A working group constituted by Insurance Regulatory and Development Authority of India (IRDAI) under Suresh Mathur, Executive Director (Health), IRDAI, to study the standardisation of exclusions in health insurance sector has submitted its report.
The working group submitted the report after carefully examining the suggestions made by various stakeholders and studying different exclusions in India and the practices followed in some of the developing as well as the developed countries. The working group also took into consideration the state of the healthcare sector in the country and the lack of unity and regulatory provisions in the sector.
Commenting on the report, Vaidyanathan Ramani, Head of Product and Innovation at Policybazaar.com, said:“The report is very customer friendly. The objective of the committee is to try to reduce the ambiguity around health insurance exclusions and make them more standardised.”
In its report, the working group recommended that all health conditions acquired after policy inception, other than those not covered under the policy contract, such as infertility and maternity, should be covered under the policy and cannot be permanently excluded. Thus, the exclusion of diseases contracted after taking a health insurance policy will not be permitted. The group has recommended that there should not be any permanent exclusion in the policy wordings for any specific disease, whether they are degenerative, physiological or chronic in nature. According to the working group, permanent exclusions can be incorporated only at the time of underwriting.
Vaidyanathan Ramani said the working committee has recommended that there should be only 17 defined exclusions which should be permanently excluded. “The exclusions will be clearly defined in keeping with customer understanding. Broadly, only 17 exclusions will be allowed in general, but in specific cases, exclusions may come from the individual having a severe condition and with their due consent,” he said.
Limited waiting periods
The working group has also recommended allowing insurers to incorporate waiting period for any specific disease. But it should be for a maximum of four years. It suggested the inclusion of sub-limits or annual policy limits for specific diseases or conditions in terms of amount, a percentage of sum insured or by the number of days of hospitalization or treatment in the product design. However, the working group added that any limits or waiting periods incorporated by the insurers as a part of the product design shall be based on objective criteria and sound actuarial principles. Vaidyanathan Ramani felt that the waiting period must be reduced to 30 days for certain conditions like hypertension, diabetes and cardiac problems.
The working group has recommended allowing insurers to incorporate permanent exclusions with the due consent of the proposer, which will allow a wider section of the population with serious pre-existing diseases to avail of health insurance, including persons with disabilities. It has observed that non-declaration or misrepresentation of material facts is a major concern in health insurance contracts. The insurance companies generally invoke cancellation clause for non-disclosure or misrepresentation. The working group has recommended that in such cases, the insurer can take consent from the insured person and permanently exclude the condition and continue with the policy if the non-disclosed condition is from the list of the permanent exclusions. But if the non-disclosed condition is not from the list of permanent exclusions, then the insurer can incorporate additional waiting period for a maximum of 4 years for the condition non-disclosed from the date the non-disclosed condition was detected and continue with the policy. This will not prejudice the rights of the insurer to invoke the cancellation clause under the policy for non-disclosure or misrepresentation.
The working group has recommended a period of eight years of continuous renewals for raising issues related to non-disclosure. After this, claims shall not be questioned based on non-disclosures or misrepresentations at the time of taking the policy. It has also proposed to review and standardize the exclusions applied by insurers for alcohol and substance abuse.
It suggested the formation of the Health Technology Assessment Committee for examining and recommending the inclusion of advancements in medical technology as well as new treatments and drugs introduced in the Indian market for coverage under Insurance. According to the working group, a detailed procedure based on international practices needs to be followed by the committee for inclusion and exclusion of modern or new technologies and treatments. It suggested that no exclusions should be permitted for any advancement in technology and advanced treatments if they are in the list approved by the committee.
The working group further recommended that the insurers should not deny coverage for claims of oral chemotherapy, where chemotherapy is allowed, and peritoneal dialysis, where dialysis is allowed. It suggested that insurers start adopting an Explanation of Benefits (EOB) in their prospectus as well as policy schedule and wordings, which can be easily understood by customers. After reviewing the entire list of optional items, the working group suggested classification of existing optional items into items that may be retained as it is as optional items, costs that are to be subsumed into room charges, costs that are to be subsumed into specific procedure charges, costs that are to be subsumed into the cost of treatment and costs that are to be subsumed into diagnostics.
The working group observed that the changes recommended in the report would have some effect on the pricing of the respective products. It proposed that policy wordings would also have to be reworked and filed with the regulator. The insurance companies also stated that the prices of policies are likely to go up if the recommendations are implemented. The working group also recommended that all deaths due to vector-borne disease should be classified as death due to disease and not as death due to accidents. But injuries or death caused by mauling by wild animals, snake bite, scorpion bite and dog bites can be termed as accidental injuries.