Understanding Group Health Insurance Policy

Here are some health insurance-related terms explained to help you understand your policy better.

Sum Insured (SI)

The 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 employee can claim 5Lacs per year. Any amount exceeding the sum insured will have to be borne by them. 

Room Rent and ICU Limits

Insurance plans usually limit room rent and ICUs cost, generally between 1% to 2% of the 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 health insurance with the sum insured (SI) as ₹2 Lakhs, and the room rent submission 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 a “proportionate deduction”. Proportionate deduction comes into force when you pick a room with a tariff 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 the room rent limit to the actual rent paid.

In the above scenario, since the room rent limit was 25% of the actual room picked, the insurer will pay only 25% of the entire bill except for 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 most significant source of dissatisfaction.

Here’s a detailed article on how these limits work>

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E-Plan, ESC-Plan, ESCP Plan

These are three types of plans that are there in group health insurance which define the scope of the policy. 

• E-Plan: This is the Employee Plan. Covers your employees only. 
• ESC-Plan: This is the Employee, Spouse, Children Plan. Covers your employees and their family.
• ESCP-Plan: This is the Employee, Spouse, Children, Parents Plan. Covers your employees and their family, including parents.

Copay

Some health insurance coverage 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. 

Waiting period

A waiting period is a time an insured must wait before some or all of their coverage comes into effect. Retail insurance products have four types of waiting periods.

1. Initial waiting period: If the person gets hospitalized in the first 30–90 days from the start of the policy, he/she won’t receive any claim benefit from their health insurance policy if they fall sick or gets hospitalized.
2. Disease-specific waiting period: There is a specific waiting period varying between one year and three years for particular ailments like a tumour, ENT disorder, hernia, cataract, piles and sinusitis.
3. Pre-existing disease waiting period: Most insurance products do not cover pre-existing diseases. They add a waiting period of 2 to 4 years of continuous policy coverage if they cover.
4. Maternity benefits waiting period: Some health insurance products provide maternity benefits, but these benefits also come with a waiting period varying from 9 months to 36 months.

Pre-existing diseases

Pre-existing disease means any condition, ailment, injury, or related condition(s) for which the insured had developed signs or symptoms and/or were diagnosed and/or received medical advice/treatment within 48 months before the first policy with the company.

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