Here's everything you must know about indemnity-based health insurance policies

Pandemic or no pandemic, what is your all-time trusted aid for an unplanned medical emergency? A good health insurance plan.

Buying a health insurance policy has become a necessity in these uncertain times, with the rising cost of health care and a desk-bound lifestyle leading to more frequent trips to the hospital.

The most common plan opted by most Indians is the indemnity-based health insurance plan also known as a mediclaim policy.

What is indemnity-based health insurance?

It is a health insurance plan that reimburses the policyholder cost of actual hospitalisation expenses incurred during the treatment up to the limit of the sum insured. For example, if a policyholder chooses a sum insured amount of Rs 10 lakh and is presented with a hospitalisation bill amounting to Rs 5.5 lakh, the insurance company will pay out Rs 5.5 lakh to the policyholder.  The remaining balance from the insured sum can be utilised for a future claim until the policy term expires.

Any patient admitted for more than 24-hours in a hospital can claim this policy.

What does it cover?

The policy covers pre-hospitalisation expenses, in-patient treatment that includes doctor’s fees, charges for ICU beds, hospital rooms, diagnostic tests, surgery, medicines and other daycare treatment (dialysis, eye surgery, angiography, etc.) It also covers post-hospitalisation and cost of Covid-19 treatment as well.

The policy works on the principle of indemnity – expenses are reimbursed on account of actual bills provided by the applicant. The amount will always be subject to the limit of sum insured.

In case of home hospitalisation, cost of treatment is covered under ‘domiciliary treatments’. This is a part of most health care plans.

What is a co-payment?

Indemnity-based health insurance policies often include a co-payment clause- a fixed amount that is pre-established. Out of the total bill, this amount is paid by the policyholder while the remaining is substituted by the insurance company.

However, there are policies that do not come with a co-payment clause and the entire amount is reimbursed by the insurer (up to the limit of the sum insured).

Cashless treatment

In case of cashless treatment, medical expenses are settled between the hospital and the insurance company. The insurance company generally does not pay the full amount on account of non-payable, exclusions and sub-limits. The policyholder should always set aside some money as an emergency fund for footing hospital bills.

During the current pandemic, many people complained of hospitals denying cashless treatment and the entire fiasco around network and non-network hospitals came to the surface.

“When my wife’s oxygen level dropped suddenly in the middle of the night, I couldn’t wait to find a network hospital and had to admit her wherever we got the bed. Now the hospital denied accepting cashless payment outright. I had to wait for my wife to get discharged, arrange all the bills, scan it and send the insurance company for reimbursement,” Ashwini Kumar from Lucknow said.

Insurance companies have tie-ups with certain hospitals and medical facilities. If you avail of the facilities of a network hospital, one is automatically eligible for cashless treatment. However, during the pandemic, many hospitals denied it to families even after the IRDAI stated otherwise.

Hence before applying for insurance, make sure to find the list of network hospitals it includes.

There are also a number of expenses not covered within every indemnity-based insurance plan like the cost of post-operative care and medicines. Therefore, while you must opt for indemnity insurance, experts suggest adding a fixed-benefit plan (it reimburses for pre-decided illness) to your portfolio as well.