Health Insurance

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Health Insurance

What is Health Insurance?

Health insurance is an insurance that covers the whole or a part of the risk of a person incurring medical expenses, spreading the risk over a large number of persons. By estimating the overall risk of health care and health system expenses over the risk pool, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to provide the money to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity. “coverage that provides for the payments of benefits as a result of sickness or injury. It includes insurance for losses from accident, medical expense, disability, or accidental death and dismemberment”.
Health insurance in India is a growing segment of India’s economy. The Indian health system is one of the largest in the world, with the number of people it concerns: nearly 1.3 billion potential beneficiaries. The health industry in India has rapidly become one of the most important sectors in the country in terms of income and job creation. In 2018, ten million Indian households (500 million people) do not benefit from health coverage. In 2011, 3.9%[1] of India’s gross domestic product was spent in the health sector. According to the World Health Organization (WHO), this is among the lowest of the BRICS (Brazil, Russia, India, China, South Africa) economies. Policies are available that offer both individual and family cover. Out of this 3.9%, health insurance accounts for 5-10% of expenditure, employers account for around 9% while personal expenditure amounts to an astounding 82%.[2] In the year 2016, the NSSO released the report “Key Indicators of Social Consumption in India: Health” based on its 71st round of surveys. The survey carried out in the year 2014 found out that, more than 80% of Indians are not covered under any health insurance plan, and only 18% (government funded 12%) of the urban population and 14% (government funded 13%) of the rural population was covered under any form of health insurance.


PRESENTATION

India’s public health expenditures are lower than those of other middle-income countries. In 2012, they accounted for 4% of GDP, which is half as much as in China with 5.1%. In terms of public health spending per capita, India ranks 184th out of 191 countries in 2012. Patients’ remaining costs represent about 58% of the total.[4] The remaining costs borne by the patient represent an increasing share of the household budget, from 5% of this budget in 2000 to over 11% in 2004-2005.[5] On average, the remaining costs of poor households as a result of hospitalization accounted for 140% of their annual income in rural areas and 90% in urban areas. This financial burden has been one of the main reasons for the introduction of health insurance covering the hospital costs of the poores.

Need For Health Insurance

For every individual in India, health insurance has become a necessity. It provides risk coverage against expenditure which is caused by unforeseen medical emergencies. Today, when the medical inflation rates are so high, failing to hold an adequate health cover can prove costly financially.
Low Penetration of Insurance in India
Medical emergencies come unannounced. To get the best medical facilities without a financial burden you will need a health insurance. Buying a health cover is no longer an option but has become a compulsion. Health insurance policy is well established in most countries but in India is remains an untapped market. Only 1.1 billion of the Indian population which is less than 15% of the Indian population is covered through health insurance.
According to WHO statistics 31% and 47% of the hospital admissions in urban and rural India are either financed by loans or through sale of assets. Additionally as per the statistics, 70% of Indians spend their entire income on healthcare and 3.2% of Indians fall under the poverty line owing to high medical bills.

Health insurance is one way to get an insurance which covers all expenses related to:

  1. Medical tests, doctor fees
  2. Costs of the ambulance
  3. Hospitalization charges
  4. Post hospitalization charges which includes doctor visits, diagnostic tests and medicines.

How one can Benefit from Health Insurance

Health insurance increases accessibility to quality healthcare, the private healthcare in particular where the costs remain a barrier for many. For families and individuals who do not have a mediclaim insurance, hospitalization means spending money out of the pocket to pay the hospital bills. Most Indians face the common situation when they do not have adequate cash to deal with a sudden medical emergency. In such a case a health insurance plan can act as a boon.
It will ensure that you get appropriate treatment in a timely manner. Irrespective of your financial capability, with an active policy you can avail the best treatment at any network of hospitals, with the clause that terms and conditions of the policy are met. After you have bought a health insurance policy, not only will it bring peace of mind but also you can avail the tax benefits under section 80D of the Income Tax Act, 1961.
Cashless Benefit
Owing to the emergence of several companies such as Royal Sundaram, Bajaj Allianz, ICICI Lombard and HDFC in the field of healthcare, the popularity of health insurance in India is on the rise. It is important to note that cashless benefit is the most important advantage of purchasing health cover in the country. This facility helps tremendously when a policy holder falls under medical emergency which requires immediate medical attention. During the treatment whatever medical expense is incurred, it is borne by the insurance company. Thus, not only will you be able to avail quality medical facility, but at reduced costs.

Important Checklist

  • The need of the hour is to accept the fact that health insurance in India is a top priority. But the question which next arises is which cover to choose. Take a look at this checklist before you buy a health insurance plan in India:
  • Hence, it is necessary to understand your needs
  • It is advised that you do not wait for getting sick before you opt for health insurance. The greater the number of health issues you have, lesser will the plan pay. Hence, act wise and opt for insurance today
  • All the policies are not equal. Some may cover accidents whereas some may not. Some may exclude terminal illness while some may not. This requires you to read the fine print carefully.
  • Make sure that you do not solely depend on the verbal wordings. Accept the policy if you agree to the terms and conditions which are in written
  • Take the settlement ratio into consideration. This will not be there in the fine print of the policy. “Settlement Ratio” refers to the amount which is paid by the company against the claims which have been made. Higher the settlement ratio and faster the settlement time, means that the insurer is doing a good job
  • Take the co-payment into consideration. This mandates that as a policy holder you will bear a pre-defined percentage of the claim and the rest will be borne by the insurer. When you compare policies, select one with the least copay amount
  • Keep the inflation in mind when you choose a health insurance plan. A particular sum assured may be alluring today but considering the inflation rate in the next twenty years, it may turn out to be inadequate
  • Even if you are insured by the employer, do not depend on it solely. An employer sponsored coverage will largely depend on their budget and you may suddenly may be in for a shock when you discover that the coverage is low
  • It is recommended that you do not wait till old age to get insured medically. Health insurance companies do not provide plans easily to those above 45 years of age or to those with health issues
  • Most policy holders do not realize that the type of hospital you opt for during hospitalization can have a cascading effect on the charges which are paid. If the room you opt for is of a higher standard you may have to shell out the additional room rent. So, you must ensure that you opt for a policy which matches your requirements
  • Most policies come with riders or an add-on coverage which adds to the benefits which are available on the policy. Check if the policy you are looking at offers these riders
  • Ascertain the benefits and the relative costs of obtaining a family-coverage policy. In most cases it has been witnessed that it proves more cost-effective than opting for separate policies. But, here too it is important to check who is being covered. The age of the person can make a big difference
  • Several health insurance companies offer cashless facility. This allows you to receive treatment in a hospital which is registered with the health insurance company without paying the bills upfront. If you opt for such a plan, ensure that the company has a wide network of hospitals which come handy in case of an emergency
  • It is a good idea to consult a health insurance advisor on whom you can rely. He should be able to provide you with unbiased advice and provide you with an insight into the best plans. Additionally he should have the capability to assist you and help you with renewals and adjustments
  • After you have narrowed down on a few insurance firms, take a look at the premium. Pick the option with the lowest premium.

Insurance Premium Increases with Age

An insurance company will often evaluate and review the profiles of patients which cost them more money. They will pinpoint on those who require frequent medical care. A person who is aging may require blood tests for diabetes, cholesterol or blood pressure checks. While providing health insurance plans to the aged, insurers try to protect their own interests by hiking the fees of the services in the form of premium. As older people are a higher cost to the insurance company, they pay higher premium. Hence, you must take note of the fact that insurance premiums will increase as you grow older. It is recommended that you act early if you want to invest in a health insurance plan.

Deduction For Medical Insurance/Medical Policy U/S 80D

  1. Deduction shall be allowed only to an Individual or HUF
  2. Deduction shall be allowed if the assessee has made payment towards
    • Medical Insurance
    • Central Govt Health Scheme or such other scheme as may be notified by the Central Govt in this behalf
    • Preventive Health Check-up
  3. Individual can make payment for wife or husband or dependent children and deduction shall be allowed equal to the amount paid but maximum of Rs 25,000 but in case of senior citizen deduction shall be allowed up to Rs 30,000.
    If the individual has taken policy in the name of parents (dependent or independent), additional deduction shall be allowed to the extent of the premium paid but maximum Rs 25,000, however, if the policy has been taken in the name of senior citizen, deduction shall allowed to the extent of Rs 30,000
  4. Deduction for Preventive Health Check-up shall be maximum Rs 5,000 in aggregate for self, spouse, dependent children and parents.
  5. HUF can take the policy in the name of any of its members and deduction shall be allowed in the similar manner.
  6. Payment shall be made otherwise than in cash but payment for preventive health check-up can be made in any manner.
  7. In case of a very senior citizen, in general medi-claim policy is not issued hence expenditure can be incurred on their medical treatment and deduction for such expenditure shall also be allowed but limit shall be the same as given above.