10 new Health Insurance rules you should know
What is Health insurance: Health insurance is an insurance that covers the whole or a part of the risk of a person incurring medical expenses, spreading the risk over numerous persons.
By estimating the overall risk of health care and health system expenses over the risk pool, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to provide the money to pay for the health care benefits specified in the insurance agreement.
The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity.
According to the Health Insurance Association of America, health insurance is defined as “coverage that provides for the payments of benefits as a result of sickness or injury. It includes insurance for losses from accident, medical expense, disability, or accidental death and dismemberment”
10 new Health Insurance rules you should know
- IRDAI has allowed policyholders to pay health insurance premiums in installments
- Buyers will have the option to choose a TPA of their choice.
From monthly premium installments to the option of choosing third-party administrators (TPA), health insurance has recently witnessed a host of changes. Insurance Regulatory and Development Authority of India (IRDAI) aims to make health insurance policies customer-friendly and more standardized.
Commenting on IRDAI’s year-long changes on health insurances policies, Prasun Sikdar, MD & CEO, ManipalCigna Health Insurance, said “The standardization of health insurance is expected to bring uniformity in interpretation as well as simplification, and ease of understanding of policies. This would go a long way in reducing grievances in the industry.”
Let’s take a look at the significant changes in health insurance policies:
1) For the first time in the history, IRDAI has allowed policyholders to pay health insurance premiums in installments. Now, one can pay insurance premiums on monthly, quarterly or half-yearly basis. However, the free-look period for monthly or quarterly premiums will be lower than what you get while paying annual premiums.
2) The regulator has made changes to cover existing health conditions in favour of policyholders. IRDAI asked insurance companies to mention pre-existing diseases, which would not be covered up to a specified period of not more than 4 years from the start of the coverage with the firm.
Customers now has the option of declaring any disease contracted up to three months after taking the policy.
3) IRDAI has allowed insurers to increase the maximum age limit filed for insurance policies. Usually, the maximum age limit of health insurance policies filed is up to 65 years. The insurer needs to inform the regulator on a certification basis about the change, said IRDAI.
4) Insurance regulator Irdai mulls barring insurers from excluding several critical illnesses such as mental problems, genetic diseases, neuro-development disorders and psychological disorders from health insurance policies. “Treatment of mental illness, stress or psychological disorders and neurodegenerative disorders,” should not be included in exclusions listed in the policy.
5) IRDAI has also asked insurers to increase the maximum age limit criterion for health insurance policies. Usually, the maximum age limit of health insurance policies is up to 65 years. The insurer also has an option to decrease the minimum age for insurance policies.
“A customer with age of 60 and above will have to pay a relatively higher premium amount, this could cause a strain in the finances,” said Sanjay Datta, Chief – Underwriting, Claims, Reinsurance and Actuary, ICICI Lombard General Insurance Company Ltd.
6) Health insurance companies can increase or decrease premiums by 15%, caused due to the modifications, based on the loss-ratio numbers of the last three financial years, IRDAI said.
7) IRDAI said change of premium rates resulting in an increase should be only after expiry of three years from the date of launch of approved or modified individual product. “Change of premium rates resulting in the increase shall be only after expiry of three years from the date of launch of approved or modified individual product,” said IRDAI.
8) IRDAI has recently asked health insurance companies to provide a list of TPAs to policyholders at the time of selling a policy. Buyers will have the option to choose a TPA of their choice. However, policyholders are only allowed to change a TPA at the time of renewal. The insurer may also limit the number of TPAs based on the health insurance product and geographical location of the policyholders.
“Health insurance consumers had an eventful 2019, as they were presented with better health insurance policies, wider coverage for their pre-existing illnesses, and ease in premium payment options. Interestingly, several changes in the conditions of coverage for existing health conditions has been done in favour of policyholders,” said Prasun Sikdar, MD & CEO, ManipalCigna Health Insurance.
9) Health insurers are allowed to introduce additional distribution channels for particular products. The insurance companies do not have to wait for regulator’s approval. They can make minor modifications in approved individual insurance products on a certification basis.
10) With a slew of changes in the 2019, insurance companies have improvised its services for customers by adopting cutting edge technology. It is likely to get momentum in 2020, said Sikdar, ManipalCigna Health Insurance.
Is Health Insurance Mandatory?
Understanding the rules for health insurance can be confusing
Do you have to have health insurance? The Affordable Care Act (ACA), signed into law in 2010, was designed to make health insurance coverage more affordable for Americans through the creation of tax subsidies, while also opening up Medicaid eligibility to more low-income individuals and families. The ACA effectively made having health insurance mandatory; not having it meant you would incur a tax penalty.
But what about now? What is the penalty for not having health insurance today? If you don’t have it, does the rule still apply? Here’s what you need to know about mandatory health insurance coverage.
Affordable Care Act’s Coverage Mandate
Under the ACA, also called Obamacare, Americans who were not otherwise eligible for an exemption were required to have health insurance coverage for themselves and their families.
Failure to have minimum health insurance triggered a tax penalty; at the same time, the ACA allowed for the creation of a premium tax credit to help Americans offset some of the cost of getting health insurance through the healthcare marketplace.
This rule changed in January 2019, when the tax penalty mandate for health insurance was eliminated. While the ACA technically still exists, Americans who choose not to maintain health insurance for themselves or their family members in 2019 and beyond won’t be penalized at tax time.
It’s estimated that as many as four million Americans will choose not to have health insurance coverage this year as a result of the penalty being eliminated.
State-Imposed Rules on Health Insurance Coverage
While the federal government no longer requires you to have health insurance, there are a handful of states that have mandates on the books regarding coverage or are trying to pass laws to make health insurance mandatory.
The states that require or have laws set to take effect that will require coverage include:
California, Massachusetts, New Jersey, Vermont
Washington, D.C., also requires residents to purchase health insurance. Other states—including Connecticut, Maryland, Hawaii, and Rhode Island—have also attempted to pass legislation that would make health insurance mandatory for their residents.
In states where health insurance is mandatory, the rules for getting and maintaining coverage are similar to those under the ACA, with coverage available through state-run health insurance marketplaces.
No Mandatory Health Insurance: The Advantages…
The primary upside to health insurance no longer being mandatory at the federal level is the money you don’t have to spend on premiums that remains in your pocket.
“If you’re young and healthy, it’s possible to get by without paying a monthly bill for health insurance, which saves you money,” says Chane Steiner, CEO of Crediful, a personal finance website. That could be helpful if you’re trying to pay off student loans or save money toward a down payment on a home.
Of course, if your employer offers some type of health insurance coverage as part of your benefits package, you may be able to get affordable coverage anyway, without having to shop around for it.
Christina Nicholson, owner of Media Maven, opted to cancel her health insurance and pay out of pocket for pregnancy-related medical expenses that her plan didn’t cover. She first considered adding herself to her husband’s health insurance, but their premiums would have increased by over $1,000 per month so she opted to pay her own medical bills.
Fortunately, she was able to negotiate discounts from her hospitals and doctors, which ended up costing her significantly less money than she would have paid had she been covered. In one instance, the difference between the cost of medical tests with insurance was $1,900 more than her negotiated fee without insurance.
…And the Disadvantages
It takes a very savvy healthcare consumer to score discounts from providers, not all of whom will necessarily go along with such requests. Normally, insurance companies, not individuals, are the ones negotiating with hospitals and doctors to lower prices for large member groups.
The main drawback when health insurance isn’t mandatory, however, is the risk you assume when choosing the self-pay route. The downside of going health-insurance-free could be substantial if you end up needing expensive medical care and you don’t have the money to pay for it from savings or your monthly income.
“You’re one major accident or illness away from falling into long-term debt, as medical bills can be quite excessive out of pocket,” Steiner says.
Even a minor health issue could result in a financial setback. According to the United Health Group, the average cost of an emergency room visit to treat issues that could be handled at an urgent care or primary care facility was just over $2,000 in 2018.
That cost is 10 times higher compared to seeing an urgent care doctor and 12 times higher than primary care, but people who don’t have health insurance may assume the ER is their only option if they get sick or hurt. Plus, illness and medical bills are known contributors to bankruptcy.
Options for Health Insurance Coverage
Before going without health insurance, Nicholson reviewed all of her options, which included being added to her husband’s plan and enrolling in a healthcare cost-sharing program. Those are also things you might consider if you’re without health insurance or thinking about canceling your plan since coverage is no longer mandatory.
You may consider short-term health insurance or catastrophic care policies, but these have their limitations, in terms of what’s covered and who’s eligible. Applying for Medicaid may also be an option, but whether you qualify is dependent on your income and family size. Each state has different guidelines with regard to the income and asset thresholds allowed for eligibility for Medicaid coverage.
The Bottom Line
Not being required by federal law to have health insurance coverage doesn’t mean you don’t need it. If you don’t have health insurance, take time to research coverage options to determine which is the best fit for your healthcare needs and budget.