IRDA has released exposure draft on
health insurance which most consider as landmark and revolutionary and
perceived that this will help society at large. But, I don’t think so as there
are few concerns and needs to be addressed before these regulations are
finalised.
The major change which the draft regulation
proposes is that all health insurance policies shall provide for entry age till
at least up to 65 years. However mere provision of minimum age till which the
health insurance should be available does not necessarily mean that all the
proposals fitting into the age will be accepted by the insurers. The final
decision as to whether to accept or reject the proposal is in the hands of
insurers and history tells us that insurers are not willing to accept a new
proposal for any person above age of 45 years. Mere providing for grounds for
rejection, which the proposed regulations provide, shall be made in writing, be
justifiable and fair will not serve the purpose. IRDA has to ensure that
proposals are not being rejected unless there are serious issues or accepting
that proposal is detrimental to the interest of other policy holders. Moreover
IRDA should also provide for right to appeal in case of rejection and the
procedure to be followed for that.
Draft regulations
also provide that all health policies shall be renewable till death and will
not have any exit age for renewal. One very welcome provision of the draft
regulations is that, it also provides that
insurer shall not refuse the renewal of the health insurance policy on
the ground that the insured has made a claim or claims in the previous or
earlier years. What the insurance company can do in such cases is that they can
load the premium if the individual claims experience, for each of the three consecutive
policy years is more than 500% of the premium under the current policy. This
cap linked as percentage of premium is going to be detrimental to the interest
of the policy holder. Let us understand the implications of this provision with
an example. For example a healthy 30 years male will get health plan for sum
assured of Rs. 3 lakhs at around premium of Rs. 4,000 p.a. Policy holder will
be loaded if his claim amount is more than Rs. 20,000 yearly for three
consecutive years. The amount exhausted is not even 10% of the sum assured and
he is liable for premium loadings as per draft. This is not justifiable and
should at the most the claim amounts should be linked to percentage of the sum
assured for better clarity and understanding of the provision. I would even go
to the extent to saying why loadings are required as premium is charged after
considering the probabilities of claims and it anyway increases with advancing
of age so as to keep pace with higher probability of claim being lodged.
The draft also required the health
insurance company to gives option to migrate to suitable health insurance plan
at the end of the specified exit age from specific policies. This is useful in
case of family floater policies where the child automatically excluded from
health cover once he completes 21 years of age and the child looses all its
history. More clarity on the count is required as to whether a person will get
the same sum assured which was available to him in the family floater plan. Policy
holder must also get all benefits carried forward without any break and
exclusions.
It is a good that draft provides for
taking into account cumulative bonus with the sum assured to arrive at sub
limits applicable. Sub limits on room rent are the major stumbling block for
the insured person to claim the full genuine expenses incurred as a few people
understand the impact of the same. This means in case you stay in a room
costing higher than this limit all other expenses will also be charged accordingly
but you will be entitled for expenses on the basis of what you would have
incurred had you stayed in a room that costs within your limit. IRDA should
also provide for periodic upward revision in the sub limits as room rents are
likely to go up looking at medical inflation. The room rents are not uniform
throughout the country and are more expensive in metro cities and these facts
are also to be looked in before finalisation of the regulations.
There are some policies available in the
market in which co-payments are required to be made by policy holder up to 20%
of the claim amount. Co-payment means part of the claim has compulsory to be
borne by the policy holder. Co-pay is levied when you are hospitalised in non
net work hospitals and are levied compulsory for claims after age 65 years. There
is no provision to regulate the terms about co-payments in this draft. IRDA
should also take necessary steps to regulate this practice.
The draft has provided for grace period
up to 30 days which at present is 15 days. One should note that cover is not
available during the break period, means if you do not renew your policy before
due date than you will not be covered for the diseases except due to accident
till you make the payment in the grace period. One should note that in life insurance
death claim is payable even you die during grace period. IRDA should look into
this as why claim should not be payable during the grace period if the claim is
genuine.
Draft also
provides for no payment of commission to intermediary in case of policy is
ported to another insurer. I strongly believe that one requires the help and
support of agent in health insurance plans and if agents are not adequately
remunerated then will be least interested in helping people in portability.
IRDA should regulate the commission payout on overall basis and not for some
specific cases. Insurers should also be asked to launch online plans which are
cheaper than normal plan just like online term plans of life insurance.
Draft should also
mandate inclusion of alternative treatments because people are worried about
the side effects arising out of the allopathic medicines. Also in some cases,
with the use of alternative medicines, a surgery can also be avoided. Many
People are already taking alternative treatments to cure their diseases, but
unable to claim the expenses. Draft should also give relief for this.
Many time previous years original policies are also
called for before settling the claims. According to me this is an absurd.
Insurance companies or their TPAs should maintain these records and policy
holder should not be harassed by asking for such requirements. IRDA should
mandate that every renewed policy will also mention the original start
date of the policy so that there is no need to submit earlier copies
afterwards.
IRDA should also not allow insurers to change premium
rates before completion of at least 5 years. We have witnessed the wrong
practice by one particular insurance company of offering a low cost
mediclaim policy and subsequently raising the premium by 300% to 400% at
the time of next renewal. The policyholders had no option but to pay the
premium so as to get the benefit of medical history for coverage of pre-existing
disease. The raise in premium should also be fare and justified.
Last but not
least draft should also provide for payment of interest @12% p.a. for delay in
claim settlements beyond 30 days.
This article first appeared at myiris.com on 18th June'2012.
