Legal Aspects of Health Insurance in India

INTRODUCTION

Life of an individual and a family is generally peaceful unless any kind of health issue arises which is indecisive and cannot be predicted before its occurrence. Needs such as desire of owning a house or a motor car or any other instrument of social status or other consumer durables of comfort can be postponed if the family has shortage of savings and limited sources of income. But, this is not the case with the unforeseen medical obligations which need immediate cash flows and have an adverse impact on the savings of the family.

Financial commitments on medical grounds can certainly ruin long term financial goals of a family which may include education or marriage of children and retirement plans besides desires stated supra. One may wonder about a solution to overcome such situations and the answer to this is none other than insurance which will help in maintenance of good health of an individual and a family without creating any possibility of financial crisis and hindering financial stability.

WHAT IS INSURANCE?

Insurance is the most effective risk management tool which can protect individuals and businesses from financial risks arising out of various contingencies. The emotional and psychological loss can never be compensated, but at least the financial loss can be compensated with insurance. Insurance is a legal contract between two parties- the insurance company (insurer) and the individual (insured), wherein the insurance company promises to compensate for financial losses due to insured contingencies in return for the premiums paid by the insured individual. In simple words, insurance is a risk transfer mechanism, where you transfer your risk to the insurance company and get the cover for financial loss that you may face due to unforeseen events

Health insurance is a product of general insurance that covers expenses related to medication and surgery of an insured which could be an individual, family or a group of people. It is an arrangement where an individual, family or a group purchase health care coverage in advance by payment of a fee called as premium.In other words, health insurance is an arrangement that helps to delay, defer, reduce or avoid payment related to medical expenses of an insured. The insurer will either ensure cashless treatment of medical ailments or provide a reimbursement of medical expenses incurred under the policy in any of the network hospitals across the country.

WHAT IS HEALTH INSURANCE?

Health insurance is an arrangement with an insurance company that can help you afford the costs of health care. Health insurance is a type of insurance coverage that typically pays for medical, surgical, prescription drug and sometimes dental expenses incurred by the insured. A health insurance policy is a contract between an insurer and an individual or group in which the insurer agrees to provide specified health insurance cover at a particular “premium” subject to terms and conditions specified in the policy. Health Insurance is one of the emerging service sectors in India. Health insurance, which remains highly underdeveloped and less significant segment of the product portfolios, is now emerging as a tool to manage financial needs of people to seek surance schemes are available in the market and providing benefits from an individual Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly. It is often included in employer benefit packages as a means of enticing quality employees, with premiums partially covered by the employer but often also deducted from employee paychecks. The cost of health insurance premiums is deductible to the payer, and the benefits received are tax-free, with certain exceptions for S Corporation Employees.

Health insurance is a part of general insurance which contributes about 29% of premium amongst all other sectors of general insurance. A plan that covers or shares the expenses associated with health care can be described as health insurance. These plans fall into commercial health insurance, which is provided by government, private and stand-alone health insurance companies.

WHY DO WE NEED HEALTH INSURANCE?

With the constant increasing prices of healthcare in our country, and with the ever rising instances of diseases, health insurance today is a necessity. Health insurance provides people with a much needed financial backup at times of medical emergencies. Health risks and uncertainties are a part of life. One cannot plan and get sick but one can certainly be prepared for the financial aspect. One of the ways to be financially prepared against uncertain health risks is by buying health insurance.

  1. Changing lifestyle: There are a plethora of reasons to have a health insurance policy in place. The tectonic shift in our lifestyle has made us more prone to a wide range of health disorders. Commuting, hectic work schedules, wrong eating habits, quality of food, and rising levels of pollution have increased the risk of developing health problems.
  2. Rising medical costs: The medical costs have dramatically risen lately. So, in case of a medical emergency, consumers end up spending their savings, which takes a toll on their future plans. Reports highlight that Indians primarily depend on their own savings when it comes to tackling health emergencies.
  3. Income tax benefit: Payments made towards health insurance premiums are also eligible for tax deductions under section 80D of the Indian Income Tax Act. Individuals up to 60 years of age can claim a deduction of up to ₹ 25,000 for the health insurance premium paid for themselves, or for their spouse or children. One can also claim another ₹ 50,000 as deduction if you buy health insurance for your parents aged 60 years and above.
  4. Coverage of pre and post hospitalisation expenses: Not only mainstream medical costs, but also the cost of OPD (out-patient department) expenses, diagnostic tests have also risen in recent times which have made it even more vital for one to buy a health insurance policy. It is noteworthy that the medical policies not only cover the hospitalisation costs but also the expenses incurred towards OPD and diagnostic tests before and after a stipulated time period as prescribed by the policy.
  5. Additional benefits: One also gets benefits such as ambulance coverage, coverage for day-care surgeries, coverage for health check-up and vaccination expenses under health insurance.
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HEALTH INSURANCE IN INDIA

The concept of Health Insurance was proposed in the year 1694 by Hugh the elder Chamberlen from Peter Chamberlen family. In 19th Century “Accident Assurance” began to be available which operated much like modern disability insurance. This payment model continued until the start of 20th century. During the middle to late 20th century traditional disability insurance evolved in to modern health insurance programmes. Today, most comprehensive health insurance programmes cover the cost of routine, preventive and emergency health care procedures and also most prescription drugs. But this is not always the case.

Healthcare in India is in a state of enormous transition: increased income and health consciousness among the majority of the classes, price liberalization, reduction in bureaucracy, and the introduction of private healthcare financing drive the change. Over the last 50 years, India has achieved a lot in terms of health insurance. Before independence, the health structure was in dismal condition i.e. high morbidity and high mortality and prevalence of infectious diseases. Since independence, emphasis has been put on primary health care and we made considerable progress in improving the health status of the country. But still, India is way behind many fast developing countries such as China, Vietnam and Sri Lanka in health indicators.

Health insurance, which remains highly underdeveloped and less significant segment of the product portfolios, is now emerging as a tool to manage financial needs of people to seek health services. The new economic policy and liberalization process followed by Government of India since 1991 paved the way for privatization of insurance sector in the country. The Insurance Regulatory and Development Authority (IRDA) bill, passed in Indian parliament, is the important beginning of changes having significant implications for the health sector.

Health Insurance is more complex than other segments of insurance business because of serious conflicts arising out of adverse selection, moral hazard, unavailability of data and information gap problems. Health sector policy formulation, assessment and implementation are an extremely complex task, especially, in changing epidemiological, institutional, technological and political scenario. Proper understanding of Indian Health situation and application of principles of insurance, keeping in view the social realities and national objectives, are important.

TYPES OF HEALTH INSURANCE IN INDIA

1. Individual Health Insurance

An individual health insurance is a type of health insurance plan wherein only one person can be covered in each plan. This means, both the health insurance premium and sum insured is dedicated for one person only and cannot be shared. This plan only offers coverage to the single individual insured in this plan. For example; If you’ve taken a plan of SI Rs 10 Lakhs, you alone will have up to 10 Lakhs to benefit from, for the entire policy period.

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2. Family Floater Health Insurance

A family floater health insurance is a type of health insurance plan wherein you and your family members share one plan. This means both your health insurance premium and sum insured would be shared amongst all members in the plan. This plan offers coverage to all family members insured in the plan. For example; if your plan SI is Rs 10 lakhs, then the entire family will have to share this amount for the policy period.

3. Group Health Insurance

Group health insurance is insurance provided to a formal group like employees working in an organization or members of society. Group health insurance can be also extended to people directly or indirectly related to the group. For instance, group health insurance for employees extends to their spouses, children, and even parents. Group health insurance is more beneficial for both employees as well as employers as they are more holistic in coverage, provide a lot more customization, and have no waiting periods involved. Not just that, as an employer, it would be far easier to manage a single group health insurance policy than tracking and reimbursing for individual plans. In addition to that, group health insurance is also a cost-effective option.

4. Senior Citizens Health Insurance

Senior citizen health insurance plans cover the elderly from various medical expenses including pre-existing diseases critical illnesses and even coronavirus. These health plans are especially designed for 60 years and above, to help them pay for their old-age related medical problems. Some of the unique benefits of senior citizen mediclaim policy include cashless hospitalization cover, day care expenses, pre-existing and diseases cover. The senior citizen mediclaim offers a range of coverage benefits to elderly people. It pays for the expense incurred and hospitalization surgery treatment, critical illnesses, accidental injuries and pre existing diseases. In the policy is renewed timely, it can cover you till the age of 80 years with lifetime renewal benefits.

5. Maternity Health Insurance

Maternity insurance is basically health insurance with maternity coverage. This insurance coverage for costs links to normal and c a s a r e a n deliveries for babies. Women employees in some organisations also get dedicated maternity insurance add- ons with their growth health policies. Maternity insurance comes with coverage for pre and post hospitalization cost with the letter being covered for up to 60 days from the discharge date. There is also coverage for the doctor’s consultation, surgeon’s fees , room and nursing costs and anaesthetic consultation.

6. Critical Illness Insurance

A critical illness policy is a special health insurance plan where a lump sum amount is paid out which is usually equal to the sum insured to the customer, in case there is any serious ailment like a straw cancer. Critical illness insurance is does a plan where you get a defined lump sum benefit which can pay for the cost of the critical element, treatment recuperation and other expenses. The full sum insured will be paid out by the insurance irrespective of the expenses and the hospital. There are serious illnesses covered under these plans including coronary artery Bypass surgery ,cancer, stroke ,heart attack ,paralysis and kidney failure and heart valve replacement along with organ transplants. Another feature of these plans is that the person insured will have to leave for 30 days in sucession post diagnosis of the critical illness for the claim to be made. There is a 90 day waiting period when the policy begins.

7. Top-Up Health Insurance

A top-up health policy is an additional coverage for people who have an existing individual plan or a mediclaim from the employer. It is for reimbursement of expenditure which arises out of single illness beyond the limit of the existing cover.

EMERGING LEGAL ASPECTS OF HEALTH INSURANCE

In order to make health insurance available to all, the Insurance Regulatory and Development Authority of India (IRDAI) recently introduced certain new laws in order to make health insurance more user-friendly.
To start with, a committee report that restricts exclusions under a health insurance policy has been introduced which are completely customer-friendly. Specifically, IRDAI issued a draft to introduce a standard health insurance plan for all with a basic sum insured of ₹50,000 to ₹10 lakh, as per the requirement of the customer.

The minimum age of entry for buying the policy will be 18 years and the maximum age will be 65 years. The plan will be indemnity-based with lifelong renewability option.

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Alternative medicine

IRDAI also mandated that the standard health insurance plan will also provide coverage for expenses incurred on alternative treatment such as AYUSH, which includes homeopathy, ayurveda, siddha or unani. The expenses, though, will completely be subject to fixed and standard sub-limits on the sum insured.

Another major proposal submitted is a four-year waiting period for inclusion of any ailment in the health cover against the current waiting period which is for two years. However, for some conditions such as hypertension, diabetes and cardiac problems, the waiting period must be reduced to 30 days. Moreover, in order to ensure that the people suffering from pre-existing diseases, including those with disabilities, get proper health insurance, the insurers will include permanent exclusions with due consent of the customer.

Also, insurers will not be allowed to question the claims of the policyholder on the ground of non-disclosure. However, this will only be applicable after eight years of continuous renewals by the policyholder. However, the policy would be entirely subject to all clauses, including sub-limits, co-pay and deductibles as mentioned in the policy contract.

Mental health

With the aim of making mental healthcare available to all, IRDAI has directed insurers to include mental illnesses to be included in all regular health insurance policies. IRDAI made it quite clear that insurers cannot deny coverage to policyholders who have used opioids or anti-depressants in the past. Also, insurers cannot deny coverage to people with a proven history of clinical depression, personality or neurodegenerative disorders, sociopathy and psychopathy.

It was often noted that a certain group of patients including cancer survivors, epilepsy patients and many others with specific permanent physical disabilities are denied medical coverage due to their severe health conditions.

Further, all health conditions and illnesses acquired after the issuance of policy, apart from those not covered under the policy contract (like infertility and maternity), will now be covered under the policy. There are numerous major ailments that cannot be permanently excluded.

Some of the important and major diseases that must be added to the list include Alzheimer’s, Parkinsons, AIDS/HIV and morbid obesity.
With all these changes in place, it is a good time to review your insurance portfolio and make sure that all health related risks are covered by the insurer.

RECOMMENDATIONS

As Health Insurance is in its very early phase, the role of IRDA will be very crucial. It has to ensure that this sector develops rapidly and benefit of insurance goes to the consumers. It has to guard against the ill effects of privatization. Unless privatization and development of health insurance is managed well it may have negative impact of health care, especially to a large segment of rural population in the country. If it is well managed then it can improve access to care and health status in the country rapidly. IRDA will have to evolve mechanism so that the private insurance companies do not skim the market by focusing on rich and upper class clients and in the process neglect a major section of India’s population.

In a view to ensure that the rural and less-developed areas do not fall prey to a step-motherly treatment in penetration of health business, the Regulator may ensure, in line with its rules jotted down for private life and non-life insurers, that minimum annual targets are given to the benefit providers so that at any given point in time, a decent portfolio of health coverage’s represent the rural sector IRDA should ensure and encourage different organizations and private insurers to develop products for the poorer segment of the community and if possible build an element of cross subsidy for them. The IRDA will have a significant role in regulating the health insurance sector and safe guarding the interests of the policy holders by minimizing the unintended consequences.

CONCLUSION

Health insurance is like a knife. In the surgeon’s hand it can save the patient, while in the hands of the quack, it can kill. Health insurance is going to develop rapidly in future. The main challenge is to see that it benefits the poor and the weak in terms of better coverage and health services at lower costs without negative aspects of cost increase and overuse of procedures and technology in provision of health care.

Author: SAMEER AFZAL ANSARI,
GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY , THIRD YEAR , SIXTH SEMESTER , BACHELORS OF ARTS AND BACHELORS OF LEGISLATIVE LAWS

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