Want Health Insurance Portability? Think Again!

Health insurance portability is much like mobile number portability allows you to change insurers and get credit for time spent with existing insurers  towards pre-existing  disease (PED) and other waiting periods. But, who think that health insurance portability is like mobile number portability, they are in mistaken and living in illusory insurance world.

 

Let us firstly, understand that what health insurance portability is? In February 2011 Insurance Regulatory and Development Authority (IRDA), announced a great option for health insurance customers as they could switch from one health insurance Company to another – called portability.  Earlier, October 2011, if you needed to change to another health insurance company, you have had to become a new customer for them and lose all the benefits of your existing health insurance policy which you have already accumulated such as NCB (No-claim bonus), waiting periods of PED and specific procedure.  Portability has, now changed that. But, it has been 18 months since the launch of the much hyped portability of health insurance; we are still sceptical about implementation of portability due to chiefly three reasons: differential product terms, different definitions used by different insurers and customer resistance to change due to ease and comfort dealing with existing insurer and last but not least your existing NCB may vanish or pay extra premium on thereof.

Consider a real life example, Puneet a family of four bought New India Assurance Mediclaim in 2007 with 30% NCB actually had a cover of Rs5 lakh(base SI) plus Rs1.5 lakh (NCB) = Rs6.5 lakh paying regular annual premium of Rs14,848.  Now, he wanted to port to Bajaj Allianz Individual Health Guard as his agent was convinced that he would have access to a better product at a slightly lower premium and comparison of the two products which closed the deal. The porting was smooth, what was surprising in this example was that Bajaj Allianz actually ported without his  NCB even though it is supposed to be portable. Hence,  Puneet has lost his NCB. According to Bajaj Allianz’s mediclaim SI slab: after Rs5 lakh, it is Rs 7.5lakh. It does not offer SI of Rs6.5 lakh. It means the Puneet has to either settle for Rs5lakh or increase the cover to Rs7.5  lakh and has to be paid annual premium of Rs17,119 for the SI+NCB which defeats his NCB earlier credit!. In nutshell, his NCB may get completely destroyed, or the insurer may port it but only by charging a premium on it. Either way he is a loser.

While this example may give a picture that portability is not seemed to be better deal for him, the reality is that insurance companies do not want to promote portability. In fact, most of them are silent about it. They hope that it does not become a regular feature but remain an exception. In the above example, spending a number of years with an existing insurance company may not help in today’s circumstances.

Most of young customers moved from a government insurance company to a private insurer. That is the dominant trend and may leave the government insurance companies with senior policyholders.  But, the situation may be worse, imagine what will be the value of a senior citizen for that insurance company if he were to try porting, but the new insurance company refused to accept the proposal? It will mean that the senior citizens will have to live at the mercy of the existing insurer as others are not willing to underwrite their portability proposal. The existing insurer will be even more emboldened to try to dismiss the policy holder’s renewal. This is why intermediaries are discouraging senior policyholders from applying for portability.

Customers who will try and opt for other insurers also have to be ensured that most of the major benefits are or will be transferred to the new insurers. Here are the key features to check the portability:

• PED , time-bound exclusions and waiting periods (usually two to four years) for specific procedures like hernia, cataract, kidney stone removal, knee-cap surgery and so on should be taken into account by the new insurer for the period spent with the existing insurance company.

• You have to initiate the process of portability at least 45 days before your current policy’s premium has to be paid.

• The new insurance company will take 15 days to accept or reject your request, after they get the relevant information from your existing insurance company which has to respond within seven days.

• Since the new insurer will do its own underwriting, you could possible end up with a higher premium and medical tests as well.

• The new insurance company has the right to reject your request. If you have had many claims in the past, it is unlikely that another insurance company will accept you in its fold.

• When you switch to another company, you will need to accept a different product. Not all health insurance products are the same; all of them offer something different. So make sure, when you move, that you read the policy wordings on you own to understand what you are signing up for.

Health insurance portability has certainly not addressed the core issue; it is not a right given to the policyholder. The insurance company makes the decision on whether to allow a customer to port or not and you have to abide by it. The new insurer may see it as a risky proposition to give credit to PED and other waiting periods while the existing insurance company enjoyed the fruits of getting the premium till the time of porting.  If you are over 50 years of age or unhealthy, your chances of porting to another service-provider are very low. On the flip side, if you are below 45 and healthy, with no claim history, porting could not be too difficult. Hence, portability will work if there is no medical underwriting.

If a policyholder had no PED when policy was taken with the existing insurer, they should port out unless there is a valid reason like claim rejection, unreasonable premium hike or better policy terms with the prospective insurer. But there are the only customers who are welcomed with open arms by the new insurance company. For others, portability is a great scheme on paper, but remains difficult to implement in reality.