Health Insurance

CHA PTER

LEARNING OUTCOMES
The learning from this
chapter will enable students
get an understanding of health.
insurance and its need
knowledge of diferent types of health insurance
º learn about different health insurance schemes
ment of India offered by the govern
º get accustomed to things to be kept in mind
insurance while selecting health

INTRODUCTION
The health insurance sector in India is
in the non-life insurance industry. emerging as the fastest-growing sector
Ideally, after life insurance, the policy an indi
vidual should buy is Health Insurance. Agood health
the next best alternative to good health. insurance plan is perhaps
The rising cost of medical treatments,
hospital bills, and major illnesses are some of the factors
health insurance plans. A major illness can affect the driving the need for
physical pain but financially as well. Health insurance covers individual not just with
you
illness medical expenses and surgical expenses by chargingagainst major
a certain fee
known as a "premium". By paying a small amount as a
under the comprehensive health insurance plan, an individual premium for coverage
can save tens of
thousands of rupees of the savings. However, a substantial portion of the pop
ulation in India lacks financial protection for health insurance. This chapter is
Tormulated in such a way that it explains the meaning, need, and importance of
buying Health Insurance and different government-sponsored scheme to make
health insurance reach wider.

11.1
 11.2 UNIT 3 INVESTMENT PLANNING AND MANAGEMENT

NEED FOR HEALTH INSURANCE

Health policies provide financial protection to an individual by providing cover.
age and quality healthcare (in the network hospital covered under the policy)
as per the health insurance plan purchased. To cover yourself and the family
member under the family health insurance plan has become a necessity because
of a dramatic rise in health care prices that have prompted customers to insure
not only themselves but their family members as well against future medical
expenses and costs.
Since the healthcare cost can leave a person cash-strapped, older people who
are retired or will be retiring must get themselves insured under the health
policy. There are significant reasons why you need health insurance:
To protect savings
The increased cost of healthcare can dip into your saving or can nega
tively impact your family's financial needs in the future if, at the correct
time, health insurance is not bought smartly. Medical expenditure can be
better managed by buying a suitable health insurance plan. Some health
insurance product offers the feature of cashless treatment also which
eliminate the process of reimbursement as well.
Dramatically rising healthcare cost
An unforeseen illness can affect a person not just physically and mentally
but also financially. With the development of medical technologies and the
increase in diseases, the cost of treatment also increases. The exponential
increase in healthcare costs necessitates the need to purchase health
insurance. A fixed-benefit insurance plan facilitates financial protection
against critical diseases like cancer and heart disease.
" Medical expenses include various other costs
It is important to understand that medical expenses are not limited to
hospitals only. Other expenses are incurred along with hospital costs like
diagnosis tests,room rent, medicine, ambulance charges, doctor's consul
tation fee, operation theatre costs, medical check-ups, etc. These other
expenses in summation account for a substantial portion of healthcare
costs than even the cost of surgery. Therefore, it is advisable to be pre
pared for an unforeseen illness by making a certain amount of periodic
paymen to the health insurance company in exchange for future coverage
for medical expenses.

IMPORTANCE OF BUYING HEALTH INSURANCE IN INDIA

Medical emergencies are unforeseen and do not come with a prior warning.
Health insurance act as financial support during those times. The below points
state why buying health insurance is important:
 CH. 11 : HEALTH INSURANCE 11.3

Financial Security
Every individual wants a financially secure life. To achieve a financially
secure life, financial planning is done well in advance by saving for the
future, one of the prerequisites in a financial plan is getting insurance.
Ahealth insurance plan acts as strong financial support during medical
emergencies. It covers critical illnesses like cancer, heart ailments, etc
which could otherwise empty an individual's pocket. The other expenses
incurred concerning the hospital like ambulance and medicine expenses
and diagnostic tests are also covered.
Changing Lifestyle
The lifestyle chosen by people nowadays is increasing health problems.
These health problems are not simply mild fever, cold, or coughs. Chron
ic diseases like diabetes, heart ailment, and cancer are emerging to be
common nowadays. Therefore, having comprehensive health insurance
coverage is more crucial than ever for protecting your health.
Coverage for Expensive Treatments
Many health insurance policies in India cover the cost of expensive treat
ments, such as cancer treatments, organ transplants, and so on, which
can be very expensive without insurance.
" Early Detection and Screening of Disease
People sometimes ignore the initial symptoms seen in their body inten
tionally or unintentionally, However, with the increase in chronic ill1nesses
it is better to get a screening test done at the earliest to avoid developing
serious health problems. A health insurance plan offers an individual
facility to avail of free health annual check-ups from time to time so that
it can be treated effectively.
Rising Medical Costs
Healthcare is increasingly expensive and it is predicted that the treatment
cost will rise in the future with a rise in inflation, The other financial
instrumnents provide interest rates but are not sufficient to meet the high
treatment expenses coupled with inflation. Therefore, taking the security
of a health plan is much more affordable. It can cover a wide range ot
expenses from the cost of equipment to the cost of treatment, medicine,
diagnostic test, etc.
" Tax Exemption
benefits as financial
Health Insurance comes with an added incentive of tax
purchaser of
relief. Under section 80D of the lncome Tax Act, 1961, the
25,000 for self, spouse,
an insurance policy can claim a deduction of ?
 MANAGEMENT
PLANNING AND
UNIT 3 : INVESTMENT
11.4
liability of
dependent children. This helps in reducing the overall taxwith an an
or pertains to individuals
This amount of benefit
an individual.
60 years. In the scenario, where the individual or his famil..
of less than
age is more than 60 years old, the maximum deduction available
member's
the premium is paid for the parents
is 50,000. This benefit accrues if
Affordable Prices
same insurance bought
Health insurance bought in youth is better than the
probably healthier and
when you grow old. When you are young, you are affordable
therefore the health insurance company provides a plan at an
by the
cost. When the policy is bought at old age, the premium asked
insurer is more. Therefore, a considerate move is to buy the policy at
an increased
a young age, as the delay in purchasing will be borne as
premium cost.
It's important to note that it is worth researching and comparing before
signing up for the plan. Also, always read the fine print and ensure that
the policy meets your needs and that you understand the coverage and
exclusions.

HEALTH INSURANCE POLICIES

Health Insurance policies can be classified under two broad categories- Indem
nity Plan and Fixed Benefit Plan.

(A) Indemnity Plan

The Indemnity Health Insurance plan covers medical expenses up to the spec
ified sum insured in the policy. Under the Indemnity plan, an insured can file
multiple claims however the total amount that can be claimed should not exceed
the amount of the sum insured. or instance, if an insured person purchased
the health insurance plan with a sum insured of 10 lakhs, then, only medical
bills up to 10 lakhs would be covered. This category includes the
majority of
health insurance policies.
Types of Indemnity Plans
1. Individual Insurance Plans: The individual insurance
erage for the insured individual only which means the plan provides cov
covers the medical expenses of the insured insurance provider
individual only. This plan
covers medical expenses such as pre- and
Costs, room expenses, laboratory charges, andpost-hospitalization, surgery
for certain healthcare consultation fees. While
services, the insured has to pay a certain stated
amount known as a co-payment. It is suitable for
health risks. individuals with higher
 CH. 11: HEALTH INSURANCE
11.5

2. Family Floater Insurance Plans: These plans cover all the members of
the family in a single plan. So, in this case, a fixed sum assured will be
provided if any insured member of the family falls ill. The sum insured
is shared equally among the beneficiaries of the plan. If considering the
total amount of premium paid by each member of the family under the
Individual Insurance plan and by those family members in total under
Fanily Floater Insurance Plan, the Family floater insurance plan involves
a lower premiun. These plans include the policyholder, spouse, and chil.
[Link], it can provide coverage to extended family as welland one
single plan can include 15 relatives.
3. Senior Citizen Insurance: These insurance plans cover the medical ex
penses and treatment of individuals aged 60 years or more. It facilitates
cashless hospitalization at the network hospitals of the insurance company.
It covers hospitalization expenses, critical illness, pre- and post-hospital
ization expenses, and coronavirus treatment. Further, since senior citizens
offered
are more vulnerable to illness therefore these policies might be
at a higher premium rate than the policy for young individuals.
insurance is a kind
4. Group/Employee Health Insurance: Group Medical
of health insurance that is provided to a group of people. It is generally
members
provided by employers to their employees. The group includes extend
of any associations, companies, etc. Further, the employees can
an extra amount
the plan by including their spouse and children with
premiums due to
of payment. Group health policies are generally low in
the reduced risks involved. Some policies even cover pre-existing disease
contributory or
and maternity expenditures in the plan. The plan can be shared by the
non-contributory. Contributory is one where a premium is
in which the
employer and the employees and non-contributory is one
premium is entirely paid by the employer.
plans are specifically de
5. Maternity Health Insurance: These insurance
bearing one. The plans
signed for women planning to have a child or are
Such plans ofter
provide coverage for both the mother and the infant.
after the pregnancy.
coverage for expenses incurred before, during, and
mother's care expenses, and
It includes coverage for childbirth expenses,
to pregnancy. It is an add-on cover
any complications that may arise due Family Health Insurance. The wait
that can be chosen with Individual or
insurance ranges from 9 months to 6
ing period for all maternity health
maternity-related expenses incurred during
years. This means that any
claimed by women. Hence, it is advis
this period are not permitted to be
examine these parameters before choosing the plan. Further, the
able to
incurred for regular check-ups, consulting
plans do not include the cost
during pregnancy.
fees, diagnosis, or vitamins prescribed
 PLANNING AND MANAGEMENT
UNIT 3: INVESTMENT
11.6

(B) Fixed Benefit Plan insurance plan in which the insuran

is a type of health treatmen,
A fixed benefit plan amount for specific medical services or
company agrees to pay a set upon diagnosis of certain listed critical diseaee
amount
It pays a fixed lump sum cancer, heart ailment, etc. The pay-outs are
made under
and ailments such as
plan irrespective of the cost of treatment.
this
Plans
Types of Fixed Benefit cover
Insurance: Preventive health insurance is a plan made to
1. Preventive cancer. It facilitates earl,
prevention of the onset of any illness like
the taking steps
through screening and
identification and diagnosis of disease regular
minimize the risk factor of critical diseases. This plan provides
to
facility in anetwork hospital of the insurer. A blood test for
check-ups monitoring, cancer screening, HIV
sugar and cholesterol, blood pressure
the tests that are included in preventive
and genetic testing are some of
plans.
insurance is a type of health insurance
2. Critical Illness: Critical Illness
lump sum amount if he is diag
that covers the insured by providing a failure,
coma, paralysis, kidney
nosed with critical illnesses like cancer,
illnesses covered are listed in
strokes and heart attack, etc. The critical
if the insured has survived the
the policy document of the insured. So, sum amount to the insured
waiting period, the policy will pay the lump
necessary to use that amount
on the diagnosis of critical illness. It is not
other financial obligations
for medical bills only it can be used to cover
abroad, etc.
as well like debts, buying groceries, availing treatment
3. Personal Accident Insurance Plans: This plan offers complete finan
accidental death.
cial protection to policyholders for accidental injuries, offers coverage
and permanent total and partial disability. This means
treatment ot the
against all medical expenses and bills incurred for the if
injury. Some plans also provide financial assistance for up to 30 days,
in case of the
the policyholder cannot work due to an accident. Further, For
death of the policyholder, the sum assured is given to the beneficiaries.
purchasing the personal accident insurance plan, there is no requirement
for health documents. It can be purchased for individuals or groups. The
individual personal accident plan covers the policyholder's accidental
juries such as loss of sight, disability or even death., While Giroup Persond
Accident insurance provides coverage to agroup of people It is gener
purchased by organisations to offer coverage to employees aginst
risk of accidents.
 CH. 11: HEALTH INSURANCE 11.7

GOVERNMENT SPONSORED SCHEMES

aim to make
In India, several government-sponsored health insurance schemes
health insurance accessible to every person, regardless of income or social status.
detail:
Some of the schemes launched by India are discussed below in

Rashtriya Swasthya Bima Yojana (RSBY)

Rashtriya Swasthya Bima Yojana (RSBY) has been introduced by the Ministry of
Labour and Employment, Government of India in order to provide health insur
poverty line. The purpose
ance coverage to individuals and families below the obligations caused by
of RSBY is to protect BPL households from the financialhospitalization expenses
medical emergencies that need hospitalisation. It covers per family i.e.,
up to 30,000 per year, the scheme caters to five beneficiaries
beneficiaries. All pre-ex
the head of the family, spouse, and three dependent cashless attendance to all
isting diseases are covered under this scheme with
30 per annum as
covered ailments. The beneficiary is required to pay only ?contributed
amount is by the
a registration or renewal fee while the premium
Central and State Governments to the insurer.

Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY)

individuals and families from
This scheme offers health insurance coverage to
economically and socially disadvantaged sections of society. It provides coverage
up to 5 lakhs per family per year for secondary and tertiary hospitalisation. It
sections of society who
caters to the need of economically and socially deprived
could not afford timely treatment and access to quality health and medication
harause of a lack of financial resources. The premium is paid by the Central
State government in the stated ratio as specified by the Ministry of Finance.

adhan Mantri Suraksha Bima Yojana (PMSBY)

This scheme is offered to individuals between the age group of 18 and 70 years
with a bank account and who give consent to activate auto-debit on or before
May 31 for the coverage period from 1st June to 31st May on an annual renewal
basis. The primary KYC for the bank account would be Aadhar. For accidental
death and total disability, the risk covered under the plan is 2 lakhs, and for
partial disability, it is }1laklh. The account holder's bank account will be debited
once for the annual premium of 20 using the "auto-debit" feature. The scheme
is being provided by Public Sector General Insurance Companies or any other
General Insurance Company who are prepared to offer the product on similar
terms with the required approvals and tie-up with banks for this purpose.
11.8 UNIT 3: INVESTMENT PLANNING AND MANAGEMENT

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

This scheme is offered to individuals from the age group of 18 to 50 years with
a bank account and whogive consent to activate the auto-debit feature, The
primary KYC for the bank account would be Aadhar. The lite cover provided is
R2 lakhs for one year for the coverage period 1st June to 31st May and is re.
newable. Risk coverage under this scheme is for 2lakhs in case of the insured's
death, for any reason. The account holder's bank account will be debited once
for the annual premium of 436 using the "auto-debit" feature. The sche
is being offered by the Life Insurance Corporation and allother life insurers
willing to offer the product on similar terms with necessary approvals and ti
up with banks for this purpose.

Aam AadmiBima Yojana (AABY)

The Aam Aadmi Bima Yojana provides financial assistance to rural households
and individuals below the poverty line. It involves risk coverage arising due to
natural death/ accidental death, permanent total disability and partial disabil
ty. The scheme was launched on 2nd October 2007. The purpose of this social
security scheme is to help individuals who are not on a payroll such as unor
ganised workers. Only one member can be covered under this coverage and the
entry age of the member must be between 18 years and 59 years. In case of a
member's natural death, the sum assured payable to the nominee is Z30,000.
In case of accidental death, the nominee will receive 75,000. While, in case
of permanent partial disability and permanent total disability, the member of
AABY will receive 37,500 and 75,000 respectively.
Central Government Health Scheme (CGHS)
This scheme provides health insurance coverage to central government em
ployees, pensioners and their dependents. It covers a wide range of medical
treatments and hospitalization expenses. It offers various facilities such as the
cashless facility in empanelled hospitals and diagnostic centres, family welfare.
maternity and child health services. The ward to an individual under the network
hospital is given based on the basic pay of the central government employe.
For the monthly basic pay up to 47,600; 47,601 to 63,100 and 63,100
and above, the ward entitled is General, Semi-Private and Private respectively:
Universal Health Insurance Scheme (UHIS)
Universal Health Insurance Scheme has been implemented by the four pubi
sector general insurance providers with the purpose to provide health car?
access to families at or below the poverty line. This scheme provides medien
expenses reimbursement of up to 30,000 for hospitalisation which is tloate
among the entire family, accidental death coverage to the main member of e
 CH. 11 HEALTH INSURANCE 11.9

family of ? 25,000 and compensation on the loss of the earning member of the
family of 50per day up to 15 days. The premium is ? 200 for an individual,.
i 300 for a family of five and 400 for a family of seven.

COVERAGE OF HEALTH INSURANCE

There is a varied number of health insurance plans offered by conpanies. A
policyholder must choose the plan according to his own needs and requirements.
Health insurance protects an individual against medical illness and ailments.
Therefore, it is important to understand the coverage provided well before
opting for any particular plan and policy.
" Preventive Health Check-up: It covers one annual health check-up at
any lab of all insured members above the age of 18 years.
" Pre and Post-hospitalisation Expenses: Pre-hospitalisation expenses
are the expenses that are incurred 60 days before hospitalisation. For
instance, doctor's visits, lab tests, and medicines. Post-hospitalisation
expenses are expenses incurred up to 120 days after the discharge from
the hospital. These expenses are different from the expenses incurred
during hospitalisation of at least 24 hours, room rent, medical surgery.
etc.

" Ambulance Charge: The charges incurred by the insured member to

reach the hospital via roadways are covered. Almost all health insurance
plans cover this.
" Day Care Treatment: Specific health insurance plan covers expenses
incurred without hospitalisation of 24 hours. For instance, treatments
that are medically necessary like Cataracts, Chemotherapy, Ligament tear.
etc.

" ICU Fees: Specific health insurance plans cover all the 1CU fees.

CLAIM SETTLEMENT

(A)Documents Required to Process Claims

The specific documents required to process a claim for health insurance will
vary depending on the insurance company and the type of claim being made.
However, some common documents that may be required include:
Completed and signed claim form
" Original medical bills and receipts
Original discharge summary and other medical reports
" Medical certificate
 PLANNING AND MANAGEMENT
UNIT 3 : INVESTMENT
11.10

APolice Report in case

of accident claims
"
documents
" Insurance policy
" ID Proof, Address
proof

(B) Claim Process

Insurance comes to the rescue during unplanned or emergency hosnih.
Health iling of a claim is necessar,
0sation. Therefore, in such circumstanCes proper
Cashless and Reimbursement claims.
There are two tvpes of claims:
Cashless Claims
needs to be admitted to one
To avail cashless claim, an insured person
company. These claims
of the network hospitals listed by the insurance
to the
facilitate the claim settlement directly by the insurance company
hospital.
hospitalization
Here are the steps generally followed for the cashless
claim process:
the Insurance
(a) Policyholder or the family member should intimate
company in advance before hospitalisation.
(b) On hospitalisation, show the health card given by the insurance
company to the Third Party Administrator (TPA) of the hospital
along with the approval of the doctor.
coverage
(c) The insurance company or the TPA will verify the policy
and the preauthorization request.
() Once pre-authorization is granted, the policyholder can directly
approach the network hospital.
(e) The hospital will directly bill the insurance company or the TPA
for the treatment provided, rather than the policyholder paying
and then claiming reimbursement.
" Reimbursement Claims
In the reimbursement claim case, firstly you have to make a payment to
the hospitalisation and medical bills for the medical treatment availed
Later, it can be reimbursed by the insurance company.
(a) After paying the medical bills, the insured need to submit bills and
other required documents stated by the insurance company.
(b) Once it is received by the insurance company, it will review a
evaluate the information and determine if the treatment wa
covered under the policy. If the claim is approved, the insurance
cOmpany will reimburse the policyholder, either through cheque
or electronic transfer, as per the policy terms.
 CH 11: HEALTIH INSURANCE
11.11

(C)Time taken to settle the claim

It is typically seen that the average time taken by nost insurance companies
to process and scttle a claim is around 30 days from the date of receipt of all
required documents. However, in some cases, it may take longer, usually 45 days
from the date of receipt of all required documents if the insurance company
needs additional information or if there are disputes about the claim.

(D) Exclusions
Health insurance policies typically exclude coverage for certain types of expenses
or treatments. Here are a few examples:
(a) Pre-existing conditions
(b) Dental treatment/surgery if hospitalisation is not required
() Treatment relating to pregnancy or childbirth including the caesarean
section (it can be an add-on to health insurance)
(d) Convalescence, general debility, congenital external defects, V.D., inten
tional self-injury, use of intoxicating drugs/alcohol, AIDS, Expenses for
Diagnosis, X-ray or lab tests not consistent with the disease requiring
hospitalisation
(e) Non- allopathic treatment.
THINGS TO CONSIDER BEFORE BUYINGAHEALTH INSURANCE
Health is indeed the biggest asset of an individual. It provides a sense of se
curity to both the individual himself as well as to the immediate family. Thus.
selecting an appropriable health insurance policy is of utmost importance. Be
low are the key considerations to be kept in mind while browsing for suitable
health insurance:
It is better to start as early as possible because, with the changing life
style, one cannot predict when a medical emergency might arise. Moreover,
policies availed at an early age are much more affordable than at a later
stage. Also, as a person progresses to an older age, he/she becomes less
and less insurable. Thus, it is advised to start at the earliest and
top-up
the plan as it reaches expiry.
" Don't take health insurance for the sake of it. Give due consideration
to the sum assured and whether it is sutficient to cover the increasing
medical costs.
Avoid plans with co-pay and sub-limit. Co-pay and sub-limit are the
techniques adopted by insurance companies tolimithospitals tromcharging
unreasonable claims. In the case of a co-pay, a part of the hospital bill is
paid by the insured himsell and he balance by the insurance company
 AND MANAGE:MENT
11.12 UNIT 3: INVESTMENT IPLANNING

the sub-limit, the

the insured amount. Under
insurance
company put ofa limit on the amount of claims that can be made by the
irrespective

hospital under different treatments.

" It is advisable to go for family floaters.
It means that instead of
family it is hetter to u
for separate policies for each individual of the
a policy which covers the whole family as the premium burden is lessu
in the latter case.

Go for plans which provide a maximum no-claim bonus. Th provisire

of noclaim bonus means that if the insured doesn't make any claim durite:
the insurance tenure and renews the policy without any breakage, then:
certain percentage [Link] current sum assured will be automatically add.
ed to the sum assured of the renewed policy. This willhelp in covering
medical expenses inflation.
Do not hide any pre-existing diseases from the insurer at the time of
buying the insurance. It will greatly reduce the claim amount at the time
of a medical emergency.

" Last and most important of all,read the fine print. It is the responsibility
of an individual to read and understand all the terms and conditions of
the health insurance policy. One the insurance policy is bought; you are
bound to oblige to all the provisions mentions in the police.

REVIEW QUESTIONS
1. Describe the needs and importance of buying a health
insurance policy.
2. Explain the classification of a health insurance policy.
3. The government spent a significant amount on framing and
ing the schemes. Explain the implement
insurance.
government-sponsored schemes in health
4. What all coverages an individual shall
seek before buying a health in'
ance policy?
5. Explain how an individual can file a
claimto a health insurance cor
6. List the exclusions in a health insurance policy.

PRACTICAL EXERCISES
1. Mr Suraj is a daily wage earner:. He lives in a village whi
cleanliness proper sanitation systep se of thís, he
are burdened with freduenhedi 0d his tay
any health inggce