What hidden clauses to be careful of when buying a group health policy for your company?

Over the last year, many companies have re-looked at their corporate health policy and have rushed to insure their team members at the earliest opportunity. But many of them have discovered the feared "hidden clauses" and "gotcha moments" the hard way.

Whether you're a 10-employee startup or a 2000 employee company, buying health insurance can be a complex process and you want to be careful about the coverage provided. This will ensure you're ending up with situations where only 50% of the hospital bill is being paid by the insurer despite the bill being within the insured amount.

Here are five important clauses to look out for in your health insurance policy.

Sum-insured

This is the maximum liability of an insurance company. Most people assume this automatically means expenses upto this limit are covered.

If you have a sum-insured of 3L, this means employees are eligible to have upto 3L of medical expenses related to hospitalization covered in the policy. However you need to look at the following clauses to understand what further restrictions apply.

Room-Rent Limits

This is one of the most important common hidden clauses or 'gotcha' since it is least understood.

Lets say your insurance policy only provides a 3L sum-insured with a Rs 3,000 rupees room-rent limit (1% of sum-insured). In a city like Bangalore, room-rent limits can be around Rs 6,000-10,000 or even more. Now, if you opt for the Rs 6,000 room (twice your room-rent limit) and have a total medical bill of Rs 3 Lakhs , only Rs 1.5 Lakhs may be covered under insurance. This is because your maximum room-rent eligibility is only 50% of what you've actually opted for at the hospital. Hence only 50% of your overall medical bill, ie, 1.5L would be paid.

All medical expenses in a hospital are linked to room rates. This is similar to how your food bill increases when you go to the AC section of a restaurant, medical expenses increases with increasing room category and rents at the same hospital.

To make an informed decision, understand what are the average room-rents in your city and have a room-rent limit that is equal to or above that.

Co-Pay Clause

A 20% co-pay means the employees will pay 20% of every bill, regardless of whether the sum-insured amount is exhausted. On a bill of 2L covered under insurance, the employee will still have to pay Rs 40,000. The larger the bill, the more the out-of-pocket expenses start to add up.

A variation of this clause occurs when co-pay is applicable for "non-network hospitals" - hospitals that don't have a cashless facility with your insurer. Given that approximately 60% of claims take place in non-network hospitals, this can cause a lot of unexpected heartburn.

Sometimes companies will have a co-pay clause as a loss mitigation step so that employees have some 'skin in the game' and are thinking about the expense incurred for hospitalization. Just make sure you're informed about this clause in advance.

Waiting-Periods

Group Health Insurance policies usually don't have waiting periods- your employees are covered from day-1 as long as you paid the premium on time.

If you are offered a discount in exchange for inserting a waiting-period clause, please refuse. The biggest advantage of a group health plan is that there are no waiting periods to make claims, avoid compromising on this. Also note that Retail or Individual Health insurance policies usually have waiting periods. This is one of the reasons to provide coverage to employees regardless of whether they purchase retail policies of their own.

Pre-Existing Conditions

Group Health Insurance policies usually don't have restrictions on covering pre-existing conditions. Similar to waiting periods, please avoid trading this for a discount on the premium amount.

Retail or Individual Health Insurance policies usually have restrictions on pre-existing conditionsd and that should be enough to pick a good policy for your company. Scruitinize room-rent limits, co-pay, waiting periods, and restrictions on coverage of pre-existing conditions. Optimise the sum-insured amount to meet your budget.

If you do this, your employees are likely to have a much improved claims experience.

Source: The Economic Times