HEALTH INSURANCE CHAPTER 1: INTRODUCTION TO HEALTH INSURANCE Definition of insurance: A contract (policy) in which an individual or entity receives financial

protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

Health insurance Definition: A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured.

The term Health Insurance is used to describe a form of insurance that pays for medical expenses. It is used more broadly to include insurance that covers disability or long-term nursing or custodial care needs. In simple words, if you are covered under Health Insurance, you pay some amount of premium every year to an insurance company and if you have an accident or if you have to undergo an operation or a surgery, the insurance company will pay for the medical expenses. It takes just one visit to a hospital to make us realize how vulnerable we are. It is a tough ordeal if you are diagnosed with an illness and need to be hospitalized, no matter if you are rich or poor, male or female, young or old. The list of lifestyle diseases like heart problems, diabetes, stroke, renal failure, some cancers just seems to get longer and more common these days. Thankfully there are more specialty hospitals and specialist doctors but all that comes at a cost. The super rich can afford such costs, but what about an average middle class person? For an illness that requires hospitalization / surgery, costs can easily run into 5 figures. A Health Insurance Policy can cover such expenses to a large extent. Life is full of uncertainties. Risk lurks in every nook and corner of human life. In short, life is unpredictable. We need to be prepared for such circumstances. Leading a happy life, involves good planning and analysis for your personal health. Accidents do happen and you need to be prepared for such situations. In times of high health cost, you need to get covered for health risks.

Escalating cost of medical treatment today is beyond the reach of a common man. In case of a medical emergency, cost of hospital room rent, the doctor's fees, medicines and related health services can work out to be a huge sum. In such times, health insurance provides the much needed financial relief. Health insurance in India Health insurance has emerged as one of the fastest growing segments in the nonlife insurance industry with 30 per cent growth in 2010-11. For the purpose of regulation, health insurance companies are classified as non-life companies. Health insurances annual premium collections are over Rs 6,000 crores. Despite the high growth, the business is a huge challenge for insurers because of the high losses over soaring medical expenses. A survey showed massive dissatisfaction with the healthcare system in India. The interesting find about health insurance in India was how people perceived health insurance in India. It is seen as an instrument to protect savings. It is not aimed at protecting the asset that is health. This is probably common to developing markets, where people tend to place wealth ahead of health. On a macro level, very few households in India have contingency plans to meet their health expenses. Health risks in India are perceived differently than the western population. Prior planning in health issues is yet to be a major priority. At Nascent Stage With a reach of just about 2% of the countrys 1.2 billion population, India offers a huge potential in health insurance market. There are over 30 health insurance products in the category offered by both life and non-life insurers. While ICICI Lombard, Bajaj Allianz and Reliance General are some of the prominent general

insurers in the health insurance space, Apollo DKV, Star Health & Allied Insurance are the standalone players. The industry is also becoming tech-savvy with facilities to buy certain types of insurance products online and payment of premium through Internet. The insurance penetration level in India is very low when compared with the global average. This has brought about a plethora of distribution channels such as agents, brokers, banc assurance (bank insurance model) avenues, soliciting insurance through Internet or direct mailing. Many banks, financial institutions and insurance intermediaries saw a huge opportunity in marketing insurance products. Insurance brokers play a vital role in bringing together insurance companies and the insured, and their role assumes importance when a claim arises. The brokers are becoming professional risk managers. There is also a likelihood that banks would soon be allowed to sell products of more than one company, as regulations governing bank distribution are being reviewed by the regulator. The Need for health insurance Health treatment nowadays is very costly. More than the disease it is the cost of treatment that takes its toll. To get rid of health worries health / medical insurance is the answer. But over 70 per cent of these spends are out of pocket which leads to lot of hardships. According to a survey by NSSO (National Sample Survey Organization), 40 per cent of the people hospitalized have either had to borrow money or sell assets to cover their medical expenses. A significant proportion of population may have had to forego treatment all together. Hence it is imperative that the health insurance coverage is increased. Increasing incidence of lifestyle diseases such as obesity, diabetes mellitus, hyperlipidemia, hypertension and cardiovascular diseases to name a few, and rising
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medical costs, further emphasize the need for health insurance. Health insurance policy not only covers expenses incurred during hospitalization but also during the pre as well as post hospitalization stages like money spent for conducting medical tests and buying medicines. The cover will be to the extent of the sum insured. Second Biggest Segment Health insurance premium collections touched Rs 6,625 crores in 2008-09 compared with Rs 5,125 crores in the previous year. Health insurance is now the second biggest segment after motor which contributes nearly 40 per cent of the total premium. Health contributes about 22 per cent of the total premium. It is also emerging as a significant line of business for many insurance companies which now have products in health insurance. Apart from increased public awareness the growth in the segment was also being driven by the Central and State governments taking up large-scale insurance programmes such as the Rajiv Arogyasri Scheme in Andhra Pradesh and the Kalaignar Scheme in Tamil Nadu (which has now been scrapped with the new government introducing fresh health insurance inititatives). Life Insurance Corporation of India (LIC) is targeting to provide health cover to close to 10 million families in the 1 year of the operation / launch of the product and expects over Rs 4000 to 5,000 crores of revenues. An investment in health insurance scheme would be a judicious decision. The health insurance scheme could either be a personal scheme or a group scheme sponsored by an employer. Some of the existing health insurance schemes currently available are individual, family, group insurance schemes, and senior citizens insurance schemes, long-term health care and insurance cover for specific diseases.
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There are two major insurance companies in India namely: 1. Life Insurance Company of India.(LIC) 2. General Insurance Company of India.(GIC) The Life Insurance Corporation (LIC) offers: 1. The Asha Deep Plan: It provides cover for cancer, paralytic stroke resulting in permanent disability, renal failure and coronary artery disease where by-pass surgery has been done. It caters to people between 18 - 65 years. 2. Jeevan Asha: The Jeevan Asha policy is the other healthcare product offered by LIC. It is an open-ended scheme covering many surgical procedures. While LIC deals with insurance for life coverage only, the GIC deals with the other aspects of insurance, including health. Following are the main health policies offered by the Indian Insurance Companies. These policies are regulated by the General Insurance Corporation and are marketed by the four big insurance companies: United India Insurance Co Ltd., New India Assurance Co Ltd., Oriental Insurance Co Ltd. and National Insurance Co Ltd. The insurance policies offered by GIC are: 1. Medicaid. Insures against any hospitalization expenses that may arise in future. This policy is designed to prevent the insured from paying for any hospitalization expenses owing to illness or injury suffered by the insured, whether the hospitalization is domiciliary or otherwise.
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It covers the expenses incurred on the following: Room boarding expenses by the hospital nursing home,Nursing expenses, Operation theatre expenses, Surgeon, anesthetist, medical practitioner, consultants, specialists fees. Also for any cost of equipment like pacemaker, artificial limbs and charges paid for anesthesia, blood, oxygen, operation charge, surgical appliances, medicines and drugs, diagnostic material and x-rays, dialysis and chemotherapy, radiotherapy, and cost of organs etc. 2. Jan Arogya Bima Policy. It insures hospitalization or domiciliary hospitalization expenses incurred on medical or surgical treatment for any illness or disease (contracted after 30 days from the commencement of the policy) or injury. Any person in the age group of three months to 70 years can be insured under this. The risk insured include sudden illnesses like heart attack, jaundice, pneumonia, appendicitis, paralytic attack, food poisoning or accidents that require hospitalization. This insurance policy was designed for the lower income group of society and the common masses. The entire idea was to protect them from high costs of hospitalization. 3. Overseas Mediclaim Policy. Any person going abroad on holiday, business, study or employment can avail this policy. Coverage under the medical expense section of this insurance is intended for use by the Insured person in the event of a sudden and unexpected sickness or accident arising when the Insured is outside the Republic of India. 4. Personal Accident Policy.

The policy compensates an individual against death, loss of limbs, loss of eyesight, permanent total disablement, permanent partial disablement and temporary total disablement, solely and directly resulting from accidental injuries. 5. Critical Illness Policy. Critical Illness Policy is an exclusive benefit policy for individuals in the age group 20-65 years covering coronary artery surgery, cancer, renal failure, stroke, multiple sclerosis and major organ transplants like kidney, lung, pancreas or bone marrow. 6. New India Assurance Bhavishya Arogya. This caters to persons between 3 to 50 years. This policy is essentially to take care of medical expenses needs of persons in their old age. The policy provides for expenses in respect of hospitalization and domiciliary hospitalization during the period commencing from the Policy Retirement Age selected till survival. This is selected by the insured for the purpose of commencement of benefits in the policy.

OBJECTIVES To study about health insurance in general To examine the type of health insurance and benefits To analyze the premium calculation of health insurance and tax benefits

RESEARCH METHODOLOGY Primary data Informal interview as been conducted with financial advisory

Secondary data Information collected from broachers, pamphlets, handbooks, websites, etc

CHAPTER 2: IMPLICATION OF PRIVATIZATION OF HEALTH INSURANCE

The privatization of insurance sector and constitution of IRDA envisage improving the performance of state insurance sector in the country by increasing benefits from competition in terms of lowered costs and increased level of consumer satisfaction. However, the implications of the entry of private insurance companies in health sector are not very clear. There are several contentious issues pertaining to development in this sector and these need critical examination. Role of private insurance varies depending on the economic, social and institutional settings in a country or a region. Critics of private insurance argue that privatization will divert scarce resources away from the pool, escalate health costs, allow cream skimming and adverse selection. According to this view, private health insurance largely neglects the social aspect of health protection. In the contrast, supporters of private health insurance claim that private insurance can bridge financing gaps by offering consumers value for money and help them avoid waiting lines, low quality care and under the table payments-problems often observed when households can use public health facilities for free or participate in mandatory social insurance schemes. Both the arguments are correct in the sense, private health insurance can be valuable tool to compliment or supplement existing health financing options only if they are carefully managed and adapted to local needs and preferences. India, with relatively developed economy and a strong middle class population, offers most promising environment for private health insurance development. Currently, private health insurance plays only a marginal role in health care systems but it is gradually gaining importance. Private health insurance is certainly not the only alternative or the ultimate solution to address alarming health care
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challenges in India. However, it is an option that warrants- and already receivesgrowing consideration by policy makers in the country. Thus the question is not if this tool will be used in the future but whether it will be applied to the best of its potential to serve the needs of the countrys health care system. Health insurance products from some private insurance companies: 1. Bajaj Allianz Health Guard Covers individuals between 5 to 55 years. Children below 5 years can be insured if the parents are concurrently insured with the company. It provides cashless facility across various hospitals across India. Herein pre-existing illness and injuries are covered in the year of cover, if the insured renews his policy consecutively for 5 years. 2. Royal Sundaram Health Shield Gold Covers individuals between 5 to 55 years. From 91 Days to 75 years and also persons above the age of 55 years are covered as a part of family and not on individual basis. All in hospitalization expenses are covered (period of stay in hospital should be more than 24hours). Pre hospitalization expenses are covered for a period of 30 days & post hospitalization for 60 days. Under this policy preexisting illness and injuries are covered in the 6th year of cover, if the insured renews his policy consecutively for 5 years. Maternity treatment charges are covered upto the extent of Rs. 20,000. These include expenses incurred in hospital/ nursing homes as in -patient in India. 3. Birla Sun Life Birla Sun Life Insurance is the coming together of the Aditya Birla group and Sun Life Financial of Canada to enter the Indian insurance sector. The Aditya Birla
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Group, a multinational conglomerate has over 75 business units in India and overseas with operations in Canada, USA, UK, Thailand, Indonesia, Philippines, Malaysia and Egypt to name a few. 4. HDFC Standard Life HDFC Standard Life Insurance Co. Ltd. is a joint venture between HDFC Ltd., Indias largest housing finance institution and Standard Life Assurance Company, Europes largest mutual life company. 5. ICICI Pru ICICI Prudential Life Insurance is a joint venture between the ICICI Group and Prudential plc., of the UK. ICICI started off its operations in 1955 with providing finance for industrial development, and since then it has diversified into housing finance, consumer finance, mutual funds to being a Virtual Universal Bank and its latest venture Life Insurance. 6. Om Kotak Mahindra Established in 1985 as Kotak Capital Management Finance promoted by Uday Kotak the company has come a long way since its entry into corporate finance. It has dabbled in leasing, auto finance, hire purchase, investment banking, consumer finance, broking etc. 7. Tata AIG General Insurance Company. The Tata AIG joint venture is a tie up between the established Tata Group and American International Group Inc. The Tata Group is one of the largest and most respected industrial houses in the country, while AIG is a leading US based

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insurance and financial services company with a presence in over 130 countries and jurisdictions around the world. 8. Max India. Max India Limited is a multi-business corporation that has business interests in telecom services, bulk pharmaceuticals, electronic components and specialty products. It is also the service-oriented businesses of healthcare, life insurance and information technology.

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CHAPTER 3: TYPES OF HEALTH INSURANCE There are various types of Health insurance plans, depending upon the need and requirement of the user. Almost all the insurance companies dealing with healthcare insurance, provide the following insurance plans: 1. Individual Mediclaim: The simplest form of health insurance is the Individual Mediclaim policy. It covers the hospitalization expenses for an individual for up to the sum assured limit. The premium is dependent on the sum assured. It is a cover which takes care of medical expenses following Hospitalization / Domiciliary Hospitalization of the insured in case of sudden illness, accident and any surgery which is required in respect of any disease which has arisen during the policy period. This cover is a hospitalization cover and reimburses the medical expenses incurred in respect of covered disease / surgery while the insured was admitted in the hospital as an inpatient. The cover also extends to pre- hospitalization and posthospitalization for periods of 30 days and 60 days respectively. Example: If a family has 4 members you can take an individual cover of Rs. 2 lakhs each for each member. Each member is now covered for 2 lakhs. If all the 4 members are hospitalized, all 4 of them can get expenses recovered up to Rs 2 lakhs each. All the 4 policies are independent. 2. Family Floater Policy: Family Floater Policy is an enhanced version of the mediclaim policy. The policy covers each family member and the entire familys expenses are covered up to the sum assured limit. The family floater plans premium is less than the separate insurance cover for each family member.
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Example: If a family of 4 takes a family floater policy of Rs. 8 lakhs, they can claim medical expenses upto Rs. 8 lakhs in that policy year. If one person is hospitalized and claims Rs. 3 lakhs, it will be paid, but they will be left with only Rs. 5 lakh worth of medical expenses that can be reimbursed in that year. The next year, the policy will start with a fresh Rs. 8 lakhs. So, in many ways the family floater plan offers flexibility in terms of utilizing the overall insurance coverage among the group. 3. Unit Linked Health Plans: Health Insurance Companies have introduced Unit Linked Health Plans which combine health insurance with investment and pay back an amount at the end of the insurance term. The returns are dependent on market performance. These plans are new and still in development phase. People who can handle market linked products like ULIP and ULPP are only recommended to take this plan. For a number of reasons, it is advisable to stay clear of unit linked health plans. Treat insurance purely as an expense. Opt for an Individual Mediclaim policy if you are single and opt for a Family Floater policy if you have family. Health insurance premiums come under tax exemption under section 80D for a maximum of Rs.15,000/-. 4. Group insurance: Group medical insurance offers insurance cover to a group with a common trait it may be employees of a company, members of a club or an association or members of a co-operative society etc. Many employers now provide medical insurance as a perquisite to their employees. Premium under group insurance is less than a standalone individual insurance policy. Group insurance is more flexible and provides
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more benefits. It is a quick and effective way to extend cover to a large chunk of population. Group insurance ensures that all the members of the group are insured regardless of their health. Thus, even those with health problems, who might not be eligible for individual insurance, can be covered. 5. Overseas Health Insurance Policy: An Overseas Health Insurance policy provides cover for medical expenses incurred abroad for treatment of illness and diseases contracted or injury sustained during the insured period of overseas travel. Anyone who is traveling abroad for business or pleasure or for educational purposes should have this policy.

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Classification of insurance

As depicted in the classification chart, health insurance is one of the constituents of Non-Life/General Insurance sector in India.

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Importance of health insurance: The importance of Health Insurance can never be undervalued for the following reasons: Provides security to human life which is of prime importance to any individual. Closely bonds Insurance Companies, Hospitals, Policyholders and TPAs together for the benefit of Indian masses. An answer to the solution of uncertainties and risks that is prevalent and ever pervading in human life. Prevention and minimization of unforeseen losses. Access to quality healthcare. Means of savings and a safe investment option. Provides financial stability in life. A tax-saving instrument that significantly contributes in reduction of tax deductions. Reduces tensions and stress caused on account of hospitalization. Greatly contributes in leading a stress-free life.

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Tax benefits: Sec 80D covers Health Insurance. You can get exemptions of: Up to Rs. 15,000 paid for self + spouse + children Up to Rs 15,000 paid for Parents (Rs 20,000 if parents are senior citizens). So in total if you pay your health insurance and your parents health insurance premiums, you can save up to maximum of Rs.35,000/-. Note: If you take Health Insurance riders with Term Insurance like Critical Illness cover, the extra premium paid for that will actually be covered under Sec 80D and not under Sec 80C.

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CHAPTER 4: HEALTH PLAN OF GENERAL AND LIFE INSURER

Several life insurance companies have of late plunged into the health segment, which till recently was dominated by general insurance companies. Among others, ICICI Prudential has launched Hospital Care and Crisis Cover and Bajaj Allianz, the Care First plan. Life Insurance Corporation, too, plans to roll out products soon. But, are these products any different from those offered by the general insurance companies, popular as med claim policies?

comparison Life Insurer Health

General Insurer

between

Insurance offered by a Life and

General Nature contract

Insurer of the

Period of coverage

Contracts are usually made Contracts for a long period.

are

usually,

though not invariably, made for a short period of one year or less and at the end of that period are renewable by mutual consent of the

insurer and the insured. Obligation of the Once the contract has been At each renewal there is an insured made, the insured is generally onus on the insured to

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under no obligation to report observe utmost good faith in any changes of circumstances informing the insurer of any affecting the risk insured changes in circumstances unless a change in the actual which may affect

nature of the contract is assessment of the cost of the requested by the insured. Premiums risk borne by the insurer.

The premiums for a life The premiums may vary at assurance contract remain each renewal to reflect fixed over the term of the changes in individual contract circumstances

Benefit payout

Pays a lump sum, irrespective Pays claims according to the of whether the policyholder hospital expenses that a has incurred those expenses person incurs, depending, of on his hospital stay course, on the amount of cover that a policyholder has taken.

Valuation Liabilities

of A deterministic approach (the A stochastic approach (with life & morbidity table) may statistical models more be adequate for the valuation complicated than the life and of life assurance liabilities morbidity table) has to be considered insurance for general

Taxation

Portion of premium paid in Premium paid in respect of respect of health insurance health insurance policies is covering the assessee as well
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as any member of the family deducted

from

taxable

is deducted from taxable income under section 80D income under section 80D

Advantages of Health insurance offered by Life insurer: Because of the long term nature of the plans, the policy holder can plan in advance his future medical/care expenses. But it is not so under General insurance. Since, the general insurance policies are subject to renewal every year, if the policy holder has been making several claims and is considered a risk, the general insurance company may deny renewal or renew it for a much higher premium. Advantages of Health insurance offered by General Insurer: Though a lump sum amount is paid by life insurers and is of long term nature, this comes with a cost. They charge bigger premiums compare with the General insurers. In addition, most general insurance companies offer medical charges up to 30 days before a person is hospitalized and pay the claims if a person has been undergoing treatment at home - also called domiciliary hospitalization. The life insurers seem to lack this facility at this point in time.

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Difference between health insurance and critical illness policy: Basic features: Health insurance is a comprehensive plan that covers hospitalization expenses however; some Private health insurance providers cover maternity benefits, OPD expenses also. On the other hand critical illness policy as the name suggests covers only life threatening diseases as listed by the health insurance provider. For instance, multiple sclerosis, cancer, kidney failure, blindness, CABG (Coronary Artery Bypass Graft surgery etc) Nature of insurance: Health insurance or mediclaim is an annual contract where the policy must be renewed every year. On the other hand, critical illness policy is taken for a long period of time, usually 10 -20 years. Benefits: Health insurance or mediclaim is a plan where the insured individual can reimburse the expenses incurred in hospitalization on producing the bills. The insured individual can also opt for the cashless facility at the network hospital and the hospital bills are directly settled by the insurance company or the TPA. The health insurance policy can be renewed every year and the policy continues even after you have made a claim. Critical illness is a defined benefit policy where the insurance provider pays out a tax free lump sum once the insured individual is diagnosed with a pre specified critical illness. The advantage of the critical illness policy is that hospitalization is not necessary for critical illness cover, diagnosis is enough. The insured individual does not have to submit original bills and claims can be made with photo copies. The insured
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individual receives the entire amount at once and can spend the amount way he likes. However, the flip side is that it is a onetime payment, which results in the termination of the policy when there is a claim. Coverage: The major difference between a health insurance policy and a critical illness policy is that scope of coverage in a healthcare insurance policy is quite wide whereas critical illness policy is restricted in coverage. Heath insurance takes care of hospitalization due to accidents or various ailments. Critical illness policies are restricted in coverage. Critical illness policy covers around 6 to 12 diseases. However, the critical ailments covered under the policy differ from insurer to insurer. It usually covers critical illnesses such as cancer, heart attack, diabetes, kidney failure, multiple sclerosis, major organ transplant diagnosed after buying the policy. It also takes care of circumstances not covered under a health insurance such as postoperative care, temporary loss of pay, travel, and boarding. It is important to note that this plan strictly adheres to the conditions laid in the policy wordings and offers cover under the specific ailments mentioned in it. Waiting Period: Health insurance policies have a waiting period during the first 30 days from the policy inception, except the ones that are accident related. Pre existing ailments are covered after 1-4 years of continuous coverage with the insurance company. Critical illness policy have a waiting period of 3 months i.e. there is no cover for those diagnosed with any critical illness during the first 3 months of buying the plan.

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The cover is generally not allowed if the insured individual expires within 30 days of the illness being diagnosed. Who should buy the policy? Health insurance policy is advised to everyone young or old. It is suggested that you buy the policy early in life to derive its various benefit. It is advisable to buy a critical illness cover after you cross 35 or earlier if there is a history of critical illness in your family. Which is better health insurance or critical illness policy? Both the policies are different in nature and hence cannot be compared. One policy cannot be a substitute of the other. However when taken in conjunction they can boost ones health insurance cover. While a health insurance helps to foot medical bills a critical illness cover would shield your finances from any major illnesses. Thus, health insurance policy as well as critical insurance policies have their own advantages ideally one should buy a health insurance and a critical illness policy to avail a wider coverage and secure their future against unanticipated medical emergencies.

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Essential guidelines for availing individual health policy: The following points should be borne in mind while purchasing an individual health policy: Understanding the policy coverage: The policyholder should be able to clearly comprehend the extent of medical coverage being offered under the particular health insurance policy before opting for it. The individual should check whether pre-existing diseases and its resultant complications are covered or not, as well as the extent of the coverage under that particular policy. Keeping an eye for medical expenses that are not covered/re-imbursable under the policy: Before availing a particular health insurance policy, the prospective policyholder should note the medical expenses not covered under that Insurance policy. It is important to note that deductibles are a part and parcel of any insurance coverage and the expenses incurred as part of the medical treatment need to be borne by the individual. Generally this list includes aprons, sterilization charges, gloves, Dettol, gloves etc. To understand whether it is a co-insurance policy: Before availing a health policy, the prospective customer should understand whether it is a co-insurance policy or not. It is advisable to get an individual health insurance policy with a co-insurance payment option. The maximum amount does not exceed 15% of the entire medical coverage for a particular disease.

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 Understanding and updating oneself about expiry period regardin g the policy cover: An individual health insurance cover entails regular premium payments on a monthly, half yearly or annual basis before the expiry of a particular policy. Nonpayment of premium within the stipulated time results in the lapsing of the policy with subsequent break in the policy coverage of the concerned individual. Even though the concerned individual holds policy with an Insurance company for many years together, a break in the policy coverage (which generally does not exceed more than 15 days) is treated as a fresh policy cover.

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CHAPTER5: HEALTH INSURANCE CLAIM SETTLEMENT PROCESS In most cases, the Insurance companies appoint a Third Party Administrator (TPA) for claims processing. That means once the health insurance policy is sold, the insurer passes on the complete details to the TPA. In case of a claim, the insured has to get in touch with the TPA for all verification and formalities. Two Ways By Which Health Insurance Claims Are Settled: Cashless: For planned hospitalization at authorized network hospitals, the TPA has to be notified in advance for availing cashless treatment or within the stipulated time limits for emergencies. The insurance desk at hospitals will generally help with all the paper work. The TPA has to approve the claim amount and the hospital settles the amount with the TPA / Insurer. There will be exclusions which will have to be settled directly at the hospital by the insured. Reimbursement: Reimbursement facility can be availed at both the network and non-network hospitals. The hospital bills are directly settled at the hospital after the insured avails the treatment. The insured can then claim reimbursement for hospitalization by submitting relevant bills / documents for the claimed amount to the TPA. The TPA mode of claims settling has its own problems. The TPA is incentivized to limit insurance claims and they are not the ones who sell the policy. There are many cases where the insured had a tough time to claim for his hospital expenses. So before taking a health insurance policy, check who the TPA is and how good they are when it comes to claims processing. Internet search and a friendly chat with the hospital staff can give you good insight on the insurer / TPA.
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THIRD PARTY ADMINISTRATION The Third Party Administrators are intermediaries who connect insurance companies, policyholders and health care providers. The Insurance Regulatory Development Authority (IRDA) selects the TPAs on the basis of strict professional norms. The Insurance industry in India has experienced a sea of change since the opening up of the sector for private participation. With a plethora of companies entering the foray in the near future, the health insurance sector is surging forward and is poised for a phenomenal growth. Health insurance is an important mechanism to finance the health care needs of the people. To manage problems arising out of increasing health care costs, the health insurance industry had assumed a new dimension of professionalism with TPAs. Further, the uncertainty related to a medical condition increases the need for a health insurance for all the citizens. Health insurance is any health plan that pools resources up front by converting unpredictable medical expenses into a fixed health insurance premium. It also centralizes funding decisions on health needs of a policyholder. This covers private health plans as well as mediclaim policies. While call center facilities and personalized financial planning tools are some of the innovative trends, experienced in the products front, the best thing to happen on the service front is the introduction of third party administrators as they serve as a vital link between insurance companies, policyholders and health care providers.

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TPAs were introduced by the IRDA in the year 2001. The core service of a TPA is to ensure better services to policyholders. Their basic role is to function as an intermediary between the insurer and the insured and facilitate cash less service at the time of hospitalization. A minimum capital requirement of Rs.10 million and a capping of 26% foreign equity are mandatory requirements for a TPA as spelt by the IRDA. License is usually granted for a minimum period of three years. Ideally, The TPA functions by collaborating with the hospitals in order for the patient to enjoy hospitalization services on a cashless basis. The specialized functions of the TPA include:

The TPA keeps and maintains all the records of medical insurance policies of an insurer.

The TPA issues identity cards to all the policyholders. The policyholders will have to show the identity cards to the hospital authorities before availing any services from the hospital.

In case of a claim, policyholders will have to inform the TPA on a 24 hr toll- free line provided by them

After informing the TPA, the policyholder will be directed to a hospital where the TPA has a tied up arrangement. However, policyholders have the option to be admitted at another hospital of their choice in which case, payment will be on reimbursement basis.

TPA pays for the treatment; they issue an authorization letter to the hospital for the admission of the policyholder in the hospital.

At the point of discharge, all the bills will be sent to the TPA while they are tracking the case of the insured at the hospital.
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TPA makes the payment to the hospital. TPA sends all the documents necessary for consideration of claims, along with the bills to the insurance company.

The insurance company then reimburses the TPA.

The challenges perceived by hospitals and policyholders in availing services of TPA are

Policyholders mostly rely on their insurance agents Low awareness among policyholders about the existence of TPA. Policyholders have very little knowledge about the empanelled hospitals for cashless hospitalization services.

In settling of their claims by the TPAs, the health- care providers experience delays as the TPAs insist on standardization of medical services/ procedures across providers.

Hospital administrators perceive significant burden in terms of effort and expenditure after introduction of TPA.

Hospital administrators foresee business potential in their association with TPA in the long run though as of now there is no substantial increase in patient turnover after empanelling with TPAs.

Future role In the fast developing health insurance sector the TPAs have crucial roles to play in the future. Some of them are

Medical examination services for life insurance policies and overseas mediclaim policies

Record verification under adjustment policies

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Documentation and policy issuing. Co-insurance recovery services for both premiums and claims Follow up of recoveries from reinsurance companies Servicing of motor policies Arbitration services Inspection and assessment of risk prior to issuing the policy

Developing viable mechanisms would help TPAs to strengthen their human capital and ensure smooth delivery of their services in an emerging health insurance market.

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CHAPTER 6: OMBUDSMAN In 1999, an act was enacted in the Indian Parliament to specifically deal with the disputes arising in the Insurance industry called as The Insurance Regulatory and Development Authority (IRDA) Act The mission of the IRDA is to protect the interests of the policyholders and to regulate, promote and ensure systematic growth of the insurance industry and other related areas. For a case to valid, no single individual can complain anything under the sun whatever he/she wishes. It is important to remember that Ombudsman does have limitations and complaint can be made only against the items prescribed in the notification. Functions of Ombudsman The main functions of this Ombudsman are as follows: To specifically deal with the disputes arising out of Insurance cases To dispose the grievances of policyholders in a swift manner To minimize the problems involving redress complaints To help in generating and sustenance of goodwill, faith and confidence amongst the consumers and insurance companies To resolve the consumer disputes in an amicable manner which is binding on the involved parties concerned To effectively tackle customer grievances in a time-bound framework Filing a complaint There is no prescribed format or a specified format for filing complaints. For an individual, it is required to give the complaint in writing stating and describing the

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facts along with relevant and sufficient documentary proof to substantiate the grievance of the claim. Once the complaint is taken up it is not required that the complainant has to be present. Presence of the complainant is required only in the mediation stage wherein it would be mandatory for the aggrieved party to attend the hearing at the ombudsmans office for presenting the complainants version of the case. Hiring a lawyer for the case to resolve the disputes arising out of claims rejection is a sheer waste of time, money and energy. The process of filing a complaint is simple. Firstly, the complaint must be made in writing with the insurance company. In addition, complaint must be reported to the Ombudsman within a year of the repudiation of the claim by the concerned Insurance Company. It must be noted that Ombudsman intervenes in the case only if the complainant has not approached any court or any Consumer Forum with regards to his matter. It must be remembered that the complaint with the ombudsman must be filed in that region only from where the health insurance policy was purchased. The complainant or any proxy on his behalf can file a complaint regarding the grievances or disputes. Before approaching the Ombudsman, it is mandatory that the complainant should have made a prior representation to the insurance company and received a reply which may be unsatisfactory in its contents or there is absence of reply for a period that exceeds 30 days (a month). It should be borne in mind that the aggrieved party should not have approached any other social forum or any community gathering in order for his complaint to be eligible by the Ombudsman.

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The steps to be followed while filing a health insurance complaint are enlisted below: First and Foremost important point is that records and copies of all relevant documents should be maintained. Make a note of all transactions between yourself (policyholder) and the insurance agent and the insurance company. Maintain a file of correspondences in order for easy tracking and retrieval of information. Maintain a record of the receipts (from the agent and Insurance Company), policy documents and TPA (Third Party Administrator) cards in order. Approach the Customer Care Department and explain them your grievances or disputes regarding the claim. Give the Insurance companies sufficient time or duration to address your doubts and grievances. If the policyholder does not feel satisfied with the reply, he/she can elevate this dispute by approaching the Insurance Ombudsman. If the outcome at the Ombudsman remains unsatisfactory, it is possible to examine the possibility of taking the legal route i.e. approaching the court or the Consumer Forum. If the claim amount involved is high, services of a suitable lawyer or an advocate can be taken. Remember that negotiation skills and tenacity to overcome the challenges for the sake of your rights are essential for resolving the disputes pertaining to the claim.

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CHAPTER 7: HEALTH INSURANCE FOR SENIOR CITIZEN Any individual aged 60 years or above is called as senior citizen. These citizens have worked hard all their lives and contributed to the development of the nation and the community. Though generally ignored and sometimes shunned by the younger community but there is much to learn from them. Some continue to be productive and work in various capacities. Most organizations and universities entertain this skilled manpower up to the age of 65 to 70 years. The senior citizens need to be cared for and the society and nation owes them a decent life in their old age. Keeping these sentiments, the Indian Government of India, has introduced several benefits through its various schemes in for senior citizens. One amongst such schemes includes health insurance policy. The schemes and policies are meant to promote the health, well-being and independence of senior citizens across the country. With numerous tax benefits, travel and healthcare facilities exclusively designed and provisioned for them, Indian Government has created sufficient reasons for Senior Citizens to feel satisfied and elated. The central government of India came out with the National Policy for Older Persons (or Elderly Individuals) in 1999. These guidelines aim to encourage individuals to facilitate provisions for self as well as their spouses old age. It also strives to encourage families to take special care of their elderly family members who are often dependant on the bread-winners in the family. This policy has been designed to enable and support voluntary and non-governmental organizations (NGOs) to supplement the care rendered by the family and provide care and protection to these vulnerable lots. Healthcare, creation of awareness, training facilities to geriatric caregivers/service providers and healthcare research

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have also been looked into and implemented under this policy. The main purpose of this policy is to make elderly people fully independent citizens. Exclusive Health Insurance Policies for Senior Citizens Insurance can be considered as a form of long-term savings for senior citizens especially those who are averse to risk-taking. This money provides financial stability and also helps such individuals in times of need. Healthcare insurance enables senior citizens to pay for medical check-ups, emergency medical expenses and long-term medical treatment. In India, health insurance policy cover is provided through several private insurance companies and four public sector general insurance companies. These are: National Insurance Company Oriental Insurance Company New India Assurance Company United India Insurance Company The National Insurance Company offers Varistha Mediclaim Policy exclusively designed for senior citizens. This policy covers hospitalization and domiciliary hospitalization expenses incurred under Section I as well as expenses incurred for treatment of critical illnesses, if opted for, under Section II. Diseases covered under critical illnesses are coronary artery disease, cancer, multiple sclerosis, major organ transplants renal failure and stroke. Ailments such as paralysis and blindness are covered at extra premium.

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Senior Citizen is under 65 years of age can avail health insurance cover for themselves and their dependants. It is advisable that such individuals must not lose time in purchasing a customized health insurance cover based on their requirements. The regulatory body for Insurance industry across India called as Insurance Regulatory and Development Authority (IRDA) has issued guidelines and instructed general insurance companies to keep at least 65 years as the upper age limit for availing a health insurance policy. Bajaj Allianz and Star Health and Allied Insurance are two such private players offering Health Insurance policies to the seniors.

What does the Senior Citizen Health Insurance Plan cover? A senior citizen health insurance plan covers the following: Hospitalization Cover: Expenses incurred as a patient after admission of more than 24 hrs. The expenses include room charges, doctor fees, nursing fees, cost of medicine and drugs, etc. Day care expenses which arise from use of special equipments or procedures like chemotherapy, dialysis, etc. Medical expenses prior and post of hospitalization, the number of days will vary across insurers. Ambulance charges for transporting the insured subject to maximum limit.

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 Pre existing diseases are also covered subject to terms and conditions of the insurer. IRDA Guidelines for Health Insurance for Senior Citizens The regulator for insurance industry in India - Insurance Regulatory Development Authority has addressed all problems relating to insurance industry in India including its policyholders with special emphasis on senior citizens. No insurer or insurance company in India can refuse or deny a senior citizen with a health insurance cover or load him/her with extra premium without providing valid reasons. All such reasons can be scrutinized by regulatory bodies like IRDA, important as it may be; the current scenario of health insurance markets across India is arbitrary in nature. For example, while some insurers reimburse the cost of medical tests to be undergone by a customer above the age of 45 years, few others insurers do not reimburse the costs incurred on medical test whereas some others reimburse only a part of it. A recent amendments made to IRDA Act, makes it mandatory for all insurance companies to reimburse 50 percent of the total cost incurred on tests, if they agree to provide insurance coverage to the clients after medical examination. This means that a senior citizen can make a claim once the insurance coverage is approved. The new rules and regulation from IRDA ensures that the insurance sector across India practices more transparency and follows uniform standards. With the entry age being extended up to 65 years, the prospective customers would have greater flexibility in choosing a plan that suits their requirements. It has become mandatory for all insurance companies to see that disclosures are explained upfront so that an insured individual or the policyholder knows what is in stock for them.

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Most insurance providers pass the discount they may provide to senior citizens to other categories by increasing their premium by a small amount. Health insurance policies for senior citizens have been introduced in India keeping the factor of cross-subsidization in mind. Such insurance policies have a lower Sum Insured with Greater Premium and are therefore to some extent designed to be self sustainable. Illustrative Policies1. Star Health and Allied Insurance Senior Citizen Red Carpet Policy offers to insure people in the age group of 60-69 years (or senior citizens) without undergoing a medical test. It also covers pre-existing diseases from the first year itself. 2. National Insurance's Varistha Mediclaim Policy- medical tests for enrollment of senior citizens are not made mandatory gives no-claim benefits and incorporates the coverage of pre-existing diseases after one claim-free year. However, it must be noted that while Senior Citizen Red Carpet gives a Sum Insured of up to Rs 2 lakhs, Varistha Mediclaim policy by National Insurance offers a maximum sum insured of only Rs 1 lakh.

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CHAPTER 8: PREMIUM CALCULATION ON HEALTH INSURANCE Premiums are calculated based on the insurance product (or plan) purchased by the individual. These insurance products may be packaged in various ways to either provide a general coverage or may meet the needs of a particular age group. To decide on the amount that one would need to shell out, the insurance company takes all costs into considerations. Some of these factors are enlisted below:a) Personal History: It takes into consideration the individuals health, present health status, past medical history, family history, age of the individual, personal habits (e.g. smoking, alcohol addiction etc.). For purchasing a health insurance cover, the insurance companies may/may not conduct an initial medical examination of an individual before issuance of health cover. b) Mortality Rate: These are charges incurred by an insurance company to cover the risks in case of any eventuality to an individual. The mortality expenses differ depending on the age and the Sum Assured being availed by an individual. Important points to be remembered in co-relation with mortality rate are:i) Premiums increase, as you grow older. ii) Premiums increase in co-relation to hereditary or lifestyle ailments such as Diabetes, Hypertension, Obesity etc. iii) In principle, premiums increase by availing higher Sum Assured by an individual. c) Administration and marketing expenses: Such expenses are incurred by the organization as part of their operational expenses. These operational expenses are recovered in the form of premium that a policyholder pays while purchasing an insurance product.

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Administration and marketing expenses also incorporate the costs incurred on designing the insurance product, market publicity, advertisements, brochures, leaflets, booklets, pamphlets etc to create awareness amongst the public regarding the option of various insurance products and services in the market. Under this heading, expenses pertaining to payment of monthly salaries to their employees, commission to insurance brokers, insurance agents, marketing and sales of insurance products and overhead costs are included, that constitute payment of premium by the policyholder. It also incorporates the costs required to meet the operational expenses on daily basis. d) Savings component: This portion of the premium is invested in various public investments approved by the Government of that country. Investments in private sectors are generally not practiced. This is based on the guidelines issued by the Regulatory Body which is approved by the government of that country. In India, IRDA (The Insurance Regulatory and Development Authority), at Hyderabad is the regulatory body and it controls the activities and functioning of Life and Non-Life (General) insurance organizations. e) Medical Underwriting: Underwriting of various insurance products is done to create a balance between an organization and an individual. This is done with a view to analyze risks from various angles and broad-spectrum factors so as to contain fiscal bleeding and containment of losses in the insurance sector. It takes into consideration the number of individuals covered under the health policy and conducts a review pertaining to any claims history pertaining to that individual or that group or an entire organization. Medical Underwriting is done with a view to establish eligibility, set premiums or deny coverage. For example premiums can significantly increase in case there is an
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individual with a past medical history of any chronic ailment or with a longstanding prevailing illness or has had a severe Road Traffic Accident etc. In case, a group or an organization is involved, medical underwriting is done uniformly for that particular group taking into consideration a host of factors. f) Adjusted or Modified Community Rating: This factor takes into consideration the geographical location, topography, physical factors of the region, economic factors involved in that region, financial stability, political stability, industrial development, trade activities, lifestyles and other varied factors. For example developed regions have to shell out higher premium in comparison to regions with minimal development, for example a village area.. This means that if you live in metropolitan city like Kolkata, Mumbai, Delhi or Chennai, you have to pay higher premium in comparison to people living in Tier-II and TierIII cities, as your risks are higher of falling sick or being injured in an accident. In addition, recently another method of calculating premium has evolved called as Experienced Rating. In this method, usage of historical data is used to decide upon the rates based on the number of claims and the claim amount made during a given period. As a result, the data that is generated is used to calculate and predict the probability and potential for claims in the future. With extensive data that is now available on Internet, the experienced rating method has proved to be a boon for the underwriters and the insurance companies. The method uses a comparison of past or historical data. This data forms the ground-work for analyzing the future premiums. g) Rating Bands: Under this category, the insurance company fixes a base rate that can be charged for a particular group possessing the same characteristics. The case characteristics include factors such as age, gender, geographical region,
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family composition, group size, occupation details, industry etc. For example a workforce comprising of healthy employees who are in their youth in the age group of 25-30 years will pay less premium as compared to the workforce who are in the age range of 45-60 years. We have given only broad guidelines to educate you about how a health insurance company is likely to decide what you will end up paying as premium to insure your health against disease and accidents. Companies that take group insurance are likely to benefit by getting a group discount, depending on the numbers of the staff that they may wish to insure.

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CONCLUSION: Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. One of the key service industries in India would be health and education Insurance sector in India grew at a faster pace after independence. The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians, have always seen life insurance as a tax saving device. Income, health expenditure, and occupation are being the most important factors, and are positively connected to income; the Governments should aim at generating sufficient incomes to the people through various employment guarantee schemes and through cash transfer methods. There are only some selected hospitals which provide the insurance benefits to the insurer. This reduces the availability of choice to the people insured. To avoid this problem a provision should be made so that all hospitals irrespective of private or public, can provide health insurance benefits to the insurers. This would also encourage people to go for health insurance. 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.

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BIBLIOGRAPHY: Websites www.wikipedia.com www.investopedia.com www.policybazar.com www.maxbupa.com www.apollomunichinsurance.com/ www.icicilombard.com/health-insurance www.bajajallianz.com/Health-Insurance

Book Health insurance R.K. Reddy

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