The covid-19 pandemic has sharply underlined the importance of having a health insurance policy to deal with treatment costs. But there are major gaps in the design of such policies—in costs which are not covered. Mint explains the typical gaps and how to fill them.
What are out of pocket expenses?
Out of pocket expenses are costs associated with an illness that you pay from your own pocket. They are not covered by your health insurance policy. For instance, money spent on consumables (such as medicines and PPE kits), deductibles (amount you must pay before the policy kicks in), co-payments (expenses that you must pay alongside the insurer), and sub-limits (such as insurance caps on room rent). Therefore, this is something that the insured ends up paying from his or her pocket. Media reports suggest that such expenses make up to 30-50% of the total amount spent on covid-19 treatment.
Why are these expenses so high?
Today, while providing treatment to patients, the use of personal protective equipment (PPE) kit is necessary to contain the spread of covid-19. The PPE kit normally includes a pair of nitrile gloves, a single-use coverall, glasses, an N-95 mask, shoe covers and a face shield. Since each of these items is separately considered as a consumable, there is a significant increase in the number of consumables used in the treatment of diseases such as covid-19. In addition, your insurance policy may not cover all diseases, and it may have high deductibles or sub limits such as caps on room rent.
What is not covered under a health insurance?
Generally, insurers don’t provide coverage for any pre-existing diseases (PEDs) for 2 to 4 years when buying a health policy. These include high blood pressure, diabetes, thyroid, asthma and even covid-19. Other common exclusions are maternity benefits, cosmetic surgery, dental surgery, joint replacement, etc. Also, outpatient treatment isn’t covered by insurers.
How can you take care of such expenses?
Careful selection will cut down your out of pocket expenses, but no insurance policy is going to take care of all expenses. So build an emergency corpus of 6-12 months of expenses in a savings account, fixed deposit, or liquid fund. Consider topping up your emergency corpus if you already have one. If you do not have an emergency corpus, you will have to liquidate assets. As a very last resort, you can borrow money, but avoid taking on credit card debt. A loan against property or a personal loan will have lower interest rate.
What can you do to minimize expenses?
Buy a comprehensive health policy with low deductibles and exclusions to minimize the overall treatment cost. Review the insurance coverage every year and top it up as medical costs increase. While taking treatment, you should go with the network hospitals of the insurer. Ask for options for the recommended tests or procedures and over the counter medicines. Carefully check the medical bills—some hospitals may tend to overcharge for various procedures and insurers reject such claims.
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