Health insurance is something we all recognise as necessary, but few of us truly understand its complexities. Given its cost, one would expect transparency; yet, policies remain opaque. Most people buy insurance based on recommendations, the premium amount, or what an agent tells them—often without delving into the fine print. Recent personal experiences have shown me just how misleading health insurance policies can be, with the reality of coverage often differing drastically from our expectations.
Case 1: A Senior Citizen's Dilemma
As a senior citizen over 70 years old, I have maintained a health insurance policy with the same company for over two decades. My coverage stands at Rs5 lakh, a seemingly adequate amount. However, after undergoing a cardiac procedure in 2016, the insurer refused to increase my sum insured. Once a policyholder crosses 65, obtaining additional coverage becomes nearly impossible.
Recently, I had to undergo a cardiac implant procedure costing nearly Rs8 lakh. My insurance provider did not have a cashless arrangement with my hospital, forcing me to pay upfront and claim reimbursement later.
The post-hospitalisation claim process was arduous. I had to fill out forms, get them signed by the hospital and submit all original bills and reports to the third-party administrator (TPA), the entity responsible for processing claims. When I personally visited the TPA to submit my documents, they merely acknowledged receipt without verifying completeness. I was told that unless there was an issue, I would receive the claim amount within two weeks.
Two weeks later, I received a request for additional documents: a 'sticker' from the implanted device and its original bill. The device was procured by the hospital which invoiced it to me. The sticker clearly showed that the hospital had charged about 50% of the maximum retail price (MRP), a price that is publicly available online. The product is from a globally renowned company and the price can simply be found through a Google search!
Frustrated, I approached the insurance company directly, where I was informed that, as a senior citizen undergoing a major procedure, I was only eligible for 70% of my insured sum—Rs3.5 lakh instead of the full Rs5 lakh. I was shocked, as I had not been informed of this restriction when purchasing the policy. Upon closer examination of the fine print, I found the relevant clause buried deep within the policy document.
The clause reads as below:
This realisation was troubling. Over the past eight years, I have paid Rs32,000 annually, totalling nearly Rs2.5 lakh in premiums since my last claim. My spouse and children also hold policies with similar premium amounts. Had I invested these amounts in a systematic investment plan (SIP), my returns might have been significantly better—unless, of course, multiple family members required hospitalisation at the same time.
This brings up a broader question: If an insurance policy is designed to benefit the company more than the insured, is it truly serving its purpose? We can always debate about his. If it is good for the insurance company, it is definitely not good for me as a family unit.
I strongly urge policyholders to scrutinise their health insurance policies regularly. Do it every year. Insurers can—and often do—add new clauses that restrict coverage over time.
Here is a sample of the 'fine print' one can find in health insurance policies:
Case 2: The Deductible Shock
My brother, a seemingly well-covered policyholder, believed he had Rs11 lakh in medical coverage. However, upon hospitalisation, he discovered a crucial detail—his policy included an Rs4 lakh 'deductible.' In simple terms, this meant that he had to pay the first Rs4 lakh out of pocket before his insurance coverage kicked in. Since his hospitalisation bill was Rs2.5 lakh, he received no reimbursement at all. The agent had not explained this crucial aspect to him; instead, he promoted the policy as an attractive, cost-effective alternative to competitors.
Deductibles are common in insurance policies, especially in top-up plans designed to supplement an existing base policy. However, they must be clearly explained at the time of purchase, not hidden in policy documents that consumers seldom read in full.
My experiences highlight several areas where insurance companies must improve transparency and efficiency. For one, health insurance companies should be required to provide clear, uniform templates (or a summary) outlining policy details in plain language. A selling brochure, a welcome email and a signed confirmation covering key clauses—especially exclusions—should be mandatory. I would like to see an insurance company put a simple one-pager for each of its schemes which spells out the exclusions and limits in layman's language.
I personally do not trust insurance agents, though there would certainly be exceptions. However, in my case, the agent did not even bother to help me with the claim! While they are there to sell you a policy, agents should also be held accountable for transparency.
I also believe TPAs should be subject to strict timelines for claim processing. In an ideal scenario, insurance companies should handle claims directly instead of outsourcing this critical function. If they lack trust in their own workforce, why have in-house staff at all? Why not operate entirely online?
Another issue is 'cashless' treatment. Why can't every insurance company ensure universal acceptance at all hospitals? My insurer does not have a tie-up with my hospital for individual policies but does for corporate policies. Why this disparity? I understand that general insurance council (GIC) has launched a 'cashless everywhere' initiative (with a few terms for applicability) that allows policyholders to avail cashless facilities even at hospitals not in the network of the insurers. But unfortunately, this was not how the claim was addressed in my specific case.
Health insurance should provide security, not stress. Unfortunately, current policies are riddled with complexities that work against policyholders when they need support the most. While insurers have a business to run, they must also uphold their fundamental promise: to provide financial relief in times of medical emergencies.
Until regulatory reforms bring greater transparency and fairness, it is up to us to be vigilant, ask the right questions and read the fine print—before it's too late.
(R Balakrishnan is an independent consultant and has been in business and finance for nearly four decades. He was one of the founding team members of CRISIL and also helped set up Malaysia's first credit rating agency. He was head of equity research at DSP Financial Consultants and CEO & CIO of a couple of mutual funds.)
I would like to commend everyone for their valuable contributions to this discussion. As a practicing doctor, I would like to address some critical points regarding medical insurance that often go unmentioned.
First and foremost, we must acknowledge the rising issue of medical inflation, which currently stands at nearly 15%. This increase significantly impacts the affordability of essential treatments, such as liver transplants, which can cost up to 25 lakhs and are crucial for saving lives. Therefore, I strongly advise individuals to secure health insurance as soon as they begin their careers, with a minimum coverage of 25 lakhs.
It's also prudent to maintain at least two separate insurance policies, as claims related to pre-existing conditions can complicate transitions between providers. Porting insurance becomes increasingly challenging after the age of 55, which is why regularly increasing your coverage as you age is essential.
Be aware that when dealing with insurance companies, there may be attempts to undervalue your claims. For instance, small items like thermometers might not be reimbursed, and many may consider this an insignificant battle. However, don't hesitate to pursue what is rightfully yours.
Additionally, it’s worth mentioning that insurance companies often negotiate discounts with hospitals, promising faster payment in exchange for reduced bills, which can complicate the patient's financial responsibilities.
Lastly, the imposition of an 18% GST on insurance premiums is a significant burden that deserves attention. In states that do not provide free healthcare, applying such a high tax is questionable; a maximum of 5% would be more reasonable.
From my experience at our hospital's TPA desk, I suggest being cautious about certain providers, as some—like Star Health and Care Insurance—are often cited for poor customer interactions.
Lastly never relay on your employer’s insurance cover as you may anytime change a job. We see horrible burden on such individuals. Top up policy is cheaper and can help you to reduce the premiums
In conclusion, it is vital that we remain informed and proactive about our health insurance choices to ensure optimal care and protection.
However on receipt of the policy, I found that the copay clause in the offer was missing. The clause said "10% copayment is applicable on the admissible claim amount in the event insured person is admitted in hospital room category which is higher than shared accomodation".
When I contacted the insurance company the executive kept mentioning the copay clause has been removed as the room category under my coverage is "Shared" !. And further that no claim shall be entertained if the insured chose a single room! I doubted my english reading capability after this!
Luckily, the company shared the Policy wording (which was not sent with the policy document), and I found the clause that the insured shall bear "10% of admissible claim incase of room category higher than eligible category that is specified in the policy schedule." This clause does not say "Copayment", but is triggered only when a higher room category is choosen.
I have read Bala Sirs article after reading about the profit margins of some of the listed hospitals in another ML piece.
While reading the other comments and this main article, I am reminded of the New York early this year and the code of Insurance companies - Delay, Deny and Defend...
There are many grey areas due to opaque nature of the industry.
Regulatory reforms are need of the hour to bring about the required transperency in the processes and operations so that the Insured persons get a fair deal.
Star health takes pride to allow online upload of documents however it's a waste ... After 2 months of submission of doc online they asked for originals. I submitted originals in September 2024.. but till now status is stuck at documents scrutiny.. complete joke of the system..