Health insurance is a financial agreement to pay for health-related costs made by an individual or group.
A person pays a premium for their health insurance. This amount must be paid to the insurance company in a defined frequency, say monthly or yearly. Health insurance premiums would depend on the health coverage and amount.
Depending on the type of health insurance you buy, you can receive coverage for a range of healthcare issues, including the cost of:
- Prescription drugs,
- Medical treatment bills,
- Surgery Cost,
- Hospital stays,
- Pre and post-hospitalization costs,
- Serious illnesses,
- Disability, or
- Long-term care due to aging.
Health Insurance Policy Terms
In an agreement with your health insurance company, some different rules and regulations governing your use of the policy and covered costs. Important things to look for in a health insurance policy are:
Deductible
This is an amount of money you must pay for health care services covered under your plan before the insurance company begins to pay for these services, meaning if your deductible is set at, say, Rs 5,000/- then your insurance company doesn’t pay anything for you until you pay the first Rs 5,000/- for health care services that are subject to the deductible.
Coinsurance
Another important concept related to your health care you must understand is coinsurance. Coinsurance is the percent share of the costs of a covered health care service that you are responsible for. This coinsurance kicks in only once you have already paid out, that is, 100% of your annual deductible. So, let’s say that in addition to your mandatory monthly premium, you’ve already paid out 100% of your deductible for covered health care costs and services you have used during the year.
Then, for some reason, you must go to the doctor again, where the doctor performs a Rs 100,000/- treatment covered under your plan. If your coinsurance is 20%, then your out-of-pocket costs for that procedure will be Rs 20,000/-, which is 20% of Rs 100,000/- The rest 80% of the medical bill will be paid to your doctor by the health insurance company.
Sub Limits
Sub-limits, as the name suggests, limit health insurance coverage. It is a condition in the policy that states that the insurance company will bear the medical expenses only up to a specific limit. After that, the remaining amount of the bill has to be paid to the policyholder. Sometimes, the sub-limit is presented as a percentage of the sum insured; on other occasions, it is a specific amount set by the insurer.
Example: Let’s say the online health insurance plan you bought gives you a sum insured of Rs. 10 Lakh, with the sub-limit on room rent being 1%. It means the reimbursement you can claim on daily room rent is Rs. 10,000. If you opt for a room that costs Rs 12,000 daily, you will have to pay the remaining Rs. 2,000 per day. Similarly, there could be a cap on other facilities like consultation, ICU, oxygen supply, and ambulance charges.
Sub-limits’ role in health insurance is to keep the expenses in check and reduce unwarranted inflated medical bills.
Exclusions
An exclusion is a provision within an insurance policy that eliminates coverage for certain acts, property, types of damage, or locations. The plan does not cover the excluded items, and excluded costs don’t count towards the plan’s total out-of-pocket maximum.
This means you are fully responsible for the cost of the service. Many times, cosmetic procedures are subject to such exclusions. These exclusions are usually for
- Specific diseases or treatments forever, i.e., not covered at all
- Existing diseases in a particular period, say two to four years
- Treatment in delisted hospitals. One should check the website of insurance companies for authorized hospitals in the network, etc.
Health Care Costs: Trends & Rising Costs
It’s sad, but health care costs have risen so quickly that many people and employers can no longer keep up with them.
Not only is the cost of health insurance rising, but the cost of medications and hospital procedures is also rising. The cost of health insurance is directly related to the cost of medical care. The higher the cost of care, the higher the cost of health insurance.
One of the reasons that health care costs are rising is that there is no right price to pay for any one service or treatment plan. Prices are made and set by the hospital or the insurance company, whoever has the most significant influence. If an insurance company has many people signed up for its plan, that insurance company substantially impacts the prices set—the same with hospitals. If a hospital is large enough, it can set its treatment price.
Insurance companies, hospitals, and other medical facilities are all getting behind the scenes with each other for most patients. A health insurance company will want to do business with a hospital that everyone always chooses to go to. The more patients a company has, whether a medical facility or insurance company, the more say it has in deciding who to work with and what prices to set.
Also, many people are being overtreated and given unnecessary extra services.
Some doctors are also promoting the latest and greatest and most expensive treatments available. These treatments may be high-tech, but they may work just as well as older treatment methods that work and are less expensive.
Reducing Your Health Expenses Cost
In addition to what is being done, there are things that you can do to help reduce your health costs.
One way to reduce your cost is to look for health insurance with a reputed health insurance company with a broader hospitalization network. Such insurance companies would work with general hospitals and may have control over practices by hospitals related to medical treatment, charges, and billing.
Another way to reduce your cost is to educate yourself on your available options and how much they will cost you. It would help if you considered essential metrics like;
- Claim Settlement Ratio. A claims settlement ratio indicates the percentage of claims settled compared to the total claims received in a year. A higher claims settlement ratio indicates that an insurance company has settled higher claims and is more reliable in paying insurance claims. Top companies typically have claims ratios that exceed 90 percent.
- Incurred Claims Ratio. The claim ratio indicates a general insurer’s ability to pay claims. It is calculated as the total value of all claims paid by the company divided by the premium collected in a financial year. For example, If the claims ratio is 75%, it implies that the company has spent 75% of the total premium earned by an insurance company. Companies existing for some time in the market would have a higher claims ratio compared to new companies. A claims ratio could be more than 100% also. It may raise questions about the insurance company’s risk management and underwriting process.
- Tenure of the insurance company in the business.
- Rating of the insurance company as available online and insurance regulatory body.
- Always check the information at Insurance Regulatory body on their website about the insurance companies from where you are looking to buy a health insurance plan, i.e., a company shouldn’t be barred or delisted, any adverse comment, pending litigations, etc.
Conclusion: Health is Wealth, Don’t Miss It!
Your health is your most valued asset. A good health insurance plan helps protect your and your family’s health and financial future for a lifetime.
Other key benefits of health insurance are access to a network of doctors and hospitals and other resources to help you stay healthy. With health insurance, you’ll enjoy:
- Being able to find the help you need close to home,
- Peace of mind and less worry because you know you’re covered,
- Access to affordable care and health information to keep you healthy.
You can boost your health and well-being with health insurance and good basic health choices.
