Topic : Mental health, disabilities, HIV/AIDS to be covered under a standard insurance policy

The Insurance Regulatory and Development Authority of India (IRDAI) has recently mandated insurers to cover these conditions under a model product framework that it has devised. It is a model setting out the minimum scope and parameters for design of the product. In other words, insurers may widen the scope of this product, but in no case can the scope of product be narrowed down.

A model schemes

In India, regulations in place already mandate that mental and physical illnesses be treated on par.

The Mental Healthcare Act, 2017 came into force in May 2018, prompting the Insurance Regulatory and Development Authority of India (IRDAI) to direct insurance companies to comply with the provisions.

However, individuals with these conditions continue to face challenges while buying health covers. Depending on the severity of the condition, insurers can choose to reject the proposals too.

Now, however, the insurance regulator has taken another step towards ensuring coverage for people with mental health issues, HIV/AIDS and disabilities. It has come up with a model product construct for offering coverage specifically to those suffering from these issues. Also, companies will now have to put in place board-approved underwriting (process to ascertain risk and determine premiums) policy for extending coverage to such lives.

IRDAI’s mandate for bringing in force a board-approved underwriting policy to ensure that no proposal is rejected on the grounds of these diseases is a pro-customer move. India has 6-7 percent of the population suffering from mental disorders. The move will bring transparency and offer a wider choice of health insurance plans to the customers.

This product will be on the lines of standardised products, such as Aarogya Sanjeevani, Corona Kavach and Saral Pension mandated by the IRDAI earlier. However, in this case, insurers can introduce features and benefits beyond what they are bound to, as per regulations. Put simply, the chances of people in this category obtaining health insurance coverage will go up.

Coverage for pre-existing disabilities, mental health conditions and HIV/AIDS

Insurers will have to get down to designing products with the model scheme released by IRDAI in mind. This is a cover specifically for people with mental health conditions, HIV/AIDS and physical disabilities; so, the pre-existing conditions are known. It is a good initiative as it ensures transparency. Inadequate disclosures create challenges for insurers at the time of claim settlement. We are studying our claim experience around such lives and working on the structure and pricing.

Besides these known pre-existing conditions, insurers will also take into account other health issues. “For instance, if someone has just suffered from a heart attack, there could be a cooling off period. Or someone could be undergoing cancer treatment, which will have to be factored into the medical underwriting,” he adds. Though HIV/AIDS, mental ailments and disabilities will have to be covered, other illnesses could still lead to denial of coverage under this product. Industry-watchers say premiums could be on the higher side. Premiums are bound to be steeper as the pre-existing conditions are known upfront and risk is higher.

Key features and restrictions

The sum assured (SA) options under the model product construct are Rs 4 lakh and Rs 5 lakh. Available as an individual, reimbursement-based product, adults in the age group of 18-65 years are eligible to make the purchase. Covers can also be bought for newborns and minors up to the age of 17.

The minimum degree of disability to be eligible for this product is 40 percent, as certified by government authorities, in line with the Disability Act, 2016. Nearly 20 disabilities listed in the policy fine print that will be covered include blindness, hearing impairment, mental illness, cerebral palsy, Parkinson’s disease and muscular dystrophy.

In addition, those with HIV/AIDS will also be covered. At present, proposals of those suffering from HIV/AIDS could be declined straightaway by insurers. Now, IRDAI’s move will ensure that health insurers give such individuals a fair opportunity to obtain cover.

Hospitalisation, day care covered but sub-limits will apply

It will cover hospitalisation and day care expenses. However, room rent is restricted to 1 percent of the SA, while ICU charges are capped at 2 percent. Cataract treatment for such individuals will be capped at Rs 40,000.

The waiting period for pre-existing diseases – other than disabilities and HIV/AIDS declared in the policy – will be 48 months from the date of policy issuance. More importantly, the product comes with a 20 percent co-pay – of the approved claim, the patient will have to bear 20 percent of the expenses before the insurer chips in with the rest.

A cover designed specifically for those with HIV/AIDS, disabilities and mental health ailments will send the right message to individuals as well as the insurance industry. It comes with co-pay and sub-limits, which is not ideal, but is still a better option than not being covered at all.

However, from the individuals’ perspective, the verdict on whether such a product will be useful or not will also depend on the affordability. I f the premiums are prohibitively expensive, the purpose of rolling out a model product construct and mandating coverage will be defeated.