OptimumHealth Coverage

With health costs becoming prohibitive, medical insurance has become a necessity. The problem however is that health insurance doesn’t cover the entire bill as there is a cap on hospital room rent, medicines, doctor’s fees and other charges. Moreover, many insurance companies reimburse the same on the basis of standard hospital charges and not the bill amount. To counter these issues, insurers have come up with fixed cash plans for different illnesses and surgeries wherein payment is made irrespective of the actual bill. For example, if you undergo a bypass surgery and the fixed cash payout under your category is Rs 3.5 lakh, the company will pay the entire amount despite what your actual bill is.

Some of the insurance companies offering hospital cash policies are Aegon Religare, ICICI Prudential, and Max New York Life Insurance .These policies classify surgeries in different grades and cash is offered based on the grading. For instance, heart bypass surgery is in the highest category and depending on the grade one is in, the insured is paid Rs 2-5 lakh. However, if the surgery is not performed, the insurance company pays only for the room rent in the daily cash plan. One disadvantage however is that fixed cash health insurances don’t offer reimbursement for pre and post-hospitalization as opposed to pure medical insurance plans. Other differences between the two kinds of policies are as follows:

a) Fees - If you compare benefits and premiums, pure mediclaim (indemnity health policies) are cheaper. For example, a family floater (indemnity plan) from ICICI Lombard General Insurance for two adults (eldest member aged 40 years) with a sum assured of Rs 4 lakh comes for an annual premium of Rs 7,702. The fixed cash plan from ICICI Prudential for two adults (eldest member aged 40 years) with a combined annual limit of Rs 4 lakh is for an annual premium of Rs 9,440. In this plan, the highest payout within the surgical benefit is Rs 1.5 lakh.

b) Assured sum - In most fixed cash plans, you don’t need to share the sum assured with family members. For example, if you take a policy with a sum assured of Rs 5 lakh for two adults in the family, you will get a total cover of Rs 10 lakh. For more members, the sum assured increases accordingly. ICICI Prudential Life’s product allows the sum assured to be shared among family members, like in a family floater plan. In family floater plans, the sum assured (maximum Rs 10 lakh) is shared between the family members. For a higher cover, you need a top-up plan (maximum Rs 20 lakh). Under the hospital cash policy, one needs to be aware of the fact that if this is an annual policy, it will have a limit on the number of days (or the amount) that can be paid for every year plus some policies may also have a lifetime limit across the years for which the policy will continue to be issued. Hence, it is not correct to compare this lifetime limit with the sum insured. The correct way to get an idea about the sum insured is to see the annual limit if any.  

c) Renewal - In indemnity products, renewability of insurance is not guaranteed. Additionally, if there is a claim in a year, on renewal of insurance, the company charges an extra premium called loading. In fixed cash products, renewability is assured and some of these policies revise rates once in three years. Generally, hospital cash policies are valid for a particular term (10 or 15 years). Once the policy term is over, an individual has to re-apply. This means dealing with new terms and conditions.

d) Claims - While you need original bills in traditional insurance policies, photocopies are accepted in fixed cash policies. This means if you have two policies, you can technically claim from both the insurers.

Take Home: Experts are of the opinion that hospital cash policies cannot replace indemnity health insurance policies. They are good to be used as a second policy (or a rider) if your sum assured in the health policy is low or you rely on group insurance policy that your employer provides. Moreover, this kind of a policy helps you in recovering some of the costs of hospitalization that are not reimbursed under a mediclaim policy.