have to be borne 50-50 between the policyholder and insurer.
What about exclusions?
Insurers told Moneycontrol that COVID-19 has made companies learn a lesson on the inclusions and exclusions. While most companies were mandated to pay health insurance claims, terms and conditions of health policies would also see change.
Analysts estimate the COVID-19 related infection control measures such as testing in-patients and staff, PPE for health staff, social distancing protocols and human resources costs is resulting in bills getting inflated by 15-20 percent over and above the regular charges.
Hospitals said the insurance companies are not covering the additional costs, forcing patients to pay out of pocket. Insurers, on the other hand, claim that they are making whatever payment is permitted as per policy terms and conditions.
Hence, for future products, pandemic-related exclusions could be clearly spelt out. This would include the conditions under which hospitalisation expenses would be paid, the infectious disease costs that would be part of the claim payments and room rent caps.
General insurers will also come out with new package rates for treatment of COVID-19 and similar diseases. Unlike regular surgical procedures, COVID-19 treatment requires interventions of varied kinds that cannot be covered under one single package of a health cover.
The package rate depends on the type of procedure, hospital and location. In Mumbai, this could range between Rs 4 lakh for a simple surgery to as high as Rs 50 lakh for advanced treatments like cancer.
Similarly, a direct impact of COVID-19 would be that it would take longer for individuals belonging to professionals like healthcare and sanitation workers, delivery personnel, store assistants who are in direct risk of contracting infectious diseases may also be given a longer proposal form to understand their risk needs. The time taken to offer health insurance to these individuals could also be 20 percent longer than a regular proposal.
This would also be a standard requirement for Indians recently returned from hotspots like the Middle East, United States, Italy or China or expats working in India from certain nations. Premiums charged for these segments would be at least 10-15 percent higher.
Won’t it be adequate to have group health policies?
Premium increases will be as steep in group health insurance products as well. Group health policies are offered by employers to their staff.
Amidst COVID-19, corporate customers have reported a 10-15 percent surge in claims for Coronavirus and allied hospitalisation by the staff and their kin.
In the near future, both insurance brokers and health insurers said that the covers will see a 15-18 percent increase in premium. Further, coverage for senior citizen parents will either be provided as an add-on for higher premiums or would have a mandatory co-pay clause where the employee would have to bear a portion of the claims.
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