The IRDA defines health insurance as the effecting of contracts which provide sickness benefits or medical, surgical, hospital or other health plans including long-term health care.
The IRDA does not create a separate legal structure for health insurance companies. Since liberalization of the insurance sector, most health insurance policies have been underwritten by nonlife insurance companies, whereas life insurers sell health insurance only in the form of riders with their life insurance policies. Of late, this line of differentiation has dimmed.
Nonlife insurers have introduced long-term policies and benefit plans covering critical illnesses and policies that provide cash payments if an insured person is hospitalized with certain illnesses. In the absence of a separate health insurance regulation, there are very few stand-alone health insurance companies in India. Some of the reasons for this trend include the excessive capital requirements and unfair competition by existing large players who sell other lines or products as well and, therefore, subsidize their health insurance business.
Recently two health insurance companies—Star Health and Allied Insurance Co. and Apollo DKV have launched their operations. In absence of a provision to register a stand-alone health insurance company, these companies sought license as a nonlife insurance company and undertook to write only three lines of business, i.e. health, accident and travel insurance. The limited competition in the health insurance market leads to considerably low product diversity and lack of maturity in pricing and underwriting. Star Health is the first health insurance company to enter the market in 2006 with a range of products aimed at the individual, corporate and rural segments.
The unique aspect of Star is that there is no third-party administrator (TPA) involvement. Most insurance companies employ third party administrators to process claims. In the absence of a TPA, the customer and the hospital deal directly with the company leading to greater transparency. Presently, it covers 3000 hospitals directly. The other player, Apollo DKV is a joint venture between the Apollo Hospitals Group and DKV, Europe’s largest private health insurer.
It currently offers cashless admission and treatment in a large number of hospitals, including those of the Apollo group and re-imbursement options in all hospitals. Health insurance covers five distinct kinds of health policies, which are sold in the market. The most common health insurance policy is one that reimburses the actual hospitalization cost for treatment of any disease offered only by nonlife insurers and stand-alone health insurance companies.
These kinds of policies are popularly called mediclaim policies (Mediclaim is actually a brand name, but has now become a generic term for such health insurance policies). The other two types of health insurance plans offered by both life insurers and nonlife insurers are hospitalization policies and critical illness policies. Hospitalization policies offer a daily allowance for every day spent in the hospital. Some policies also provide higher daily allowance for stay in intensive care units (the ICU).
Yet others have a provision for a lump sum payment if a policyholder undergoes any of the surgical procedures covered in the policy. Critical illness policies are useful for survivors of serious chronic lifestyle diseases such as stroke, heart attack, etc. Advances in modern medicine have ensured that many people survive these illnesses.
This survival, however, comes at a cost of a serious dent in the ability to earn (salary or from business). Critical illness insurance steps in here and pays off a lump sum benefit, which helps people to maintain their current lifestyle. Most life insurers have long offered these covers as riders. These critical illness covers are now also being offered as stand-alone policies to cover the risks of specific critical illnesses such as cancer, stroke, heart attack, etc. The fourth type of health insurance policy in the market is the specific conditions coverage being offered by some life insurance companies. These plans are designed specifically to offer health insurance against health complications due to certain diseases such as diabetes or cancer.
They may also cover expenses related to periodic check ups under a structured disease management program specific to the condition covered by the policy. ICICI Prudential life insurance offers Diabetes Care and Cancer care for people suffering from these diseases. A fifth type of policy that has recently been launched by a life insurance compnay is a health insurance product providing hospitalization cover with an additional saving component in the product.
This policy creates a health fund which is used to reimburse expenses not covered in the other hospitalization benefit plans. A part of the premium for this product is invested for future healthcare expenses to buildup a fund. The product allows a customer to select annual hospitalization cover limit for the family and select a suitable premium.
Under the plan, a part of premium goes towards hospitalization cover and the remaining amount net of charges is invested to build the health fund. Apart from tax benefits applicable for health products, this product offers guaranteed coverage against medical expenses incurred due to hospitalization up to the age of 75 years Besides, some companies may also allow claims against out-patient treatment, diagnostics and dental care. The new health products in the market offer consumers more benefits. They do not have some limitations of the older products.
Typically traditional mediclaim type policies have an exclusion of pre-existing conditions and the consumer has to renew his policy every year with an increase in premium. Some new health insurance products which are being offered by the life insurance companies guarantee cover till the age of 75 years, and offer coverage for accepted pre-existing illnesses after 2 years of the policy. They also cover some out-patient health procedures which are excluded in the older basic health insurance schemes.
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