Why Health Insurance

The textbook basics on health insurance and the underlying dynamics of how they work.

What is health Insurance?

Health insurance, a phrase interchangeably used with medical insurance, is a type of insurance policy that covers both outpatients (OPD) and inpatient (IPD) medical treatment expenses due to an ailment or an accident. It is not only an important tool to assist the medically vulnerable in their recovery process, but also to prevent them from falling into poverty due to the unbearable cost of medical treatment.

Why Health insurance is important?

Health insurance is important because it encourages people to get timely medical care and thus improves their lives. Research has shown that uninsured people are in general behind in accessing health care services due to lack of financial resources. Millions of Nepalese people are deprived of basic health care despite that being a fundamental right. The Ministry of Health and Population has been providing free of cost 42 types of medicines from district hospitals, and  35 and 25 types of medicine from Primary Health Care Centers and Sub Health Posts respectively. However, the lack of proper infrastructural, high level of absenteeism of health practitioners, and low level of treatment have discouraged people from going to government owned service providers. According to the Nepal Living Standard Survey 2011, 63 % of Nepalese people go to private health care providers despite their weak financial background simply in search of better health care services.

The senior Gynecologist Dr. Bhola Rijal shares his experience that more than 70% patients prefer to go to private hospital after being frustrated by the slower service delivery culture of public hospitals. He adds, “None of the public hospitals provide services free of cost but are charging high amounts of fees, ignoring the free of cost policy provision. That’s why a significant number of people select private hospitals even if they have to pay some additional amount.” As we know, 44% of people live below the poverty line. They cannot afford expensive service cost to get their treatment. That’s why the role of health insurance is very crucial in our context.

Every year 15 million people are pushed towards poverty globally due to unbearable financial burden as a result of treatment, according to the World Health Report 2013.  Though such a study has not yet been conducted in Nepal, it can be easily projected that thousands of people are losing their financial position after obtaining prolonged medical treatment.  Sr. Cardiologist Dr. Bhagwan Koirala states, “It’s been a trend that poor people become poorer after hospitalization of even a few days. However, rich people also face the prospect of becoming poor after treatment here in Nepal.”  He further explains that health insurance is the only security tool that makes health service accessible to the general public without they having to mortgaging assets.

In a nutshell, the continuous surge in the price of health services and the poor public health facilities have expanded the gap between patients and their affordability of treatments. In addition, global climate change is bringing in more critical diseases but our health system is not able to come up with corrective measures. So, a multidimensional health insurance makes it possible for individuals to get treatment by paying negligible amount of money.

Current Trends in Health Insurance

Non-life insurance companies have been offering group health insurance for registered organization only, as designed by the Insurance Board of Nepal. It is a conventional type of policy and is especially available through the employer. Depending on the size and nature of employer, employees may pay only a part or the entire sum of the premium. An organization having more than fifty employees is eligible for the policy. Due to the massive pressure put by trade unions and activist groups, health insurance is compulsorily implemented by some large and middle organizations.

However, individual and family members who are affiliated with such organization are deprived from health insurance despite their capability of paying insurance premium.  In fact, insurance companies take health insurance as a financial and administration burden rather than a profitable segment of insurance industry.  The acting CEO of Siddhartha Insurance, Birendra Baidwar Chhetri shares that insurance companies in general are accepting  health insurance only because of the a fear of losing other business if they stop offering health insurance.  “Many organizations demand health insurance first as a prerequisite before insuring their other property and possessions.”  He adds “Despite unwillingness to provide health insurance, most insurers are accepting it only to attract other businesses.”

Considering the importance of  health of people, Siddhartha Insurance has broken  the culture of insuring only formal sector employees and has been insuring every eligible individual and family since last year. Its policy is commonly considered as a milestone in health insurance development in Nepal

However, lack of awareness in people, lack of health infrastructure, and unavailability of health manpower are taken as major hindrances for the growth of health insurance at grass root level, according to Mr. Chettri.

Cashless Service in Health Insurance

Cashless service is a sophisticated feature now available in health insurance policy.  With cashless hospitalization, customers are no longer required to pay hospital bills on their own and then follow-up for reimbursement.  Under this facility, the insured need not deposit any sum of money before getting hospitalized, nor pay the bill from their pocket except for non-medical expenses and exclusions.  

According to the World Health Report 2010, many people do not go hospital even in serious illness and injury just because they are unable to manage in time.  This condition also prevails in Nepal.  The research concludes that rich people use OPD service where as poor people are forced to use ICU or the emergency ward.  It can be inferred that poor people in general cannot afford to seek treatment in earlier stage because of weak financial background.

As injuries or illness may strike at any moment, and this cashless facility enables the insured to receive treatment, whether or not they have money at that moment.  All they need to do is to get admitted to any of network of  hospitals of the insurer, and concentrate only on their recovery.

Premium and Policy Term

Once you buy a health insurance policy it is valid for a year, and you need to renew upon expiration to keep it effective for successive years.  The final premium rate will be determined according to your requirement, and adds on benefit you have taken.  In fact, 1.5% of the sum insured is charged as the insured’s health insurance premium.  For example, if you are going to buy a health insurance policy of Rs. 1 lakh, now, Rs. 1500 would be premium amount.  The same rate is also applicable for corporations. For example, if there are 25 employees in an ABC organization, the organization has to pay of 1.5% of th sum insured, multiplied by 25 as its premium.

And 2.25 % of the sum insured is charged for a family package, which covers a couple and two children under the age of 21.

 The Social Health Security Development Committee is working on behalf of the Government of Nepal on health insurance in Kailali, Baglung and Ilam.  Under the program Rs. 2500 premium is provides an insurance of Rs. 50000, and covers five members in a family.  However, a family with more than five members needs to pay additional Rs. 450 per person. There are also provisions for people to get discount as per the financial criteria determined by the ministry of Poverty Alleviation.

Exclusions

Health Insurance policy normally does not cover following expenses: all non-medical expenses including transportation and visitors; medicines and medical item other than those prescribed by the doctor ; (Vitamin, Calcium, nutrition and sanitary item); and expenses related to pre-existing disease artificial limb and those incurred during waiting period.

Waiting Period

During the waiting period, also known as elimination period, the health insurance does not cover any type of medical expenses other than the expenses on treatment as result of an accident. The first month after the date of policy inception is regarded as the waiting period in Nepal.

Excess

An excess is the first fixed amount of the total medical expenses that should borne by the insured.  In the hospitalization policy, the excess amount is fixed at Rs. 500 or 10% of the bill amount.  If total bill amount is lower than Rs.500, the insured must pay the entire bill amount from his/her pocket.  Similarly, if the bill amount is in excess of Rs. 500, the insured needs to pay 10% of the total bill amount and the remaining 90% is borne by the insurance company.  Likewise, Rs. 150 or 15% is determined as the excess amount under the domiciliary policy.

 

 

Reimbursement Process

As mentioned earlier, cashless hospitalization service is applicable only in network of hospitals identified by the insurance company.  However, a network hospital may not always be located near the vicinity of the insured.  In this situation, the insured can get service from any of registered health institution at the time of injury or illness.  The insured however needs to file claims to the insurance company within seven days along with original copy of bills/vouchers.  The insurance company will then analyze terms and conditions of the policy and reimburses the money within seven days from the date of the claim registration.