Health insurance is a financial saviour but a lack of clear understanding of the terms and conditions can lead to some out-of-pocket expenses for the policyholder. When buying health insurance plans, people usually connect with insurance agents or sales professionals who are eager to close the deal and hence suggest plans depending on what the customer is willing to pay. If one cuts back on benefits and features, the plan becomes pocket-friendly and is thus easy for the agents to close the deal. Due to lack of awareness, people buy such plans and suffer when the claim arises. So, here are a few factors one should consider when buying health insurance
Deductible is on top of the list. It is an upfront cost you pay before health insurance covers you. So, if you have bought a health cover of ₹10 lakh with a deductible of ₹1 lakh, then you have to first pay ₹ 1 lakh out of your own pocket every policy year before your policy starts covering you. Deductible can be used to lower your premium and make your policy look affordable, but its dark sides are seen when the hospital bill arrives and brings financial stress if you haven’t planned for this payment well. To tackle this financial stress, it is better to avoid health insurance which covers you with no such condition attached. If you still need to add deductible, then keep some emergency fund aside before opting for it.
Next is copayment. It is a fixed percentage of the claim that you agree to pay from your own pocket, irrespective of the claim amount. Generally, it is 10%, 20% or 30% of the claim amount. Many health insurance buyers opt for copayment without understanding its real meaning. And when the claim arises and they have to pay a huge amount themselves, they think that they have been cheated by their insurer. In some cases, health insurers insist to have a copayment, or copay, option in the policy. This usually happens in cases where fresh policies are issued to senior citizens. But if there is an option to reduce your copay by paying an extra premium, please go ahead and do it if you can afford it.
Another aspect which we need to look into is sub-limits in the policy. This can be in the form of disease-wise limits or a cap on daily room rents. If there is a room rent capping in your health insurance policy, then you need to stay in a room which is covered under your policy to avoid out-of-pocket expenses. We have seen many cases where people upgrade their room, to get better facilities and at the time of discharge had to pay more than what they expected themselves to pay. Let’s assume that your health insurance covers a room of up to ₹5,000 per day. At the time of hospitalization, you decide to stay in a better room which costs ₹10,000 a day. You might be assuming that for a 5-day hospital stay, you need to pay only the difference in the room rent which is ₹ 25,000 for five days out of your own pocket. But in reality, your hospital bill including all other charges will also double up since you upgraded the room from a limit of ₹5,000 to ₹10,000 a day. Your policy will only pay all the other charges such as doctor’s fee, nursing charges, surgery cost, etc. that correspond to the room rent limit you are eligible for.
What you will end up paying on your own will be mind-boggling. In this case, if your total hospital bill comes to ₹3 lakh, you might end up paying ₹1.5 lakh on your own. So, it is very important to bear these two things in mind. Either buy a policy which has no room rent restriction or stay in a room which is fully covered under your health insurance policy.
Copays, deductibles, and room rent limits are a few key components of health insurance plans that determine your financial responsibility while you avail treatment in a hospital. Understanding these clauses and how they are used in your insurance plan can help you make an informed decision about your health insurance policy and budget for potential out-of-pocket expenses.
Nidhi Verma is founder and chief executive officer at Algates Insurance.
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Published: 21 Jan 2024, 10:13 PM IST