Insurance watchdog IRDAI has announced new guidelines on standardization in health insurance, which give clarity both to customers and health insurers about the nature of coverage. Importantly, IRDAI has cut down exclusions in health insurance while more illnesses are covered. In this way, insurers cannot take away the right to insurance coverage of a customer. The regulator has advised all the health insurance companies to update and include the suggested changes in existing products by October 1, 2020. Let's find out more about the new norms and what they mean.
Despite health insurance being a critical product, health insurers had so far made their own rules and tweaks. In short, there was no standardization or pre-defined format of the exclusions in a standard health insurance policy. Health insurance exclusion refers to anything the insurance company will not cover ranging from a type of medicine to a type of surgery. Insurer 'A' would say a customer cannot get coverage for a specific disease, but Insurer 'B' would offer coverage. The new guidelines make all the exclusions in a health insurance cover completely standardized in accordance with the policy terms and conditions.
Previously, the exclusions in the health insurance coverage were not fixed. They varied from one insurer to another. This led to confusion among the policyholders, especially during claim time when they often found out their costs of treatment of a disease will not be covered. However, the IRDAI has now defined a list of exclusions. This means only the listed ailments will be excluded from the health insurance policy. So, if your ailment is outside that excluded list, the insurer cannot deny your coverage.
Many senior citizens and non-senior citizens used to find that age-related ailments were not covered by health insurers. Age-related ailments like knee-cap replacements, cataract surgery, Alzheimer’s disease and Parkinson’s disease which were earlier excluded from the health insurance policy will now be covered by the insurance company.
The list of permanent exclusions has been standardized too. So, any ailment occurring due to working in a hazardous place, artificial life maintenance, treatment of mental illness and internal congenital diseases will be all covered under a regular health insurance policy. Further, neurodevelopment disorders, puberty and menopause-related disorders and genetic diseases will be covered.
Amit Chhabra, head-health insurance, Policybazaar.com says: “As per the new guidelines the exclusions will now be standardized along with the policy wordings. This was a grey area earlier and there was a lack of clarity as such on the exclusions which could potentially lead to confusing customers and problems at the time of claims. As per the new guidelines, there will be a defined list of exclusions and only the listed ailments can be excluded from the policy.”
There is clarity around permanent exclusions. While insurers are free to put permanent exclusions on specified conditions with customer consent, the freedom to put high-risk ailments in permanent exclusions has been virtually done away with. Insurance companies will now have to cover people suffering from ailments like HIV and AIDS even if they incur any other disease providing it is disclosed by the policyholder.
On the Pre-existing Diseases (PED) front, the IRDAI has set new guidelines to define pre-existing diseases. A pre-existing diseases or illness refers to any disease or illness which the policyholder is suffering from before the date of issuing the policy. Health insurance companies have different terms and conditions for providing policies to applicants with a pre-existing illness. As per the guidelines, any disease/s or ailment/s that is/are diagnosed by a physician 48 months prior to the issuance of the health cover will now be classified under PED. Earlier there was no clarity on PED. “Now, after the issuance of the policy, if the policyholder is diagnosed with any disease within three months of the issuance then the same will be considered as a PED if disclosed by the policyholder,” says Chhabra of Policybazaar.
Standardization of health regulations will help when a customer wishes to change their health insurer. If a customer is not happy with service or premium costs, they had the freedom to switch but were constrained from doing so as some companies used to set arbitrary waiting periods for PED. This meant that if a person did not have a PED for a certain time under the old policy, sometimes that time was lost in the new policy when they switched. “(Now) if a person transfers from one insurer to the other and has already completed in part some of the waiting period requirement — then the new insurer may impose only the unexpired/residual waiting period not exceeding 48 months from the date of the first issuance of porting out the policy,” says IRDAI. Standardization of the health insurance policies especially those governing PED is also expected to increase the number of people opting for portability of health insurance. (The writer is a journalist with 14 years of experience)