Some Suggestions for Improving Health Insurance Schemes

1. Introduction

Health Insurance in a narrow sense would be ‘an individual or group purchasing health care coverage in advance by paying a fee called premium.’ In its broader sense, it would be any arrangement that helps to defer, delay, reduce or altogether avoid payment for health care incurred by individuals and households.

The health insurance market in India is very limited covering about 10% of the total population. The existing schemes can be categorized as:

(1) Voluntary health insurance schemes or private-for-profit schemes;
(2) Employer-based schemes;
(3) Insurance offered by NGOs / community based health insurance, and
(4) Mandatory health insurance schemes or government run schemes (namely ESIS, CGHS).

In this paper we would deal with category 1 mentioned above and discuss with specific requirements of Senior citizens. After a brief discussion of various schemes presently available, some suggestions for improving Health insurance schemes are made. This is really a summarization of all positive points of many schemes.

2. Health Insurance needs of Senior Citizens:

Population of Hyderabad is estimated to be about 6.5 million and Andhra Pradesh currently has about 77 million population and at an estimated 8 per cent the number of older persons is likely to be about 6.2 million. The projections of the United Nations reported that Hyderabad would assume the status of becoming the 23rd largest mega city of the world by 2011 when the population is likely to cross the 10 million mark. There will be about 1 million people over 60 years in the city while in the entire country the number is likely to be over 110 million. The increasing population of elderly needs an urgent redressal mechanism to address issues associated with elders.

Requirements of seniors in Health Insurance are critical. They are prone to be involved in accidents more often than youngsters and adults and frequent hospitalization would be necessary. Diseases like Hypertension, Diabetes, and Heart problems are prevalent among the elders. Their income generating capacities dwindle drastically after retirement. Insurance costs are prohibitive and out of reach of most seniors. They require hospitalization, domiciliary treatments, accident and emergency care, more than casual nursing etc. They are prone to be neglected or sidelined or ignored as they tend to talk a lot, repeat same stories, and become self centered as far as their health is concerned. Psychiatric counseling for loneliness may also be needed. Loss of self-confidence due to neglect and abuse by near and dear might creep in.

All over the world medical treatment costs are going up. Same is the case of medical insurance premium rates. For instance Mediclaim policy for a family of four (one senior, one middle aged wife and two adult children) used to be 7000 in 2001. It is 12000 in 2004. Even among the 10% of the population who enjoy a semblance of health insurance, Government or Pre-retirement Employer meets expenditure in most cases under some group Insurance schemes.  Individuals in private sector and unorganized sector are worst hit by lack of good schemes.

The situation is similar around the world. For example in the USA , Retirees who receive health benefits from their former employers saw premiums shoot up an average of 25 percent this year, a new study says.  The study by the Kaiser Family Foundation and Hewitt Associates, showed a continued erosion of retiree health benefits among large employers.  Companies are requiring retirees to pay a larger share of premiums and other health costs. While continuing to provide coverage for people who have already retired, about 8 percent of large private employers took action in the last year to end all subsidized health benefits for future retirees, and another 11 percent said they would do so next year.

3.Voluntary health insurance schemes or private-for-profit schemes  

In private insurance, buyers are willing to pay premium to insurance company that pools people with similar risks and insures them for health expenses. The key distinction is that the premiums are set at a level, which provides a profit to third party and provider institutions. Premiums are based on an assessment of the risk status of the consumer (or of the group of employees) and the level of benefits provided, rather than as a proportion of the consumer’s income.

In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies (National Insurance Corporation, New India Assurance Company, Oriental Insurance Company and United Insurance Company) and the Life Insurance Corporation (LIC) of India provide voluntary insurance schemes. The Life Insurance Corporation offers Ashadeep Plan II and Jeevan Asha Plan II. The General Insurance Corporation offers Personal Accident policy, Jan Arogya policy, Raj Rajeshwari policy, Mediclaim policy, Overseas Mediclaim policy, Cancer Insurance policy, Bhavishya Arogya policy and Dreaded Disease policy)

3.1 Mediclaim

Of the various schemes offered, Mediclaim is the main product of the  GIC. The Medical Insurance Scheme or Mediclaim was introduced in November 1986 and it covers individuals and groups with persons aged 5 – 80 yrs. Children (3 months – 5 yrs) are covered with their parents. This scheme provides for reimbursement of medical expenses (now offers cashless scheme) by an individual towards hospitalization and domiciliary hospitalization as per the sum insured. There are exclusions and pre-existing disease clauses. Premiums are calculated based on age and the sum insured, which in turn varies from Rs 15 000 to Rs 5 00 000.

3.1 FAQ on Mediclaim.

As Mediclaim is the most popular scheme even now, we shall discuss this in detail.

It is best done by quoting an FAQ on this topic from Outlook Money: –
FAQ on Health Insurance:  Taken from Outlook Money ( http://www.outlookmoney.com/scripts/insufile.asp?file=FAQs-health.html )

What is sum insured?

The sum insured is the maximum cover an individual can take (in aggregate) from any of the four subsidiaries of the General Insurance Corporation (GIC). The insured will have to choose the sum insured, which can range from Rs 15,000 to Rs 5,00,000. The limit of liability for Domiciliary Hospitalization is about 15 per cent of the sum insured chosen.

What are the expenses covered under this policy?

The policy pays for expenses such as:

• Professional fees of the doctor, surgeon, medical practitioner, consultants.
• Cost of medicine, diagnostic medicine, blood, anesthesia, oxygen, chemotherapy, radiotherapy, cost of pacemaker, artificial limbs.
• Hospital accommodation
• Nursing expenses
• Diagnostic test expenses

Do I need a health check-up for obtaining the policy?

No, you can buy a policy without any check-up up to 60 years of age. After that age, you need to furnish reports on Urine Strip Test, P.P. Blood Sugar and E.C.G.

What kind of bonus is available under this policy?

The bonus available under this policy is known as “Cumulative Bonus”. It is given at 5 per cent on the sum insured progressively for every claim-free year. It is applicable on 10 claim-free years. But in case of a claim during any year, the earned cumulative bonus will be reduced by 10 per cent on the next renewal of the policy. However, the basic sum insured will remain the same.

What is Domiciliary Hospitalization under Mediclaim Insurance?

Mediclaim treatment for a period exceeding three days for such illness/disease/injury which in the normal course would require care and treatment at a hospital/nursing home but is actually taken whilst confined at home in India under any of the following circumstances:

• The condition of the patient is such that he/she cannot be removed to the hospital/nursing home
• The patient cannot be removed to hospital / nursing home for lack of accommodation therein

However the benefit of Domiciliary Hospitalization cover is not available in respect of expenses incurred for pre- and post-hospitalization treatment and expenses incurred for treatment for any of the following diseases:

Asthma

Bronchitis

Chronic nephritis and nephritis syndrome

Diahhorrea and all type of Dysenteries including Gastro-enteritis

Diabetes Mellitus and Insipidus

Epilepsy

Hypertension

Influenza, cough and cold

All psychiatric or psychosomatic disorders

Tonsillitis and upper respiratory tract Infection including laryngitis and pharingitis

Arthritis, gout and rheumatism

However when treatment such as dialysis, chemotherapy or radiotherapy is taken in the hospital/nursing home and the insured is discharged on the same day, the treatment will be considered to be taken under the Hospitalization Benefit section. The liability of the company under this clause is restricted as stated in the Schedule attached to the Policy.

Can my whole family be covered under a single policy?

Yes. In fact a family package discount of 10 per cent is also available.

Therefore it is a myth to say Mediclaim covers all?

YES, With Mediclaim what is not allowed is more than what is allowed. The following diseases are excluded from cover only for the first year of the policy:

Cataract, benign,

prostatic, hypertrophy

hysterectomy for menorrhagia or fibromyoma

hernia (v) hydrocele,

congenital internal diseases, fistula in anus, piles,

sinusitis and related disorders.

Injuries, diseases or medical states not at all covered under this policy

Cost of spectacles, contact lenses, hearing aids, dental treatment, surgery – unless it requires hospitalization, convalescence, or rest cure congenital external disease, sterility, venereal diseases, directly or indirectly related to AIDS, pregnancy and circumcision – unless it is necessary under certain circumstances alone.

Intentional self-injury, use of intoxicating alcohol, drugs are not covered.

3.2 Other Schemes of National Insurance Company:

Another scheme, namely the Jan Arogya Bima policy specifically targets the poor population groups. It also covers reimbursement of hospitalization costs up to Rs 5 000 annually for an individual premium of Rs 100 a year. The same exclusion mechanisms apply for this scheme as those under the Mediclaim policy. A family discount of 30% is granted, but there is no group discount or agent commission. However, like the Mediclaim, this policy too has had only limited success. The Jan Arogya Bima Scheme had only covered 400 000 individuals by 1997.

4. Entry of Private Sector into Health Insurance:

The year 1999 marked the beginning of a new era for health insurance in the Indian context. With the passing of the Insurance Regulatory Development Authority Bill (IRDA) the insurance sector was opened to private and foreign participation, thereby paving the way for the entry of private health insurance companies. The Bill also facilitated the establishment of an authority to protect the interests of the insurance holders by regulating, promoting and ensuring orderly growth of the insurance industry. The bill allows foreign promoters to hold paid up capital of up to 26 percent in an Indian company and requires them to have a capital of Rs 100 crore along with a business plan to begin its operations.

4.1 Players in the Private Health Insurance Sector

Currently following companies offer Health Insurance:

• Bajaj Allianz General Insurance Company Limited
• National Insurance Co. Ltd.
• ICICI Lombard General Insurance Co. Ltd.
• The Oriental Insurance Co. Ltd.
• United India Insurance Co. Ltd.
• Reliance General Insurance Company Limited
• Royal Sundaram Alliance Insurance Co. Ltd.
• TATA-AIG General Insurance Company Limited
• Cholamandalam MS General Insurance Co. Ltd

We shall now see some details of the schemes offered by Private companies:

4.2 Bajaj Allianz: Bajaj Alliance offers three health insurance schemes namely, Health Guard, Critical Illness Policy and Hospital Cash Daily Allowance Policy.

1) The Health Guard scheme is available to those aged 5 to 75 years (not allowing entry for those over 55 years of age), with the sum assured ranging from Rs 100 0000 to 500 000. It offers cashless benefit and medical reimbursement for hospitalization expenses (pre and post-hospitalization) at various hospitals across India (subject to exclusions and conditions). In case the member opts for hospitals besides the empanelled ones, the expenses incurred by him are reimbursed within 14 working days from submission of all the documents. While pre-existing diseases are excluded at the time of taking the policy, they are covered from the 5th year onwards if the policy is continuously renewed for four years and the same has been declared while taking the policy for the first time. Other discounts and benefits like tax exemption, health check-up at end of four claims free year, etc. can be availed of by the insured.

2) The Critical Illness policy pays benefits in case the insured is diagnosed as suffering from any of the listed critical events and survives for minimum of 30 days from the date of diagnosis. The illnesses covered include: first heart attack; Coronary artery disease requiring surgery: stroke; cancer; kidney failure; major organ transplantation; multiple sclerosis; surgery on aorta; primary pulmonary arterial hypertension, and paralysis. While exclusion clauses apply, premium rates are competitive and high-sum insurance can be opted for by the insured.

3) The Hospital Cash Daily Allowance Policy provides cash benefit for each and every completed day of hospitalization, due to sickness or accident. The amount payable per day is dependant on the selected scheme. Dependant spouse and children (aged 3 months – 21years) can also be covered under the Policy. The benefits payable to the dependants are linked to that of insured. The Policy pays for a maximum single hospitalization period of 30 days and an overall hospitalization period of 30/60 completed days per policy period per person regardless of the number of confinements to hospital/nursing home per policy period.

4.3 Royal Sundaram Group:

The Shakthi Health Shield policy offered by the Royal Sundaram group can be availed by members of the women’s group, their spouses and dependent children. No age limits apply. The premium for adults aged up to 45 years is Rs 125 per year, for those aged more than 45 years is Rs 175 per year. Children are covered at Rs 65 per year. Under this policy, hospital benefits up to Rs 7 000 per annum can be availed, with a limit per claim of Rs 5 000. Other benefits include maternity benefit of Rs 3 000 subject to waiting period of nine months after first enrolment and for first two children only. Exclusion clauses apply.  

4.4 Cholamandalam General Insurance:

The benefits offered (in association with the Paramount Health Care, a re-insurer) in case of an illness or accident resulting in hospitalization, are cash-free hospitalization in more than 1 400 hospitals across India . Recent improvements in the schemes provide for combining Medical insurance with Life Insurance as well. The Family Health Plan is a floater policy facilitating one to adjust the entire sum assured just for one of the four insured persons if need be. It covers pre-hospitalization (thirty days prior to date of admission; hospitalization – surgery, room rent, medicines, diagnostic tests etc) and post-hospitalization up to sixty days. 142 minor surgeries are covered.  Extra health covers like general health and eye examination, local ambulance service, hospital daily allowance, and 24 hours assistance can be availed of.  Pre-existing diseases are not allowed if it repeats within the first month of acceptance of policy – otherwise they are allowed. Maximum entry age is 50 years and children must be under 26 years.

4.5 ICICI Lombard: ICICI Lombard offers Group Health Insurance Policy.

This policy is available to those aged 5 – 80 years, (with children being covered with their parents) and is given to corporate bodies, institutions, and associations. The sum insured is minimum Rs 15 000/- and a maximum of Rs 500 000/-. The premium chargeable depends upon the age of the person and the sum insured selected. A slab wise group discount is admissible if the group size exceeds 100. The policy covers reimbursement of hospitalization expenses incurred for diseases contracted or injuries sustained in India . Medical expenses up to 30 days for Pre-hospitalization and up to 60 days for post-hospitalization are also admissible. Exclusion clauses apply. Moreover, favorable claims experience is recognized by discount and conversely, unfavorable claims experience attracts loading on renewal premium. On payment of additional premium, the policy can be extended to cover maternity benefits, pre-existing diseases, and reimbursement of cost of health check-up after four consecutive claims-free years.

Recently ICICI Lombard has come out with Health Insurance Product for Individuals and families. They have a new Family Floater policy which provides maximum benefits.

New Family Floater Health Plan is a comprehensive policy that covers pre-existing diseases and also offers free medical check-up. What’s more, it also covers maternity in addition to several add-on features like EMI payment options (presently available on ICICI Bank credit cards), recovery benefits, double benefits etc.  

No Claim Bonus- On renewal of your policy, you would be entitled to a discount equal to 5% of the premium amount, provided no claim has been made in the previous policy term.

Cashless Facility- Your family can avail Cashless Hospitalization at any of the network hospitals (more than 1100 tie-up hospitals all over the country).

Income Tax Benefits- The premiums payable is eligible for tax benefits as per Section 80D of the Income Tax Act

Most Comprehensive Cover
– Includes pre-hospitalization for 60 days and post-hospitalisation for 90 days.
– Includes some modern day care treatments which do not require 24 hour hospitalization

Following Table gives the waiting period and sum available under pre-existing illnesses:

Named Conditions	Waiting period	Option I 6 – 30 Yrs	Option II 31 – 50 Yrs	Option III 51 – 75 Yrs	Option IV 51 – 75 Yrs
Heart Conditions	3 months	75,000	50,000	50,000	25,000
Cancer	9 months	50,000	25,000	25,000	15,000
Tonsillitis / Sinusitis	5 months	5,000	5,000	5,000	5,000
Appendix	5 months	10,000	10,000	10,000	10,000
Hernia, Hyrocele, fistula & Piles	5 months	10,000	10,000	10,000	5,000
Stones in urinary & biliary tract	5 months	10,000	10,000	10,000	7,500
Arthritis, gout, rheumatism and orthopedic complaints	5 months	25,000	15,000	15,000	7,500
Cataract	9 months	7,500	5,000	5,000	3,000
Maternity	9 months	5000 year I, 15000 year II	5000 year I, 15000 year II	N.A	N.A

External Mobility Aids and Appliances

– For the first time in India expenses towards external mobility aids and appliances will be reimbursed subject to a limit of Rs. 10, 000.

Accupressure, Ayurvedic and Homeopathic Treatment

– Again, for the first time in India , Rs 5000 will be provided for these adjunct treatments. Provided the treatment is administered by a medical practitioner and is mandatory for the given illness

Recovery benefits
– In case of an unfortunate event, a person is hospitalized for more than 10 consecutive days, a lumpsum benefit of Rs. 10, 000 will be paid

Double Benefits
– If 2 people in the same family are hospitalized consecutively for a period for 5 or more days, a benefit of Rs 10,000 will be paid (provided both of them are insured under this policy).

Floater Cover
– Medical Expenses of the entire family are covered with in a single policy.

Equated Monthly Installment (EMI)
– Premium payment spread over 12 months
– No advance payment necessary.
– Option of upfront payment also available.

No Claim Bonus
– 5 % discount on renewal premium, in case no claim is made during the policy period up to a maximum of 25% cumulative discount.

Free & Compulsory Health Check-up
– Free compulsory health check-up will be done for all those applying for this insurance plan.

Hospital Daily Allowance
– In addition to hospital expenses, a daily hospital cash allowance of Rs 250 per day for 7 days will be paid to cover your daily expenses.

Nursing Allowance
– Rs 300 per day for 5 days, provided the medical practitioner recommends nursing post hospitalization.

Local Road ambulance Service
– In an emergency, cover is provided for expenses incurred on Ambulance services. The cover will be limited up to a maximum of Rs. 1000 with in city limits.

Rates of Premium for the New Floater policy is given below:

	Age below 30 Years		31- 50 Years		51-75 Years
Sum	3 Lakhs per Family	5 Lakhs per Family	3 Lakhs per Family	5 Lakhs per Family	Option I 2 Lakhs Floater Cover	Option II 2 Lakhs Floater Cover
Total Member- 1	7,800	11,100	12,350	15,300	14,600	11,350
Total Member- 2	8,800	12,300	13,700	17,000	24,800	18,300
Total Member- 3	10,800	15,800	17,650	21,460
Total Member- 4	12,800	19,200	21,550	25,900
( Above-mentioned rates are inclusive of 10.2% Service Tax )

5. Recent announcements

During the past couple of months a number of Health Insurance schemes have been announced by Banks, State Governments, NIAC etc. Brief mention is made of a few of these.

Syndicate Bank has introduced SyndArogya scheme with NIAC. It is supposed to benefit all bank customers. Details are yet to be released.

Andhra Bank has introduced schemes for the poor. The scheme for senior citizens, AB Jeevan Prakash Plus, has been introduced in alliance with Life Insurance Corporation of India and United India Insurance Company. It is a cumulative term deposit scheme for the senior citizens in the age group of 61-65 years providing insurance cover. The scheme offers free health insurance and free life insurance cover, where there is no need for medical examination for joining the scheme.

The depositors have two options – Rs 2 lakh and Rs 1 lakh.

ICICI Lombard has introduced low-cost health insurance for all the six lakh people residing in Anel Taluk in Karnataka. Policy covers 3 days of hospitalization, most kinds of surgeries and even subsidized diagnostic tests and low cost medicines.

Premiums vary from Rs 120 to 180 per year. This is a program of Biocon, ICICI Lombard and an NGO called Narayana Hrudalaya.

Kamineni Hospital Group has introduced Kamineni Arogya Bhima Insurance Card. Card Holders pay a premium ranging from Rs 850 per annum to Rs 2500 for an insurance cover of 50K to 2 lacs. The card is valid for a family of five members. Members may be of age anywhere from 3 months to 65 years. It is a floater policy meaning anyone member can avail the benefits for the entire assured sum if need be. There is no medical check up for persons below 49 years. Existing ailments are covered. Card valid for treatment only in Kamineni group of hospitals.

6. Suggestions and Ideas

In this last section let me list out a few suggestions for improving Health Insurance schemes or to make them attractive.

1. 1. As senior citizens cannot afford the cost of premiums, but they badly need some kind of Insurance or the other, premiums must not be based only with an eye on profit. They must be linked to cost of living Index. In a way if it is possible, the Government may subsidize premium. Or, by collecting heavier premiums during early years – when one is young and can afford to pay or somebody else — Say the employer – pays!!.
   2. Insurance policy must be made portable across various insurers. In most of the schemes pre-existing diseases are allowed after a certain period of continuation of policy.  This is called the waiting period. Supposing you stand to benefit in fourth year from pre-existing disease clause, insurer simply allows it to lapse without sending you any reminder. This is a standard practice in many companies. If the customer can move from one insurer to another without loss of continuity (of course by paying extra or a lower premium depending upon needs) all insurance companies may become competitive.
   3. Government of India should allow Income Tax Rebate say up to 25% of premium contributed. Presently the insurance premium up to certain limits is exempted Income Tax.
   4. Tax rebates must be available for ALL insurance companies registered with IRDA, and just for Mediclaim policy of Government companies.
   5. NGOs registered with IRDA must be permitted to market Health Insurance. Companies floated for this purpose may be treated as TRUSTs and exempted from Income Tax. They may be allowed to invest surplus funds just like charitable institutions.
   6. As a result of improvements on Healthcare, drugs, living habits etc, life expectancy has increased. Entry Age restrictions must be removed or liberalized. Presently, even though Medical Insurance is permitted to be active beyond 65, one must have started paying premiums much earlier.
   7. Diseases, which are not allowed, in insurance scheme, are often called Exception List. This list must be short and meaningful.
   8. Premiums must be reasonable. Though ICICI Lombard schemes offer best cover than all other schemes, it is also the costliest.
   9. A recent study in Delhi by WHO shows that among 1000 respondents, 37.3% had hypertension, 22% had diabetes. Out of these 22% did not know of their condition except through this survey. Regular Health Check ups are indeed beneficial to prevent serious problems later on. Insurance companies must encourage regular check ups and offer incentives in premiums for those who show proof of periodical health checks.
   10. Prevention is better than cure. For example, giving up smoking prevents health impairment in later years. In the USA , Medicare provides reimbursement of expenditure relating to quitting smoking.
   11. Insurance schemes must provide good discounts for the years in which there is no claim. Presently they are meager and meaningless.

• Senior Citizens associations, duly recognized by government ( for instance, insisting on affiliation or registration in FAPSCO) may be reorganized into Self Help Groups. Group Insurance schemes may be introduced for members of such associations.
• Special Schemes aimed at Senior Citizens should take care of illnesses like diabetes, heart problems, fractures, hypertension, prostate  hypertrophy etc.

(Paper presented during the seminar on “Affordable Health Insurance system for Seniors” conducted by Probus Club of Hyderabad & Association of Senior Citizens & FAPSCO, Hyderabad on 30^th January 2005, Hyderabad)