Today, many personal finance articles tell you that one of the biggest personal finance take-aways from Covid is that everyone ought to sign up for a generous health insurance cover. But they fail to include the statutory warning that must come with every such plug – “Don’t expect your hospital bills to be settled in full”.
Prompted by real-life experiences of many investors who had filed claims for Covid treatment, PrimeInvestor conducted a Twitter dipstick survey in the last week of May on the claims settlement experience of policyholders. The results were revealing. Of 103 respondents who had filed a Covid related claim, only 28% received reimbursement of 80% or more of their bills. A good 39% folks received less than half the claim they filed and 18% got just a 50-70% settlement.
But this claims experience is not unique to the pandemic situation. Partial settlement of claims in health insurance in India seems to be the norm rather than the exception. While Indian life insurers have substantially improved their claims settlement ratios to levels of over 95% in recent years (check out life claims data here), for health insurers, ratios of 70-80 % are the norm. Even these ratios (based on the number of claims settled), do not capture the fact that most health claims get only partly reimbursed, unlike life claims.
This is why we decided to kick off PrimeInvestor’s health insurance coverage with looking into one question: What reasons do health insurers give for rejecting claims or paying up only partly?
We thought one good way to find out would be to scour the rulings given out by the Insurance Ombudsman (the official who arbitrates on complaints filed by health policyholders against insurance companies). You can know more about the Insurance Ombudsman here.
While we’ve covered only a fraction of the cases here, these instances give us a good idea of the key safeguards that you ought to take while signing up for health cover, so that you can bump up your chances of getting your claim. We cover only indemnity plans (commonly known as mediclaim plans) that offer hospitalization cover here.
When filling out health insurance forms, we often wonder how much of minute detail we must go into about our many health conditions. Should we include niggling concerns or only disclose major surgeries or setbacks? Well, the case of Mr PT who had his mediclaim entirely rejected for non-disclosure about psoriasis (a common skin disease that leads to itchiness) tells us that, when it comes to health claims, molehills can become mountains!
Mr PT who had a Rs 5 lakh mediclaim policy underwent an angioplasty and a cataract operation and submitted bills of Rs 1.2 lakh and Rs 1.05 lakh with the insurer. When he filed his claims, the insurer on skimming through his records found that his treating doctor mentioned that he had a pre-existing disease (psoriasis) that he hadn’t disclosed in the policy proposal.
Mr PT claimed that he didn’t disclose it because he was diagnosed with the condition 30 years ago and was fully cured by then. But the insurer contended that Mr PT’s condition was chronic as his treating doctor had mentioned it. Had he disclosed this pre-existing disease in his policy form, they would not have issued his policy or renewed it. Mr PT’s psoriasis didn’t have anything to do with his two surgeries. Still, the ombudsman in this case settled the case in favour of the insurer on the grounds that Mr PT had misrepresented his health condition to the insurer by not disclosing details of his pre-existing disease.
Here's what this case shows:
- It warns us of the dangers of filling out health insurance forms in a sketchy fashion or leaving the form-filling to the agent.
- More importantly, it tells us not to leave out any health condition, however minor and irrelevant it may appear to us, while applying for a policy. To be able to recount such details and do the form-filling without any slip-ups, we may need to maintain very detailed and systematic health records over the years.
- You need to be aware that the non-disclosure clause in health policies is so strictly enforced that even if you personally did not understand a diagnosis made by your doctor, you are expected to reveal it in the application form. This argues for carefully filing away and preserving your doctor’s prescriptions whenever you are treated for any medical condition and for seeking a full explanation from the doctor when you don’t understand any part of his diagnosis.
Need for hospitalization
Are you a hypochondriac or just over-careful about your health? If you like to check into the hospital just to be sure, you need to be aware that your insurer may not to cover such ‘voluntary’ hospitalization. In indemnity health plans (commonly called mediclaim), one of the necessary conditions for reimbursement is that hospitalization should be necessary and recommended by the treating doctor.
The case of Mrs U whose claim was rejected by the insurer may be a good learning. Mrs U, whose husband had a family floater policy for Rs 8 lakh, was hospitalized at a multi-specialty hospital for removal of a bilateral lipoma (a fatty swelling between skin and muscle) below her armpit.
When the hospital presented a bill of Rs 96,000, the insurer repudiated the claim on the basis that this surgery did not require hospitalization at all and could be done on an outpatient basis. It also said that the x-ray, lab examination and other services billed by the hospital were unnecessary for Mrs U’s case. The surgeon also made a note in the case file that the patient suffered from a ‘phobia of tumour’ and underwent the surgical procedure to rule out cancer, implying that the removal or the hospitalisation was not strictly necessary. The ombudsman thankfully asked the insurer to pay up the claim because the treating doctor had advised in-patient treatment and hospitalization, validating Mrs U’s claim.
There’s also the case of Mr W, who having fractured three ribs on an accidental fall down a staircase (he held a mediclaim policy of Rs 1.3 lakh), saw his piddling claim of Rs 7,930 repudiated by the insurer. The claim was mainly towards a CT-scan, x-ray and lab investigations during his three-day hospitalisation.
The insurer argued that Mr W could have availed of these treatments as an out-patient instead of getting himself admitted. The ombudsman however held that as the doctor had advised complete bed rest for recovery, hospitalization was warranted and directed the insurer to cough up the sum. Then, there’s the case of Mr M, who after signing up for a Rs 75 lakh indemnity policy, found his claim towards a 13-day hospitalization for Covid with high fever and sore throat was summarily rejected by the insurer who claimed that as “he only received oral medication and IV, without any active line of treatment”, he wasn’t eligible for the cover and perhaps did not need hospitalization at all. The ombudsman ruled in favour of Mr M, after finding that the hospital’s line of treatment was in line with the Kerala Government’s Covid protocol.
The learning from these cases is that, if you are contemplating hospitalization for a planned surgery or health condition or even on an emergency, you must ensure first that you have a clear recommendation for hospital-based treatment in writing from your treating doctor, so that your insurer doesn’t baulk at the claim.
Policy fine print
The common perception is that the larger the health insurance cover you sign up for, the more you are assured that your claim will be settled in full. But this is far from the truth. No matter what your sum assured, your reimbursement depends entirely on whether your treatment meets the conditions tucked away in the fine print of your policy.
There’s the case of affluent Mrs T, who signed up for a Rs 50 lakh cashless individual indemnity policy, earned a bonus of Rs 25 lakh and had to undergo treatment for Covid-19 at the hospital for 15 days. Though she filed a claim for just Rs 94,262, the insurer approved less than half the sum and paid Rs 40,340. The insurer claimed that the rest of the bill was not reimbursable, as the hospital’s charges towards consultation, nursing, room stay, lab investigations exceeded government-approved rates for Covid treatment and thus were not allowable. The insurer finally agreed to up the settlement amount to Rs 50,227 after asking for detailed hospital bills.
There’s the case of 25-year-old A, whose father had a family floater plan, requiring treatment for dental injuries on account of a fall from a bicycle at his institute. The accident damaged eight teeth and required both suturing and tooth replacements, which A had done as an out-patient in two different hospitals. The insurer disputed the claim on the count that the second course of treatment involving a root canal or dental implant was not covered by the policy as it specifically excluded “Dental treatment or surgery of any kind unless necessitated by accident and requiring hospitalization.” The ombudsman however held that the insurer had to settle at least half the claim as it was due to an accident.
Then, there’s also the poignant case of Mr N who was admitted in the hospital for acute myocardial infraction and succumbed to his illness on the same day. Mr N had a health policy with a critical illness clause that offered benefits if the insured was diagnosed with certain critical illnesses. But the policy fine print said that this benefit was subject to the condition that the insured must survive the illness for 30 days from his diagnosis for the benefit to be paid. As Mr N suffered a heart attack the same day he was diagnosed, his dependents couldn’t claim the benefit.
Going by the ombudsman’s rulings, many indemnity claims tend to be only partly paid because the insurer believes that the hospital in-charge of treatment has padded up its bills. Many health policies include an in-built clause that allows only ‘admissible medical expenses’ that are in line with ‘reasonable and customary charges’ for a line of treatment to be claimed.
‘Admissible expenses’ are defined as the expenses ‘no more than what other hospitals in the same locality would have charged for the same treatment’. Many Covid-related claims seem to get only partly settled because the insurer excludes unreasonable charges for consumables such as PPE kits or room rent that exceeds government-determined rates while accepting the claim.
In ordinary policies, claims often get repudiated or partly settled because the policyholder appears unaware of conditions such as waiting periods for pre-existing diseases, or room rent sub-limits or co-payment clauses in the policy, which she has signed up for.
The above is not a comprehensive checklist of all the reasons that insurers may cite for not settling your health claim in full. But if you take care of the hygiene factors listed above, it would at least make sure that the insurer has an uphill task in whittling down your claim!
Note: We published a YouTube video recently about the differences between Covid insurance policies.