What is health insurance, benefits, types, and requirement

A health insurance or health insurance policy is a contract between an insurance company and the policyholder with the intention of protecting the latter against costly and unforeseen health costs. Though policyholders pay monthly premiums, co-payments, co-insurance and deductibles (the portion to be paid by the policyholder), it is expected that the total out-of-pocket payment in case of a medical emergency is much higher than all the expenses of a health policy.

Health insurance can be availed through a government agency or private business. To determine the total cost of insurance, an insurance provider estimates the population's collective medical expenses, then divides that risk among a group of policyholder customers.

In concept, insurance providers assume that one person may incur large unforeseen expenses, while others incur none. The total cost is then divided among a group of individuals to make health insurance more affordable for everyone's benefit.

As per the terminology of health insurance policies, a clinic, hospital, doctor, laboratory, healthcare practitioner or pharmacy treating an individual is referred to as a "provider". “Insured” is a person who has taken a health insurance policy or coverage.

Depending on the type of health insurance coverage, either the insured pays out-of-pocket expenses at the time of treatment and is then reimbursed by the insurance provider or the insurance provider pays the treatment expenses of the insured directly to the service provider.

There are many types of health insurance plans. Private insurance providers are bringing up a wide range of insurance plans for their customers, keeping in mind the genuine and diverse requirements of the customers. A person can avail insurance just for themselves or their whole family, and don't be surprised if you see a care plan for diabetes or a plan specially designed for heart disease patients in the market.

Depending on which sector you choose for your health coverage, health insurance can be roughly divided into two types.

1. Private health insurance

There are two types of health insurance policies offered by private companies. A hospital policy that covers your hospitalization expenses and general treatment policies (sometimes known as ancillary or extras) that cover some of your ancillary treatments; for example, dental health, physiotherapy, etc. Most providers offer a combination of both policies. However, you can buy them separately too. myUpchar Bima Plus is also a private health insurance under which you can cover yourself and your family.

2. Public or government health insurance

In this type of insurance, the central government or the state government pays a part of your insurance premium or subsidizes the insurance provider so that you get insurance cover at a much cheaper rate. There are many health insurance schemes being run by the government, which have been described in the last part of this article.

Getting health insurance is important for many reasons, the biggest one being financial support in times of need. Lack of insurance often becomes a financial burden for uninsured people in case they or one of their family members faces a serious health issue. Due to this, many times these people fail to get timely or adequate medical care.

Free treatment or care in some hospitals does improve the access to medical services but they do not replace the need for health insurance, as many of the costs still have to be paid out-of-pocket.

In such cases, the benefits of health insurance coverage usually outweigh the cost of additional services.

Health insurance policies are designed to ensure that you don’t have to worry about hefty bills if you require medical treatments in the future.

They also make sure that you get admitted to a private hospital as and when required and get your diagnosis and treatment done at the earliest.

With health insurance, you will have the option of choosing a private hospital from a list provided by the insurance company. Most hospitals provide a private en-suite room, TV and choice of food under this - services an uninsured person might not opt for or be able to opt for due to the overall cost of treatment.

No one wants to get sick or injured, but a medical emergency is usually unforeseen. Health insurance ensures that you don’t need to worry about medical bills and other things related to treatment on top of the health condition in case one ever arises.

In addition to coverage for doctor visits, lab tests, hospitalization, surgery and emergency care, you may also be able to avail some of the following benefits from a health insurance policy:

• Health insurance is a cost-effective way of getting protection against unforeseen health issues and being able to opt for a doctor and health care service of your choice in case a need arises. 
• Health insurance helps you get the best available medical treatments in your time of need.
• One of the benefits of taking a private health insurance plan is that most of them cover a similar set of essential health benefits, some even cover pre-existing health conditions. 
• Along with the other benefits of private health insurance, it saves you from the long waiting list for treatment in government hospitals; private insurance usually covers everything from your treatment room to your doctor or surgeon's fees.

If you are buying a cover or upgrading your plan for the first time, you may have to wait for a certain period of time before claiming the benefit. During the waiting period, you may receive no benefits or fewer benefits.

There are many things you should consider while opting for health insurance. Following are some recommended steps to follow during the selection process:

• Review the important terms of the health insurance. Understanding the language of the health policies helps you to know the benefits each plan actually offers.
• Make a list of health insurance requirements that your family will/may need in the future. For example, coverage for major medical conditions, dental, eye and medicine coverage, etc. 
• If you have a working parent, you may like to find out if your parent's employer offers an insurance policy. If so, when does the enrollment take place and what are the options? Is the parent associated with any club, special interest group or organization that provides health insurance? Are they eligible and approved for any government insurance scheme? Do they want to get service from a private provider?
• Collect information about available health insurance providers.
• Determine what type of coverage best suits the needs of your family.
• Request your agent or advisor to suggest you one or two attractive policy options.
• Review and compare policy provisions with the checklist you made for your family’s health insurance needs.
• Also, decide whether the cost of insurance is within your family's financial means.
• After that, you can apply for the scheme of your choice.
• If you already have medical insurance through your employee benefits package, you do not need private medical insurance. Also, if you have loans to repay and no savings, you should still pay off the loan with your own money instead of getting private medical insurance. In such cases, you can take help from the free health services provided by the government instead of opting for private ones.

If your financial conditions don’t allow you to take private health insurance, you can take advantage of the Government of India's scheme Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana.

There have been a lot of changes in the health insurance industry in the last five years. On a holistic level, in some cases, the health insurance industry has standardized and new regulations have been created. Health insurance products now contain very few hidden elements that can surprise you, for example:

• All health insurance policies are now mandatorily issued for the entire lifetime of an individual.
• Insurance companies cannot charge claim-based loading (no claim related costs) after the policy is issued.
• Insurers are required to give a 3 months advance notice to existing customers before increasing the premium or adding conditions to the policy.
• The further advantage has come from increased competition among health insurance companies, with various companies adding interesting features to standard insurance products to attract customers.

Here are a few pointers that every investor should keep in mind before buying a health insurance policy.

• Don't take too long to buy a health insurance policy

If you opt for health insurance later in life, there is a chance that you may be denied coverage because you may have exceeded the upper age limit for the policy. Most policies do not cover pre-existing medical conditions either. On the other hand, buying a health insurance policy early in life has several benefits that include, but are not limited to, lower premiums and better coverage.

• Individual cover or family floater

You should also be clear if you want individual cover for every member of your family or buy a family floater policy cover. Family floaters are great as the price is usually lower than individual covers for each family member. But if one of your family members is above 50 years of age or suffers from health issues, it would be prudent to look for individual cover for such member in addition to the family floater policy.

• Consideration of Sum Assured in the context of rising inflation

Think long term, as you may not need this policy immediately, but you will definitely benefit from having more cover in the future. Depending on the health conditions and the facilities availed, the current cost of hospitalization today is around Rs 50,000 to Rs 3 lakhs. Let's say you are 30 today. Now, as per the average healthcare inflation coming in at 7.5% for the next 20 years, the hospitalization bill when you are 50 will be around Rs.13 lakhs.

• Compare eligibility capping for hospital rooms

Many health insurance policies have a ceiling on the room rent, which means you are eligible to claim room expenses only below this cap. If you choose to rent a room above this limit, you will have to pay the extra cost as out-of-pocket expenses.

• Check Any Sub-limits / Co-pays

Most of the insurance policies have points like sub-limit and co-pay. They put a limit on a particular expense (say 2% of the sum insured). Make sure you are very clear on these when you take the policy. There are also some insurance products that have limits for specific surgeries. For example, if your sum insured is Rs 5 lakh, they may limit the cost of a particular surgery to 50% of your sum insured.

• Hospital network is an important parameter

When you compare the key features discussed above, you should also compare the hospital network of the shortlisted insurance companies and then compare these for areas where you or a family member is likely to be hospitalized in case of an emergency.

• Finally, understand the wording of the policy

Ask your insurance broker or agent to provide you with the policy wording of the product you have chosen. Make sure you check these yourself, the customer information sheet and the policy document in particular. This is a page that summarizes all the important conditions that you should be aware of. Every health insurance company needs to get it passed by the government (IRDA).

Ask questions until you are satisfied. 

• You should also take into account what is and is not covered in your policy.

Not all policies are comprehensive. Depending on your level of cover, you may not be fully covered for all the costs associated with your treatment and some expenses will have to be paid out of your own pocket.

For example, your healthcare insurance may not cover the following private treatments:

• Organ transplant
• Pre-existing medical conditions
• Cost for normal pregnancy and delivery (Read more: Normal delivery)
• Cosmetic surgery (Read more: Plastic surgery)
• Chronic diseases such as HIV or AIDS, sugar, epilepsy, high BP and related diseases
• Mental health and depression
• Sports injuries or work-related injuries

It may be possible for you to choose a policy that also covers mental health, depression and sports injuries.

By now, you must have realized that health insurance is a complex product and a lot of investigation is required before you choose a policy for yourself and your family. Also, it is best to get a health policy at an early age when you can. 

In case you need any assistance with insurance claims, your provider may also help you with it.

Here are some cost-effective government-sponsored health care schemes that you can avail of if you belong to a certain income group.

• Rashtriya Swasthya Bima Yojana (RSBY)

RSBY (National Health Insurance Scheme) has been launched by the Ministry of Labor and Employment, Government of India to provide health insurance coverage for families living below the poverty line (BPL).

• Employment State Insurance Scheme (ESIS)

The scheme is applicable to non-seasonal factories operating with 10 or more employees and in some states, certain establishments (shops, hotels, restaurants, cinemas, newspapers, etc.) having 20 or more employees. Certain states and union territories also include private educational and medical institutions in this scheme.

• Central Government Health Scheme (CGHS)

This scheme is for Central Government employees, pensioners and their dependents, who live in cities covered by CGHS. Any employee of the central government can get the CGHS card issued from the office of the Additional Director of the city.

• Aam Aadmi Bima Yojana (AABY)

Aam Aadmi Bima Yojana, a social security scheme for rural landless families, was launched on October 2, 2007. The head of the family or an earning member in the family of such a household is covered under this scheme.

• Universal Health Insurance Scheme (UHIS)

UHIS is yet another health insurance scheme that covers the medical expenses for the primary earning member of the family. It can also be availed as a group policy. Four public sector general insurance companies are implementing the Universal Health Insurance Scheme to improve the quality of health care available to poor families.