Prevalence of a pre-existing disease is one of the main reasons why a health insurance claim gets rejected. Most health insurance policies come with a waiting period on pre-existing ailments to avoid fraud or adverse selection. From an insurance standpoint, this seems fair as insurance is about covering a risk and not an eventuality, but most often customers end up with the short end of the stick. That’s because it is loosely defined. The definition of a pre-existing ailment is open to wide interpretation that favours the insurers, but this may change.
That’s because the latest report by the Insurance Regulatory and Development Authority of India (Irdai) recommends a much sharper definition of a pre-existing ailment. The regulator constituted a working group in July 2018 to look into standardising and simplifying exclusions in health insurancecontracts. The group’s report was published earlier this month.
We pick out the main takeaways that will swing the balance in your favour.
Sharper definition of pre-existing ailment
The current definition of a pre-existing ailment is any condition, ailment or injury or related conditions for which there were signs or symptoms or were diagnosed or for which medical advice or treatment was received within 48 months prior to the first policy issued by the insurer.
In other words, the definition classifies an ailment as pre-existing if the insured person had symptoms. Now an individual may have mild symptoms or may not be aware of the symptoms of an ailment at all until she sees a doctor. But from an insurance point of view, even if the customer was genuinely unaware of a pre-existing condition, it would become a ground to deny a claim. “It’s unfair to the customers because they are paying health insurance premiums and are completely unaware that a pre-existing clause can lead to denial of their claim. It’s important that both the insurer and the insured be aware of any pre-existing conditions,” said Kapil Mehta, co-founder, SecureNow Insurance Brokers Pvt. Ltd.
The report has recommended that a pre-existing ailment should be defined as an ailment that’s diagnosed or for which medical advice or treatment was recommended or received by a physician prior to the effective date of the policy. “The proposed definition is considerably better for policyholders because it removes the reference to signs and symptoms. Claims rejection should reduce materially,” added Mehta. The waiting period on a pre-existing disease, as is the norm, can’t be more than four years.
No claims to be rejected after a wait of 8 years
It’s not only in the initial years that you run the risk of getting your claim rejected. The insurer can deny your claim any time on grounds of non-disclosure.
The report recommends that insurers will get a moratorium period of eight years of continuous renewal after which the claim shall not be questioned based on non-disclosure or misrepresentation except for proven fraud. “The 8-year moratorium is fair for customers and insurers. Currently claims do get rejected even after several years of premium payment for non-disclosure, even if the claims are unrelated to the non-disclosure. This issue will be addressed through the moratorium,” added Mehta.
Permanent exclusions not allowed.
Other than the waiting period on pre-existing ailments, health insurance policies also come with permanent exclusions for certain ailments like HIV or Parkinson’s disease. So even if the policyholder contracts any of these ailments after purchasing the policy, the diseases remain permanently excluded.
The report states that all health conditions acquired after policy inception should be covered. So, exclusion of diseases, such as Alzheimer’s, Parkinson’s, AIDS/HIV and morbid obesity, cannot be permitted if they are contracted after a policy is bought. “There are some generic exclusions like maternity, infertility common across policies and are part of the policy contract, but in addition to these medical conditions, some policy contracts add to the list of permanent exclusions. The report therefore recommends that policies, other than the generic exclusions, can’t exclude ailments by clubbing them under permanent exclusions,” said Sanjay Datta, chief, underwriting and claims, ICICI Lombard General Insurance Co. Ltd.
…but listed pre-existing ailments can be excluded
The report also allows insurers to permanently exclude certain existing health conditions to ensure that customers with these ailments are not denied a cover completely. “Currently, if a policyholder has a serious pre-existing condition, the insurers don’t offer health insurance at all. This is because, as per rules, insurers are mandated to cover the condition after a waiting period. The report recommends allowing insurers to permanently exclude these conditions which would otherwise lead to denial of health insurance altogether,” said Datta.
But the report doesn’t allow insurers to exclude all pre-existing ailments. Insurers can exclude only those ailments that would otherwise lead to denial of a policy. The working group has identified a list of 17 conditions for which insurers can incorporate permanent exclusions if they are pre-existing at the time of underwriting.
According to the report, this will allow a wider section of the population with serious pre-existing diseases, including persons with disabilities, to be insured.
This list doesn’t include lifestyle ailments like diabetes or hypertension. In fact, the report recommends that the waiting period for these conditions should not be more than 30 days.
Currently, health insurance comes with an initial waiting period on specified ailments. This means that if the policyholder contracts one of these ailments after buying a policy, the insurer is not liable to pay claims during the waiting period.
Insurance for new-age treatment
The report also acknowledges rapid medical advancement and the need for health insurance policies to include new-age drugs and treatment. The committee has recommended the formation of a health technology assessment committee (HTAS), which will examine and recommend the inclusion of advancements in medical technology as well as new treatments and drugs introduced in the Indian market.
Insurers, however, can be allowed to incorporate co-payments to include new-age treatments, given the prohibitive costs. As is the case with some policy contracts, the committee also recommends that insurers shouldn’t deny a claim for oral chemotherapy where chemotherapy is allowed or peritoneal dialysis where dialysis is allowed.
What it means for you
The committee is looking to make health insurance more inclusive by minimising and standardising exclusions. This, according to Subrata Mondal, executive vice-president, underwriting, Iffco Tokio General Insurance Co. Ltd, will make policies more uniform, thereby reducing the scope of misinformation. “For customers, if the deciding factor is the price, then buying a cheap policy could mean added exclusions. So it’s important to reduce and standardise exclusions to make all offerings comparable. This will also make portability a practical possibility,” he said.
But these recommendations may have an impact on the premiums. “The committee’s draft report takes a significant step forward to make health insurance more comprehensive for the customers as it seeks to minimise exclusions and increase inclusions. This will not be without an impact on pricing. However, right now, it’s too early to guess the potential impact (on the premium) and this will become clear once the report is finalised, in consultation with all the stakeholders and we have enough data,” said Antony Jacob, chief executive officer, Apollo Munich Health Insurance Co. Ltd.