It is undoubtedly understood that medical insurance is a necessary risk cover which every family must have. The sky rocketing hospitalization costs can make a deep dent into the financial networth of a family. This blog post discusses top reasons why medical insurance claims get rejected and how one can prevent these mistakes. However, before going further into the post, I would recommend reading our background post on Basics of Medical Insurance.
Medical Disclosures – New Policies
This is one of the most common reason behind rejection of claims. An Insurance Company is fair in asking about any pre-existing diseases / illnesses / surgeries that a person has before agreeing to extend an insurance cover. A person seeking insurance may knowingly hide a medical condition, fearing a rejection of the policy or a higher premium. At times, an existing illness becomes an integral part of a person’s life and it doesn’t strike the person that it needs a disclosure. Surprising as it may seem, common ailments like hyper tension / blood pressure / Thyroid related ailments are often forgotten at disclosure stage. In other cases, an illness which got cured is missed in the disclosures. Whatever may be the reason, non disclosure makes a policy extremely vulnerable for future claim rejection as it starts with a false base.
Consider this – if an insured person did not disclose for example a hypertension illness while taking the policy. In an event of hospitalization, it is highly likely that the treating doctor would identify this issue and make a note in the hospitalization case file. This file goes to the insurance company for settling the claim. It becomes highly likely that the claim could be rejected as the Insurance Company would have no records of such an ailment as pre existing disease disclosures.
My take > It is better to have a proposal being rejected or being issued with a higher premium, than paying premiums on a policy which is taken on a false ground resulting in potential claim rejections.
How much Disclosure is good ?
I would say – over disclosure is better than under or no disclosure. An experienced insurance advisor would be able to assist in identifying the required disclosures and getting this documented in the insurance application. Yes there are odd situations like a minor fracture which occurred decades back – would you want to disclose it ? I would say a Yes again. In most of such situations, the policy issuance ignores these disclosures if they are considered immaterial.
My take > let the decision of materiality of disclosure be with the Insurance Company rather than at your end.
Room Rent Capping
Many insurance policies, particularly employer offered group medical insurance policies provide cover only upto 1-2% of the sum assured as the daily room rent limit. For example, if your insurance policy has a sum assured of 5 lakhs and it has a daily room rent capping of 1% of sum assured, the admissible daily limit of hospital room rent will be Rs. 5000. In many hospitals at sub Rs. 5,000 per day, a single room is not available. One would need to downgrade their hospitalization stay to a shared room to fit into the admissible room rent limit as per the insurance policy.
If one ends up taking a room whose daily limit is greater than the room rent capping, the insurance Company will only approve the proportionate claim. For example, if one ends up taking a room whose rent is Rs. 10,000 per day, the insurance Company will only pay 50% of the overall hospital bill, upto the sum assured, i.e. Rs. 5 lakhs in our example.
My take > Either take a policy with higher sum assured so that despite of room rent capping, the available limit is high enough. Alternatively, go for medical policies which have no room capping.
A hospitalization bill breakup includes procedure cost, room rent cost, doctor visits, medications and certain consumables & non medical items. The consumable & non medical list could include things like gloves, utility charges, slings, braces, toiletries, masks, thermometers, etc. The insurance policy documents detail around 60-100 items which are classified as non medicals and are not covered in the policy. Generally the cost of such items can range between 5-15% of the medical bill. There is nothing much which an individual can do to avoid them, but these can be definitely limited by keeping an eye on such items being given to a patient without any specific need.
My take > Consider adding a deductible add-on cover on your policy (if this feature is available in your policy). This would cover such expenses.
Poorly Substantiated Claims
An insurance company intends to confirm that a medical expense must be required and must be sufficiently substantiated to ensure that they were actually incurred. The industry is marred with fraudulent claims and such a requirement by the payer of the Claim is justified to protect its interest.
To justify that a medical expense is required – all expenses musts be supported by a prescription of a qualified doctor. In addition, these expenses must be related to the hospitalisation event. To substantiate that the expenses were actually incurred, all expenses must be supported with a proper invoices and medical reports. If either of the two is missing, it the claim may get rejected.
We do appreciate that when an emergency hospitalization is needed, keeping a track of all prescriptions, bills and reports may not always be on top priority. However, as the medical situation stabilizes, one must get the supporting documentation in order before filing the claim. In COVID, there have been so many cases where the drugs needed for the treatment were prescribed but weren’t purchased with a proper invoice and vice versa. Or the amount paid for the treatment was more than on the invoice. All such claims were not fully paid by the insurance Companies for the reasons mentioned in this paragraph.
My take > Guard the prescription and the invoice.
Allowing porting of medical insurance policy has been one of the best thing done to the product by the insurance regulator. A few insurance policy doesn’t cover specific medical ailments for the first two years. Any existing medical ailment may not be covered for upto four years. Each year, one adds to the existing medical history held with an insurance company. This is critical as it enhances the coverage with passage of time, i.e. providing coverage to ailments after two years and pre existing illnesses.
Prior to porting, if one moved from an insurance company to another, the entire clock would get reset. In other words, one loose coverage for specific ailments for 2 years and pre existing ailments for upto 4 years. As a result, one was forced to stick onto an insurance provider for years despite of poor policy conditions and expensive premiums. With porting, one can now move the insurance coverage from one insurance company to another and ‘port’ their medical history to allow no break in their medical coverage.
However there is a slight glitch here > In many cases, one may take a policy say 5 years back and develop an illness post taking the initial medical insurance. As a result, there would be no document record of such ailment being recorded with the existing insurer. If one intends to port their policy to another insurer, one must be extremely diligent to disclose all ailments which were acquired in the past. A side effect is > the subsequent insurer may consider such disclosed ailments as ‘pre-existing’ medical condition and may not cover them for next 3-4 years. A good argument is – such a condition was in existence during the previous policy coverage period. However, in absence of any documented communication with the previous insurer, the new insurer is likely to reset the medical history for such pre existing ailments. And if one chooses to stay silent (knowingly) or avoids disclosing (unknowingly), the subsequent insurer may reject the claim associated with such a pre-existing medical ailment owing to lack of disclosure.
My take – if a person has any major pre-existing ailment which is not documented in the renewal notice of an existing medical insurer, such a person should not port to a new insurer. If one really needs to port, then it must be done with a full disclosure to avoid rejection of future claims.
In the end, I would also like readers to visit Beshak’s website, an organisation which specialises in insurance advisory – an unbaised resource for insurance products, claims and lots of learnings. I personally have benefited from their knowledge sharing sessions.