Why is it Important to Understand Specific clauses in Health Insurance?

Mr. Rakesh Sharma (55-years-old) opted for a cataract operation last month. But he is not satisfied with his insurance company as the company refused to reimburse his operation cost. But why was his claim rejected despite purchasing the best health insurance policy from an eminent insurer? It is clearly mentioned in his policy of health insurance in India that cataract surgery is not covered in the first year of the policy. Mr. Sharma didn’t check the clauses of health insurance plans and committed this mistake. If he had gone through the policy clauses properly and had delayed the operation by a year, then his expenses would have been reimbursed by the health insurance company.

So, you must check all specific clauses that are mentioned in your health policy to avoid the pain of claim rejection.

What is health insurance?

Health insurance is a protection plan that offers adequate coverage to you and your family members against various diseases. A comprehensive health policy also safeguards your savings against hospital bills and medical inflation.

The waiting period clause

This is the most imperative clause that most policyholders don’t understand. Unfortunately, this clause can affect the possibility of receiving benefits from day one of your health insurance policy. The waiting period is when you can’t raise any claim for the particular diseases or health conditions mentioned in your policy. The waiting periods can be three types; initial, disease-specific, and pre-existing.

• The initial waiting period could be between 30-90 days
• For disease-specific, the waiting period can go up to 2 years
• For pre-existing conditions, the waiting period can be up to 4 years

Exclusions, sub-limits, and co-payment clauses

Before purchasing a health insurance policy, don’t forget to check what is covered and what is not covered. Almost all health insurance policies exclude certain expenses and enforce sub-limits within the overall sum insured. In addition, they insist policyholders pay a specific part of their claims from their sides. This will release the burden from the insurer.

In case of exclusions (the expenditures that your insurer will not bear), the scope for vagueness has been reduced. Because IRDAI has mentioned a list of 199 such expenses as part of standardization norms, but you should be careful about the waiting period for various ailments/diseases.

In the initial waiting period (30 days), the policy doesn’t honor any claims, except the ones related to accidents. For surgeries and other ailments like cataracts, gallbladder stones, kidney stones, etc., a waiting period of 24 months is applicable. The waiting period is 48 months for all pre-existing conditions.

Sub-limits and co-payment clauses reduce the insurance company’s liability and responsibility. In the case of a co-payment clause (most senior health insurance policies come with this type of clause), the company pays up to 80% of the approved claim, while policyholders will pay the remaining amount.

Under the sub-limit clause of your health insurance policy, the company compensates for the expenditures related to a health condition only up to a certain limit. The policyholder usually pays the remaining bill amount. Sub-limits are only applicable to certain conditions like room rent or on the treatment of certain diseases. Different types of sub-limits are available in health insurance policies.

• Sub-limit on room rent
• Sub-limit on treatment
• Sub-limit on hospital expenses

Room rent clause

This is another imperative clause that most health insurance companies often include in their policy terms. Health insurers usually pay 1% and 2% of the sum insured for room rent and ICU charges, respectively. If the insured policyholder handpicked a room that exceeds the rent covered in the policy, then the policyholder needs to bear the remaining balance from his/her side. All other expenditures the policyholder raises will be charged as per the room type. So, a policyholder meticulously selects a room that is solely covered under the policy plan.

Renewability clause

Insurance companies often refuse senior citizens to renew their policies on the grounds of adverse claim experience. But these people claimed that they need the cover the most because of their age issue and delicate health conditions. So now, IRDAI instructed all health insurance companies to renew a policy except on the grounds of deception and misrepresentation.

Now, insurers should renew a policy on the same terms and conditions on which they have issued the first policy. Without any consent of the insured policyholder, they can’t change or alter the policy. Claim-based loading, where premiums were tramped because of a claim initiated in the previous year, too, stands eradicated. These days, insurance companies can load premiums based on overall age-wise and disease-wise claim experience.

Reasonability clause

This is another pivotal reason for disputes in the claim settlement process. The clause portrays that only ‘reasonably and necessarily’ incurred expenses will be qualified for a claim.

For reasonable charges, the insurance company will compare your hospital bills with the same treatment of another hospital in the same locality. The prime purpose of the reasonable charges clause is to ensure fair billing by hospitals.

For example, if your hospital charges Rs 1 lakh for surgery, typically costs Rs 70,000 by another hospital, the insurer will pay you the lower amount. But the new regulation explained that if an insurance company rejects a claim, then they need to show proper medical reasons. Thus, policyholders are not accepting the reasonability clause nowadays.

These are some imperative clauses that you should be aware of before purchasing a health insurance policy. Go through your policy documents properly and if you have any queries, ask your insurer. This will help you to understand when you can’t initiate a claim to avoid the pain of rejection.