Why do you buy health insurance? To make sure that a medical emergency doesn’t set you back financially. And you know you have a good plan when you make a claim on your policy and walk out of the hospital without paying a rupee from your pocket. That’s what a good health insurance policy should ensure, in the least. Anything over that is a bonus.
In an effort to get your attention and to make policies attractive, insurers have been innovating by adding different features to the basic plan.
While some health plans will promise to restore the sum insured after a claim, some will cover maternity, and some will offer out-patient (OPD) benefits—where you pay for your out-patient medical bills and get them reimbursed from the insurer.
Value addition is a good thing, but it obviously comes at a price. A constant refrain of the industry is that we should include these value-added features in the Mint SecureNow Mediclaim Ratings (MSMR). Their reasoning is: features add to the cost, which may take the ratings south. A policy’s price is a prominent parameter in MSMR and the ones that are cheaper get more points.
So, this year we looked at some of these value-added features, but including them in the ratings is rather difficult. Each policy is different from the other in terms of the limits and the caveats under which these features can be claimed.
Consider the maternity benefits. On a sum insured of Rs.10 lakh, for a family floater with four members where the eldest is 35 years, the maternity limits for a normal delivery varied between Rs.15,000 and Rs.10 lakh, with waiting periods between 9 months and 5 years. OPD benefits, too, came with a fine print on limits and exclusions.
Including them in the ratings would have made the ratings rather noisy: each parameter would have many sub-parameters to reflect the many nuances.
We didn’t want to make MSMR clunky, so we chose another way.
Comprehensive selection
In our selection process, we chose to pick up pure-indemnity plans and excluded the extra features wherever the choice was available.
Indemnity plans pay for hospitalisation. A basic plan covers hospitalisation expenses including pre- and post-hospitalisation expenses and the listed day-care procedures.
Second, in the footnotes we have mentioned the policies that offer some of the extra features such as maternity coverage, OPD and overseas health insurance benefits. Going forward, we will mention more features here.
With this out of the way, the ratings continue to reflect three important aspects that a good health insurance policy should have: price, product coverage and claims experience.
Price: Affordability is a real concern for most people. So, insurance policies that have a lower price, get higher ratings. However, price alone doesn’t make a policy top-notch. In our scoring process, premiums account for only 30% of the weightage, which means that 70% of the weightage comprises other parameters like product features and claims record. The ratings, therefore, tell you more about the extent of coverage that the policy offers, and the claims experience.
This means that even if a policy gets zero in the price parameter, because it may be the most expensive, it is still capable of being an ‘A’ rated product if it shines in the other categories.
Product features: These get the maximum weightage of 45%. This is further split into six categories, five of which are about minimum exclusions and maximum coverage.
The most important parameter is the waiting period on a pre-existing ailment. Waiting period is one of the main reasons why claims by policyholders get rejected by insurance companies. That is why this parameter gets a weightage of 15%. A policy with a lower waiting period helps.
While most insurers exclude pre-existing ailments for 4 years, some have a lower threshold. So, policies with a lower waiting period will score higher. A waiting period of 1 year or less gets a score of 15%.
Sub-limits on room rent are the second-most important feature as the health insurance policy doesn’t just cap the expenses on room rent but also other associated medical costs. Therefore, if you opt for more than what your policy’s limit allows, you pay not just the difference in the room’s rent, but other incidentals as well. Accordingly, this feature gets a weightage of 14%, which is up from 8% last year. A policy with sub-limits gets a zero and one with none gets full marks (14%).
Wait period on specified ailments: Waiting on certain specified ailments comes with a weightage of 5.5%.
Initial waiting period on ailments, such as cataract and hernia, are standard but there are policies that waive off the waiting period. These get full marks. To limit their liability on such ailments, insurance companies can put more caps.
The norm is to restrict the capping to cataract, but if a policy has more disease-specific caps, it gets a zero out the total 2.5% weightage. The weightage has been reduced from 5.5% last year, as most products have begun removing the disease-specific caps—for all diseases except cataract.
Co-pay: The other parameter that gets a lower weightage this time is co-payment—from 5.5% to 2.5% this year. Co-payment is yet another restrictive feature where you bear a portion of the claim amount. This clause is especially prevalent in policies for senior citizens.
Given that you are more likely to need medical care at that age, insurers limit their liability by asking you to pay a part of the bill. By doing this, insurers not only feel comfortable in insuring you, but the premiums also tend to get a tad affordable.
Increasingly, other than the policies for senior citizens, insurers are removing co-payment in other health plans as well. The weightage has, accordingly, come down. Policies that have co-payment on all claims get zero, and policies with no co-payment get full marks.
No-claim bonus: While these parameters are largely about offering you comprehensive coverage, we have also looked at the no-claim bonus that bumps up the sum insured for every claim-free year. Policies that increase your sum insured by at least 15%, to keep pace with medical inflation (which is at least 15%), get the highest score of 5.5%.
Claim processing: Finally we come to a critical category of claims experience. This category gets a weightage of 25%. It deserves more, but to do justice to the weightage we need the numbers to be sharper.
Right now they are noisy on two counts. First, the claims data reported by the insurers is on an aggregate basis: it doesn’t segregate the claims data according to retail and group portfolios.
Mint has been pointing out the need to segregate the two, to make the numbers talk clearly.
The good news, however, is that the new rules have removed the category of closed claims that get reported in the public disclosures.
Closed claims are those unpaid claims where the insurers didn’t pay up because of lack of documents or follow-up from the policyholder. Mint has repeatedly pointed out that closed claims are diluting the number of rejected claims.
Health Insurance Regulations 2016 have removed this category so a claims decision will either be seen as paid or rejected.
For the purpose of our ratings we have looked at claims paid versus the total number of claims on which the insurer has taken a decision.
So the denominator is the sum of claims settled plus claims repudiated plus claims closed: insurers with highest claims settlement of at least 95% get the highest weightage of 15%.
The second sub-category is that of claim complaints per 10,000 claims registered and this gets a weightage of 5%.
Complaints registered reflect the number of dissatisfied customers with regards to claims. Insurers that have less than 30 complaints per 10,000 claims, get the highest score. The third sub-category is of claims pending for over six months, with a weightage of 5%: the fewer they are the better is the score.
Long journey
From rating health insurance plans three years back, MSMR has come a long way in terms of refining parameters, but it continues to be an ongoing exercise.
For now, we find merit in adhering to the broad features of a health insurance policy, but going forward we hope the industry evolves with less restrictive value-adds and the regulator pushes for more hygiene in the way they disclose their data.
More policies get launched every year. But due to space constraints we are unable to accommodate all the policies that were analysed on our pages—in all more than 400 options.
See detailed information and scores of each policy’s features here
