Health Insurance

Health insurance in India typically pays for only inpatient hospitalization and for treatment at hospitals in India. Outpatient services were not payable under health policies in India. The first health policies in India were Mediclaim Policies. In 2000 government of India liberalized insurance and allowed private players into the insurance sector. The advent of private insurers in India saw the introduction of many innovative products like family floater plans, top-up plans, critical illness plans, hospital cash and top up policies.

The health insurance sector hovers around 10 % in density calculations. One of the main reasons for the low penetration and coverage of health insurance is the lack of competition in the sector. The Insurance Regulatory Authority of India (IRDA) which is responsible for insurance policies in India can create health circles, similar to telecom circles to promote competition.

Broadly we can divide the health insurance plans in India today can be classified into three categories:

1. Hospitalization
Hospitalization plans are indemnity plans that pay cost of hospitalization and medical costs of the insured subject to the sum insured. The sum insured can be applied on a per member basis in case of individual health policies or on a floater basis in case of family floater policies. In case of floater policies the sum insured can be utilized by any of the members insured under the plan. These policies do not normally pay any cash benefit. In addition to hospitalization benefits, specific policies may offer a number of additional benefits like maternity and newborn coverage, day care procedures for specific procedures, pre- and post-hospitalization care, domiciliary benefits where patients cannot be moved to a hospital, daily cash, and convalescence. There is another type of hospitalization policy called a top-up policy. Top up policies have a high deductible typically set a level of existing cover. This policy is targeted at people who have some amount of insurance from their employer. If the employer provided cover is not enough people can supplement their cover with the top-up policy. However, this is subject to deduction on every claim reported for every member on the final amount payable.

2. Hospital daily cash benefit plans:
Daily cash benefits is a defined benefit policy that pays a defined sum of money for every day of hospitalization. The payments for a defined number of days in the policy year and may be subject to a deductible of few days.

3. Critical illness plans:
These are benefit based policies which pay a lumpsum (fixed) benefit amount on diagnosis of covered critical lllness and medical prodcedures. These illness are generally specific and high severity and low fequency in nature that cost high when compared to day to day medical / treatment need. eg heart attack, cancer, stroke etc now some insurers have come up with option of staggered payment of claims in combination to upfront lumpsum payment.

Key aspects of health insurance:

Payment options
Direct Payment or Cashless Facility: Under this facility, the person does not need to pay the hospital as the insurer pays directly to the hospital. Under the cashless scheme, the policyholder and all those who are mentioned in the policy can undertake treatment from those hospitals approved by the insurer. Reimbursement at the end of the hospital stay: After staying for the duration of the treatment, the patient can take a reimbursement from the insurer for the treatment that is covered under the policy undertaken.

Cost and duration
Policy price range: Insurance companies offer health insurance from a sum insured of Rs. 5000/-for micro-insurance policies to a higher sum insured of Rs. 50 lacs and above. The common insurance policies for health insurance are usually available from Rs. 1 lac to Rs. 5 lacs. Duration: Health insurance policies offered by non-life insurance companies usually last for a period of one year. Life insurance companies offer policies for a period of several years.

Tax benefits
Under the Income Tax Act, under Section 80D, the insured person who takes out the policy can claim for tax deductions.

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