How to Select or Choose the BEST Health Insurance Plan? is one of the most common queries posted by the readers of this blog. I highlighted the importance of health insurance plan in my post, Why do we need Health Insurance? Let me admit that to select a Health Insurance Plan is difficult or complex compared to any other insurance policy. The reason being, a large number of deciding factors in Health Insurance Plan.
The plans like life insurance or critical illness plan are event specific. On the other hand, there are a lot of ifs and buts in health insurance plan. To share an example, there is NO concurrence or agreement among various health insurance rating agencies. One of the health insurance plan rated BEST by one of the rating agency is rated below average by another agency. Though each of them has their own ranking methodology and ranking can be manipulated. It leaves the potential customer high and dry.
Health Insurance Plan – Fix your requirement First
To simplify this entire process to select the best Health Insurance Plan, it is important to fix your requirement first. Here by requirement, i mean following factors to be decided first.
(a) No of members to be insured:
Normally, the potential policyholders are confused whether to avail individual or family floater plan. In another scenario, some would like to include their elderly parents in family floater plan. Please remember that premium of the health insurance plan is decided by the age of the eldest member under family floater plan. The health insurance provider will be more than happy to include elder members as it will increase the overall premium. The best solution is to avail a separate Health Insurance Plan for elderly parents depending on their requirement.
Lastly, Family floater plan is more economical compared to the individual plan/s.
(b) Coverage Amount:
It is always good to have maximum coverage but remember that premium increases with the coverage amount. Recently, one of the readers of my blog Priyanka asked me the ideal coverage amount. She is 26 years and was married recently. Now for a young couple, it does not make sense to avail a coverage of higher amount of 9L.
Therefore, in my opinion, the young couples can start with lower coverage amount say 2L and may avail top up policy in future to increase the coverage. The probability of hospitalization is low at a young age. Moreover, a premium of health insurance plan is not locked thus monetary benefit to avail higher coverage at a young age is missing. I will discuss it in detail later in the post.
The coverage amount should be low for the salaried class as they are already covered by their employer. As financial planners always suggest opting for “personal” Health Insurance Plan even if you are covered by your employer. Therefore, if you are salaried then you should opt for lower coverage initially and may increase the same through a top up policy every 10 years to hedge the risk.
Lastly, you should opt for higher coverage at a young age if there is a medical history of the family in terms of genetic diseases/ailment. Though in medical terms, the genetic disease is more serious term i.e. caused by an abnormality in DNA but i am using it literally. For example, Blood Pressure, Heart Disease, Skin Diseases etc are also genetic in family depending on family history. One of my distant cousins has all the diseases/ailments of her mother i.e. High BP and Migraine. Therefore, in such cases, it is advisable to opt for higher coverage at a young age.
(c) International Cover:
Some people are globetrotter either professionally or by personal choice. If you are in IT field then there is a high probability of offsite posting abroad. Similarly, one of my uber-rich friends undertakes one foreign trip every quarter. Therefore for such people, it is important that Health Insurance Plan provides international cover. Please remember that not all the Health Insurance Plan provide international cover. Therefore, depending on your requirement you may include an international cover.
(d) Maternity Cover:
Personally, i suggest not to include maternity cover in your requirement list. Still, some of the young couples prefer maternity cover because of the high perceived maternity cost. You can do a simple maths to decide whether to include a maternity cover or not. Check the premium of Health Insurance Plan with and without maternity cover. In some policies, it is an inbuilt feature but still you can find out the premium difference by comparing similar policies.
Assuming the premium difference is Rs 6000 p.a. You are expected to spend between Rs 50k to Rs 75k towards the maternity expenses. From a financial perspective, it is too costly in a long run. Moreover, there is a waiting period of 3-4 years to avail maternity benefit.
(e) Add-on features:
In order to make Health Insurance Plan more marketable and attractive some of the health insurance providers include add-on features like health checkup, alternative treatment, OPD, e-opinion, second opinion etc. Always remember that such add-on features add to the cost of the policy. Personally, i don’t foresee any value in these add-on features. I am not acting judgmental but you may include these features depending on your requirement. You may consider alternative treatment and health checkup provided premium is not increasing drastically. I strongly suggest against OPD as there are a lot of ifs and buts that i can write a separate post on the same.
Now you are ready with your exact requirement and let’s move to next section.
How To Select or Choose The BEST Health Insurance Plan?
As a first you step, from laundry list, you can shortlist the health insurance plan that fulfills and meet your requirement. For example, in my case, i was looking for a health insurance plan with a coverage of 9L. Therefore, almost all the plans of public sector health insurance providers were dropped during initial screening. Secondly, public sector health insurance providers are not so strong in cashless tie-ups that we will discuss later in the post. Now i was left with health insurance plans of private insurer fulfilling my requirement. I evaluated these plans on following parameters in same order
1. Premium of the Policy:
One of the most imp point about the premium of health insurance plan is that it is not fixed i.e. it is dynamic. Unlike term insurance policy, wherein the premium is fixed for the policy tenure, the premium of health insurance may keep changing (read: increasing). In layman terms, unfortunately, there is NO INCENTIVE to BUY Health Insurance Plan at an early age to LOCK the premium. Sometimes premium is low because of co-pay clause (Please check the point no 4).
In my screening activity, i dropped plans with the comparatively high premium amount.
2. Pre-Existing Disease:
This clause is very important if you have the existing medical condition. Secondly, remember that this clause also includes diseases that you are not aware of at the time of availing health insurance plan. Normally the health insurance provider provides coverage for pre-existing disease only after completion of 24 to 48 months of continuous insurance cover. This is one of the reasons why you should avail health insurance plan at an early age :).
Here i would like to clarify that pre-existing disease is one of the major disputes between the policyholder and the insurance provider. The reason being, if the insurance provider is able to prove that i was suffering from XYZ disease or medical condition that existed before i purchased the policy. In this case, all my claims linked directly or indirectly to this XYZ disease/ailment or medical conditions will be rejected till the pre-existing disease period is in force. The argument of being not aware is ignored in such cases.
Sometimes the buyer gets confused between waiting period and pre-existing disease waiting period. In layman terms, both are waiting period. Here the term “waiting period” of 30 days is used to highlight the fact that during initial 30 days from the date of issue of policy only the emergency hospitalization will be covered.
3. Sub Limits on Room Rent:
In my opinion, this is very important but mostly ignored at the time of purchase of health insurance plan. Before that, i would like to highlight one critical fact that many people are not aware. The cost of medical treatment basically depends on the room rent. For standard procedures and treatments, the total medical cost is offered as a package to the patient depending on the type of room.
For example, my wife was admitted to one of the reputed hospitals for delivery. The hospital handed over the list of packages. The total cost for c-section varied from Rs 60,000 to Rs 1.5L depending on the room. As i opted for the single private room, therefore, i was charged Rs 1.25L. If i would have opted for twin sharing room, for the same procedure the cost was Rs 90k.
In the health insurance plan, there is a sub-limit on the room rent. For example, in my policy, it is 1% of the coverage amount. Normally the sub-limit for room rent is 1%. Therefore, for a coverage of Rs 9L, i can opt for a room with a rent of Rs 9000 per day. Now you must be wondering why it is important and i am okay with twin sharing or general ward. Please note that the quality of treatment is linked to the room rent. This is my personal observation. As in my wife’s case the medical care, attention, and treatment was better compared to the twin or triple sharing.
At the same time, there is a flip side to it. For standard treatment/package, the health insurance plan specifies max limit like for maternity cover it is normally 50k to 75k. In my case, it was 75k whereas my actual bill was 1.25L. Therefore, i paid 50k from my own pocket. Normally, Higher Sub Limits on Room Rent help in non-standard treatment/package i.e. you can claim higher amount. For standard package/treatment, you may need to shell out additional amount from your pocket.
Normally, Co-Pay clause is applicable for Senior Citizen health insurance plan and is usually 10%-15%. What it implies is that if your medical bill is Rs 1L then the insurance provider will pay 85k and you will pay 15k. Usually, the policies with low premium include the co-pay option. Preferably, you should not opt for a plan with co-payment clause. Reason being, co-pay can be a substantial amount in case of a high-value claim.
In one of the case, the reader of the blog underwent long treatment and the total bill was 10L. The insurance provider only covered 7.5L and he had to pool 2.5L from his pocket. The medical expenses of 1L were not allowed (exclusion) and 1.5L was paid by the policyholder towards co-pay clause as mentioned in the health insurance plan.
Needless to mention that you should check the list of exclusions. Normally it is standard across health insurance provider but still, you may check the same to avoid any future shock.
6. Cashless Facility:
In my opinion, it is another important factor to consider. When i opted for health insurance plan i checked whether some of the good/reputed hospitals in my city/area are covered under the cashless facility or not. The cashless facility is important because you may not be able to arrange the funds at short notice.
7. Waiting Period on specified ailments:
This clause is different from the pre-existing disease or 30 days waiting period. The health insurance plan excludes specified ailments like ENT, Diabetes, hernia, hypertension etc for a period of initial 2 years from the date of issue of policy. The list of ailments may vary from company to company. The reason being, to avoid fraudulent claims. For example, if i have to undergo sinus surgery costing Rs 50k. Then i may opt for individual health insurance plan by paying a premium of Rs 10k. I will claim 5ok towards sinus surgery and discontinue policy from next year. Thus, i will be spending 10k for the surgery :).
Words of Wisdom:
In this post, i covered some of the important factors to be considered while selecting or choosing health insurance plan. I have a lot more to share. In one of the future posts, i will share how you can save on health insurance premium and medical expenses by selecting right health insurance plan/features.
As health insurance plan is a non-standard financial product. Therefore, you cannot select health insurance plan only based on the premium. Thanks to IRDA, if you are not happy with the existing health insurance provider you can opt for portability of health insurance.
Last but not the least, the medical history of the family can play important role in the selection of the right health insurance plan. The reason being, the probability of diseases/ailments based on family history is HIGH. Trust me it is true. In the case of my friend’s family, the entire family tree suffered from heart disease at some point or another. Therefore, i suggested him to opt for health insurance plan designed for heart diseases/cardiac care. Alternatively, there should not too many strings attached to heart disease in health insurance plan.
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