DYK: Three health insurance terms that Irda has redefined

Recently Irda amended guidelines to alter the standard definition of some of the terms.

In order to simplify health insurance and smoothen the processes involved, the Insurance Regulatory and Development Authority (Irda) standardized the definition of some of the most popular terms used in health insurance in February. It also rolled out standard forms for claims and a list of exclusions. Recently Irda amended these guidelines to alter the standard definition of some of the terms. Here are three most important terms and their definitions.

Room rent

This is defined as the amount charged by a hospital for the occupancy of a bed on per day basis and shall include associated medical expenses. These associated medical expenses would include costs such as medical equipment costs and nursing charges. So if you buy a health policy with sub-limits on the room rent, the cap on room rent will include these associated costs.

The standard definition of a deductible is a cost-sharing requirement that provides that the insurer will not be liable to pay a specified amount in case of indemnity policies and for a specified number of days/hours in case of hospital cash policies. In other words, deductible is the part of expenses that has to be paid by you before the insurer takes over and pays the rest. For example, if a policy has a deductible of Rs.1,000 and the bill comes to Rs.2,000, the insurer will settle only Rs.1,000, but if the bill comes to just Rs.1,000 the insurer will not pay anything. Co-payment, on the other hand, requires you to pay a pre-decided portion or percentage of the claim amount every time you make a claim.
Further, the insurer will need to specify how the deductible would be applied. Applying it annually would mean, regardless of the number of times the claim is raised, once the policyholder has paid the deductible, the insurer will cover the rest of the expenses. Applying it per claim would mean a deductible would apply every time a claim is made and applying it on life would mean a deductible would apply on the person whenever he raises a claim.

The standard definition of portability is transfer of the credit gained for pre-existing conditions and time-bound exclusions if the policyholder chooses to switch insurer. There are three types of time-bound exclusions in health insurance: pre-existing ailment exclusion for the first four years, named disease exclusion for the first couple of years and initial waiting period of about 30 days during which insurers don’t cover hospitalization expenses due to an ailment. The credits on these exclusions can be ported from one policy to another. So if the policyholder has a health policy for two years and wants to change his insurer in the third year, his new insurer will waive the pre-existing ailment exclusion by two years. The new guidelines have changed this definition to allow insurers to not offer, if it chooses to, portability of benefits if the policyholder decides to move from one plan to another within the same insurance company.