IRDAI Looks To Minimize Health Insurance Exclusions

Insurance and Regulatory Development Authority of India (IRDAI), on 24^th July 2018, announced that it is working towards minimizing Health Insurance exclusions. IRDAI has been frequently issuing guidelines on standardization of Health Insurance. It also works on bringing about transparency in health insurance plans.

According to the 2017 Global Medical Trends Survey, healthcare costs in India have increased by 20%. Also, according to the National Health Profile 2018, public expenditure on health for an individual has gone up by 100%.

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Health Insurance: IRDAI To Minimize Exclusions

Why is health insurance penetration low?

Only 14.1% of people in rural areas and 18.1% of people in urban areas are covered by any kind of health insurance. (A report made by National Sample Survey Office [NSSO]). In spite of an alarming rate at which medical costs are increasing, health Insurance has a low penetration in India. Why?

Among other reasons like the tendency of people to assume that they will not fall sick, there are other factors responsible for this:

• Lack of awareness on the importance of Health Insurance
• Lack of standardization of health insurance plans
• Lack of clarity on terms and conditions
• Exclusions of major and terminal illnesses

Benefits offered by Health Insurance:

Every Health Insurance Provider offers benefits at their own discretion. ‘X’ may offer to cover doctor’s fees but ‘Y’ may not. As of now, there is no great degree of standardization in Health Insurance. Nonetheless, following are some of the common benefits offered by most Health Insurance Providers:

1. OPD Care
2. Prescription Medicines
3. Emergency Care
4. Hospitalization
5. Preventive and Wellness Services
6. Laboratory Services
7. Maternity and Newborn Care

Common exclusions of a Health Insurance policy:

Exclusions are illnesses or diseases which are not covered under health insurance policies. Following are the common exclusions:

1. Pre-existing diseases: All pre-existing diseases like diabetes, high blood pressure, and so on have a waiting period ranging from 2 to 4 years before coverage starts.
2. Pregnancy: All pregnancy-related costs like childbirth, vaccination and others are not covered immediately. It is covered after a waiting period of 2 to 4 years.
3. Surgeries: Usually, surgeries like joint replacement, cosmetic surgery, and dental surgery are not covered.
4. Alternative treatment methods: Many insurers do not cover alternative treatments like Ayurveda, Homeopathy and Unani. However some insurers cover this, but cap the amount covered (usually 7.5% to 25% of sum insured). Only Allopathic treatment is fully covered.
5. Hospital costs: Certain hospital costs like room rent, doctor’s fees, ambulance costs and so on, have sub-limits. Sub-limits are the maximum amount an insurer pays. For example, there’s a 1% cap per day on sum assured in a health insurance policy on room rent. This means, there is a sub-limit on room rent and it is limited to Rs 5,000 a day if a health insurance plan has a sum insured of Rs 5 Lakhs. You can stay in a room with a tariff of up to Rs 5,000 per day.
6. Lifestyle-induced diseases: Unless specified at the time of application, lifestyle-induced diseases which arise due to smoking, drinking, drugs and a stressful job are excluded. They might be included if you pay a higher premium on being asked by the insurer.
7. Permanent exclusions: Intentional injuries, injuries in war, HIV, congenital diseases are permanent exclusions.

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IRDAI to minimize health insurance exclusions:

On Tuesday, IRDAI announced a consumer-friendly move which will in turn increase health insurance penetration in India. It has started working towards minimizing health insurance exclusions.

IRDAI issues guidelines on health insurance to:

• Ensure standardization of health policies and
• Enhance transparency and uniformity.

Every insurer uses different terminologies in health insurance policies. Lack of standard nomenclature, procedures, products offered, exclusions, treatment of critical illness; and so on are the problems faced in this industry. Consumers find it difficult to digest the concepts and working of health insurance.

Therefore, IRDAI requires the Health Insurance industry to adopt a uniform approach when it comes to ‘exclusions’, be it incorporating ‘exclusions’ as part of a product, or the wordings of ‘exclusions’.

To realize this step, the insurance regulator IRDAI, has set up a 10 member committee to conduct a study and report in eight weeks time. Headed by Suresh Mathur, Executive Director for Health, Insurance and Regulatory Development Authority of India, the panel will examine the common exclusions of the health insurance policies.

What is expected of the committee?

The committee is required to:

• Conduct a study on the prevailing exclusions with an aim of minimizing them.
• Trim down the number of exclusions not covered, with regard to new treatment methods and technologically advanced treatments.
• Identify the type of exclusions which will continue.
• Study the terminologies/wordings/language of the exclusions
• Standardize terminologies to make it simple and understandable to consumers.
• Examine the scope of individual specific and ailment specific permanent exclusions, allowed at the time of underwriting, so that the insured is not denied claims not relating to the exclusions.

Why many people avail Health Insurance?

• Tax benefits: Premiums paid towards the health insurance policy are eligible for tax deductions under Section 80D.

Why should people buy Health Insurance policy?

• Out-of-pocket healthcare expenses will reduce drastically. Hence, you will have greater control over your budget.
• A sedentary lifestyle and unhealthy food habits put you at risk of developing lifestyle diseases like diabetes, heart disease, stroke, and so on.

Final Verdict:

The outcome of this panel/committee and the consumer-friendly moves undertaken by IRDAI, may enhance the scope of insurance coverage in the country. The report may prove to be a game changer in the Health Insurance industry.

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