Why the claim experience differs between individual and group health plans

The main issue that causes stress for individual policies is waiting periods. Individual policies have different types of waiting periods. The first is an initial waiting period, which can last 30 to 90 days and only covers accidental emergency claims. Then there is a disease-specific waiting period, where certain named illnesses are not covered until the waiting period is over.

This waiting period can last between one and four years. Common illnesses on this list include cataract, hernia, and knee replacement. Lastly, there is a waiting period for pre-existing diseases, which can last between two and four years. If a condition such as high blood pressure existed before the policy was issued, then a related claim, such as a heart attack, can only be covered after the waiting period is over.

At the time of a claim, the insurer checks if it is subject to any of these waiting periods. In most group policies, all waiting periods are waived. This means that the check is not necessary for group policies.

Another issue that arises with individual policies is that of policy sub-limits. While sub-limits may be present in both group and individual policies, the way they are applied is different. In an individual policy, the caps are usually linked to the sum assured. For example, the room rent cap may be stated as 1 percent of the sum assured. It is important to determine what the applicable sum assured is.

Also read: Moneycontrol-SecureNow Health Insurance Ratings: How to pick the right policy 

Reasons for delays in claim processing, poor claim experience 

Some individual policies consider the accumulated no-claim bonus as part of the sum assured. It is also important to check if the sum assured was increased in recent years and if the incremental sum assured is subject to any waiting period. These issues do not arise in group policies. In a group policy, there is no accumulated no-claim bonus, the sum assured for each year is defined at the policy start date. Even if there was an enhancement in the previous year, the caps would be linked to the current year's sum assured.

A third factor that leads to back-and-forth communication are the various add-ons that can be included in individual policies. These add-ons may be unique to a specific insurer and not commonly chosen. As a result, the TPA that handles the claim may sometimes fail to check for them.

The initial claim settlement may be processed as usual. However, once it is brought to the insurance company's attention that an add-on was chosen, they may then correct it. In group policies, the conditions are generally the same for a particular group of members, so there is less chance of confusion.

Failed to disclose pre-existing condition? Claim could be rejected

Finally, when an individual policyholder files a claim, the insurer will check if there was any non-disclosure at the time of the policy application. This can be a major issue. The insurer will investigate old records and look for any potential links to the current claim. This scrutiny can feel like an attempt to deny the claim for the policyholder. In group policies, members are guaranteed coverage, so there is no underwriting of individual members. So, such checks are not applicable for group policies.

In conclusion, individual health insurance policies can come with several complexities and challenges that can cause stress for policyholders during the claim process. Group policies tend to have less complexity and confusion. To navigate these complexities and ensure a smooth claim process, it's important for policyholders to be familiar with the terms and conditions of their policies, be proactive in addressing any issues that may arise, and engage with an insurance broker who can help navigate the insurance ecosystem.

In the case of my friend's father, we were able to obtain the previous policies from the insurer directly, which is ironic considering that the TPA should have coordinated with the insurer to avoid causing inconvenience to the policyholder. However, in reality, the process is not always smooth and efficient.