It is a combination of a hospital cash cover and a defined benefit policy for the entire (immediate and extended) family. But can it compete with mediclaim?

Raj Pradhan

LIC (Life Insurance Corporation of India) has launched a new non-linked health insurance plan called ‘Jeevan Arogya’. The company has sold more than 10,000 policies in less than a week and expects the product to be a grand success. The policy offers comprehensive hospitalisation benefits for the whole family of the principal insured. The plan also offers to cover the parents-in-law of the principal insured besides the spouse, minor children and parents up to age 80. This is a combination of hospital cash and defined benefit policy. This plan is not a substitute for mediclaim, but can act as a supplement.

A mediclaim policy only reimburses the expenditure incurred on the treatment of an illness at a hospital. There are several other expenses that are, typically, incurred which mediclaim policies do not reimburse. Expenses such as travel, attendant’s lodging, loss of income loss (for the patient and/or the attendant), pre-hospitalisation diagnostic tests, medicine, etc, can run up to as much as 30%-40% of the total cost of treatment of an illness. Moreover, mediclaim covers limited day-care procedures.

The hospital cash benefit pays daily allowance for every day of hospitalisation. It is offered for a maximum of 30 days in the first year and 90 days per year thereafter, inclusive of stay in an ICU (intensive care unit). The maximum number of days in an ICU is restricted to 15 in the first year and to 45 days per year thereafter. There are four options offered for per-day allowance—Rs1,000, Rs2,000, Rs3,000 and Rs4,000. The defined benefits are payable regardless of the insured getting reimbursement under any other scheme, on the basis of certified photocopies of the original bills. This is for proof of the surgery having been carried out. The defined benefit plan may pay more than the actual cost of the surgery.

The plan covers 140 major surgical benefits, 140 day-care procedure benefits, other surgical benefits and an ambulance benefit. The major surgical benefit will be maximum 100 times the daily hospital cash benefit. For example, if the policyholder takes the Rs1,000 hospital cash allowance option, then major surgical benefit will pay maximum Rs1 lakh in a year. The lifetime limit for major surgical benefit is eight times the major surgical benefit. In this example, the lifetime limit is Rs8 lakh. The plan has a fixed benefit for 140 surgical procedures—like major surgery of the aorta, heart-valve replacement using mechanical prosthesis, lung transplantation and so on. Category 1 will entitle you to 100% of the major surgical sum assured, which is Rs1 lakh in the above example. Splenectomy, thoracoplasty, aortic valve repair and so on (Category 2) will entitle 60% (or Rs60,000 in the above example). Total prosthetic replacement of the hip joint (Category 3) and TIPS (transjugular intrahepatic portosystemic shunt) procedure for portal hypertension (Category 4) will get 40% and 20% of major surgical sum assured, respectively. The plan does not cover any pre-existing condition, unless disclosed and accepted by LIC prior to the date of cover commencement.

The day-care procedures will be five times and other surgical benefits will be twice the daily hospital cash benefit per day. In the above example, they will be entitled to a flat Rs5,000 and Rs2,000 (per day), respectively. It is only an added incentive of the plan. For example, cataract surgery, operation of glaucoma, operation of nasal turbinates and so on will get Rs5,000 in the above example. All surgical procedures not in the 140 major surgical list and 140 day-care procedures are considered as other surgeries. The ambulance benefit will get expenses up to Rs1,000 based on an event that needs Category 1 or 2 major surgery. The plan offers a premium waiver benefit and a no-claim benefit. In the event of Category 1 or 2 major surgery for any insured covered under the policy, the total annualised premium following the date of the surgery will be waived. The no-claim bonus will add 5% to the daily allowance in the following year of a claims-free current policy year. The plan has optional term assurance and an accident benefit rider. There is a rebate of 2% of premium for yearly payment and 1% of premium rebate for half-yearly payment.

Premiums are guaranteed for three years from the date of commencement of the policy. With mediclaim premiums going through the roof every year, customers will be attracted by the three-year guarantee. Moreover, uncertainty of cashless mediclaim with public-sector insurers and rejection of some claims on flimsy grounds by general insurers can make Jeevan Arogya attractive for disgruntled customers.

Customers have to realise that the unique selling proposition (USP) of this plan is based on the event of one of the 140 major surgeries occurring—as defined in the plan. It is possible that the surgery you have to undertake may not fall in the 140 major surgeries defined in the plan—or may be classified as Category 2, 3 or 4 (entitling you to 60%, 40% and 20%, respectively). The plan will be less useful in such cases and this is the limitation of the plan. For example, coronary angioplasty with stent implant for two or more coronary arteries is Category 3 (40% of the major surgical sum assured); coronary artery bypass grafting (CABG) is Category 1 (100% of major surgical sum assured), but also needs two or more coronary arteries to be bypassed via open chest surgery. What if the patient opts for minimal invasive CABG? A mediclaim policy will pay for hospitalisation without surgery or any kind of surgery. There are other health plans like ‘critical illness’ policies which will pay the policyholder having ‘critical illness’ without surgery or any kind of surgery. LIC Jeevan Arogya is certainly addressing a new benefit segment. To make the plan compete with mediclaim, LIC is offering a quick-cash facility by allowing payment of 50% entitlement during hospital stay in the case of 57 specified major surgeries. It is difficult to predict if this ‘quick’ payment can work efficiently at all hospitals in different parts of the country. It is certainly an attempt by LIC to smoothen the payment process so that the customer has less to pay from his own pocket during the hospital stay.

The total premium to be charged for a policy will be the sum of premiums in respect of each member to be covered in that policy. The indicative annual premium for Rs1,000 (daily) hospital cash benefit and Rs1 lakh major surgical benefit is Rs2,242 for age 30, spouse premium of Rs1,730 for age 30 and child premium of Rs794 for age 5. The actual annual premium will be decided by LIC and there may be a need for medical examination, especially for elderly parents/extended family. There are several plans offering only hospital cash benefits starting from Rs662 (Bajaj Allianz) for Rs1,000 per day allowance for a policyholder of 30 years. LIC Jeevan Arogya, which offers premium of Rs2,242 for Rs1,000 per day allowance and major surgical benefit up to Rs1 lakh for 140 major surgeries and 140 day-care procedures, is competitive in the current market scenario. For higher coverage, a customer may need to buy a policy for Rs4,000 per day hospital cash benefit which will entail Rs4 lakh major surgical benefit. The customer needs to go through the 140 major surgical benefits and 140 day-care benefit annexure to understand which surgeries are covered in the plan and how much it will pay out for each procedure.