New Health Insurance Regulations: Practical Difficulties Remain, Say Experts

Ever had a health insurance claim denied? Or stood in line at a hospital waiting for hours to complete a painful claim settlement process, so you can take your loved one home? The insurance regulator is trying to fix these issues. In a master circular released on Wednesday, the Insurance Regulatory and Development Authority of India introduced several changes to regulations that govern health insurance.

Foremost among the proposed changes are timelines for cashless settlement, making health insurance available to all, and an attempt to reduce the denial of claims.

"These are extremely customer-friendly measures and will help in establishing trust in health insurance among the masses," said Amit Chhabra, chief business officer of Policybazaar. "Health insurance is the need of the hour, given the increasing incidence of critical illnesses and the increasing medical costs."

"These steps will all get implemented by Sept. 30 and will significantly improve the customer experience for policyholders," he added.

However, industry insiders say that the changes in regulations, while a step in the right direction, may be difficult to implement.

Quicker Cash Settlement

The regulator wants to make sure that the waiting period during cashless settlement is kept in check. The master circular requires insurance companies to clear pre-authorisation within one hour and complete final settlement during discharge within three hours.

However, this may be hard to accomplish, according to an industry insider who spoke with NDTV Profit on the condition of anonymity. Often, the delays are not because of a lackadaisical approach by the insurance company, but because of a delay in the sharing of information by hospitals, the insider said.

Health Insurance For All

In an attempt to make health insurance available to all Indians, irrespective of their age and existing medical conditions, the regulator has said products must be crafted to cater to more people based on age, region and treatment.

For example, it has always been harder for senior citizens to buy health insurance policies because of the high premium. The new regulation calls for policies to be issued to people of all ages, including senior citizens. It even calls for products to cater to those with chronic illnesses.

On paper, this sounds like it would be a positive change, but implementation on the ground could look very different.

"The manner of implementation remains a concern despite the policy being a good step to make health insurance accessible to people of all ages," said Arnav Pandya, financial consultant and founder of Moneyeduschool.

"We could come to a situation where the premium could be so high in comparison to the cover that it might even make the individual think about building their own corpus," he said.

The person quoted above makes a similar point. Insurance companies may be forced to make products available for all people, but underwriting is ultimately their prerogative, the person said. In other words, insurance companies could create a product and still choose to not sell it to anyone.

Pre-Existing Illnesses

If the regulations are implemented in their new avatar, a claim cannot be denied if a health insurance policy is over five years old, even if a pre-existing condition existed and was not disclosed. This is called the moratorium clause. The caveat is that a claim could still be denied in the case of fraud.

For example, if an individual had a chronic liver disease when they bought an insurance policy and didn't disclose it, and if they paid the premium for five years, their claim based on the new regulation cannot be denied by the insurer.

Again, implementation will be a challenge.

There's no clear definition of fraud, said the person quoted earlier, adding that nothing really changes. The non-disclosure of the pre-existing condition could be interpreted as fraud and a claim can still be rejected, the person said.

Miscellaneous Changes

There are also smaller steps like the requirement for insurers to provide a Customer Information Sheet that will provide them with details related to their sum insured, coverage, exclusions, sub-limits, deductibles and waiting period.

And finally, people that haven't made any claims can avail the benefit of a no-claim bonus, in the form of either an increased sum insured or a discount in the premium paid for the next year.