Here are some health insurance-related terms explained to help you understand your policy better.
Sum insured is the maximum amount in a year that the insurance company will pay to each of your employees if they are hospitalised. So, if your SI is 5Lacs, each of your employees can make claims for 5Lacs per year. Any amount exceeding the sum insured will have to be borne by them.
Insurance plans normally come with a limit on room rent and ICUs cost, which is generally in the range of 1% to 2% of sum insured. Here is how the room rent limit works.
Typical room rent for a private ward in a category-A hospital (such as Fortis, Manipal, etc.) in Bangalore is ₹8,000 per day. Let’s say I get hospitalized for 5 days, and my per day room rent is ₹8,000, and my total hospital bill is ₹2 Lakhs (i.e. ₹40,000 for room rent, and ₹1.6 Lakhs for the surgery and other expenses such as diagnostics, pharmacy).
Let’s say you have set up a health insurance that has sum insured (SI) as ₹2 Lakhs, and the room rent submit is set as 1% of SI, i.e. ₹2,000 per day.
The employee would naturally think that he would need to pay ₹6,000/day (₹8000 — ₹2000) for room rent, i.e. ₹30,000 for 5 days, out of his pocket, and the rest ₹1.7 Lakhs will be covered by the insurance company.
But most of us don’t know that room rent and ICU limits come with “proportionate deduction”. Proportionate deduction comes into force when you pick a room with tariff which is above the allowed room rent limit in your policy. It means that the insurance company will cover you for the associated medical expenses in proportion to room rent limit to actual rent paid.
In the above scenario, since the room rent limit was 25% of the actual room that was picked, the insurer will pay only 25% of the entire bill except the MRP products such as medicines. That is, the insurer will pay only ₹65,500, and the rest ₹1.34 Lakhs will be borne by the employee, despite having a policy of ₹2 Lakhs. This generally comes as a big surprise to employees when they eventually make a claim, and hence is the biggest source of dissatisfaction.
These are three types of plans that are there in group health insurance which define the scope of the policy.
Some health insurance cover requires the insured (your employees) to pay a part of the amount they claim. The percentage of the claim amount that has to be borne by the policyholder under a health insurance policy is known as Copay. Ideally, you should choose a policy for your employees with Zero Copay.
A waiting period is the amount of time an insured must wait before some or all of their coverage comes into effect. Retail insurance products have four types of waiting periods.
Pre-existing disease means any condition, ailment or injury or illness or related condition(s) for which insured had developed signs or symptoms, and/or were diagnosed and/or received medical advice/treatment, within 48 months prior to the first policy with the company.