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Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care and health system expenses, among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement.

Medical Test in Health Insurance & Its Importance

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    Written by PolicyBazaar - 
    Views: 286 - 
    Modified 27 July 2016

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Most people generally loathe the idea of having to undergo medical tests and examinations. There have been many incidences where people shun the idea of investing in a particular insurance, if the insurance company urges them to undergo certain medical tests before approval.

A fair share of people also fall prey to false advertisements run by many insurance companies where they promise to provide health insurance without a medical test.  Somehow the possibility of not having to undergo a medical test, just to buy a term plan, seems much favorable. But, are health insurance policies without medical tests worth it? Does it pose a problem later and create a sticky situation that you can do nothing about?
Let’s first understand how beneficial it is, if you opt for an insurance policy without a pre-medical requirement.

Below are a few assumptions.

    Policy approval time is quicker in case of health insurance without medical tests.
    The one seeking the policy saves time, as they don’t have to travel to the predefined medical centre.
    If the policyholder suffers from an existing medical condition, not having to undergo a medical test would mean that they do not have to pay a higher premium on insurance.

Why do Insurance Companies Insist on a Pre-Medical Test before Policy Approval?

    Generally the onus of checking the risk potential of the policyholder rests with the underwriting team. By asking you to do a medical test or checkup, the insurance company eliminates the task of their underwriting teams, which is not the case for health insurance without medical tests.
    If an insurance company offers medical test at discounted rates, there are high chances that they could charge you a higher premium on your policy. This is because the premium payment is based on the perceived health risk that the policyholder is supposedly exposed to. In case there are certain tests missing, it is assumed that the policyholder is trying to hide certain medical conditions, and hence is charged a higher premium rate.
    On hindsight, if you do a complete medical test as stated by the insurance company, there is possibility you only pay a “Preferred Rate” if your tests determine you are healthy. Opting for health insurance without medical tests would mean that you would attract the following rates predefined by most insurance companies.
        Standard Rate
        Sub Standard Rate
        Smoker Rate
        “Preferred Rate” is a lower premium rate offered to the policyholder who is deemed healthy through medical checkups and tests as requested by the insurance company and not applicable in case you buy health insurance without medical tests.

Buying an insurance policy that does not require medical tests done could mean that you undertake a “Declaration of Good Health.” With this statement especially as a policyholder, the disclosure onus lies on you. In times of medical insurance requirement, if it is found that you have an existing medical issue not disclosed, your policy claim can be rejected on grounds of the “nondisclosure of medical facts.”

By not disclosing medical, “Material facts” about you, the insurer has no decision power to insure you. There has, however, been a slight change in this since Oct 2015, especially for claims made on a policy existing for over 3 years. In such cases, the insurer has to pay the claim made by the insured.

Read More: Why Medical Test is Important While Buying a Health Cover?

When you apply for an insurance policy the underwriting team checks your risk factors as well as your Human Life Value. The amount is calculated on your financial and medical underwriting. If your policy is devoid of these processes, there is a chance that your life cover is not of the value you want.

The deducted amount means that you are under insured, something that no policyholder would like, especially in times when they are in dire need of financial support. This again points to the fact that getting a medical test done is necessary to fend off any chances of being under insured.

A low risk cover would even disregard the fact that you are young and very healthy; the only cover you might receive is just Rs.5 Lakh cover. If the policyholder does a medical test and duly submits medical test results, they stand chances of receiving a higher cover as per their requisites.

A snapshot of your health result is, therefore, essential for you as a policyholder and the insurance company. For the policyholder, it allows for lesser chances of rejection on claim of policy, and getting a reasonable risk cover.
Final Verdict

The verdict is in favour of medical tests that most insurance companies ask you to undergo. Health insurance policies without medical tests attract a higher premium amount. It is, therefore, advisable to thoroughly evaluate non-medical test polices, before you buy them. Buy them only if they suit your needs, preferences and budget.

We suggest you choose a policy that wants you to undergo medical tests, instead of health insurance without medical tests. The tests are nominally charged, and a full report includes fasting blood sugar, blood pressure test, blood count, ECG and sometimes it could also include liver tests and kidney tests. The tests are not much of a hassle and will only help you in the long run.
A health insurance policy is:

    A contract between an insurance provider (e.g. an insurance company or a government) and an individual or his/her sponsor (e.g. an employer or a community organization). The contract can be renewable (e.g. annually, monthly)or lifelong in the case of private insurance, or be mandatory for all citizens in the case of national plans. The type and amount of health care costs that will be covered by the health insurance provider are specified in writing, in a member contract or "Evidence of Coverage" booklet for private insurance, or in a national health policy for public insurance.
    (US specific) Provided by an employer-sponsored self-funded ERISA plan. The company generally advertises that they have one of the big insurance companies. However, in an ERISA case, that insurance company "doesn't engage in the act of insurance", they just administer it. Therefore, ERISA plans are not subject to state laws. ERISA plans are governed by federal law under the jurisdiction of the US Department of Labor (USDOL). The specific benefits or coverage details are found in the Summary Plan Description (SPD). An appeal must go through the insurance company, then to the Employer's Plan Fiduciary. If still required, the Fiduciary's decision can be brought to the USDOL to review for ERISA compliance, and then file a lawsuit in federal court.

The individual insured person's obligations may take several forms:

    Premium: The amount the policy-holder or their sponsor (e.g. an employer) pays to the health plan to purchase health coverage.
    Deductible: The amount that the insured must pay out-of-pocket before the health insurer pays its share. For example, policy-holders might have to pay a $500 deductible per year, before any of their health care is covered by the health insurer. It may take several doctor's visits or prescription refills before the insured person reaches the deductible and the insurance company starts to pay for care. Furthermore, most policies do not apply co-pays for doctor's visits or prescriptions against your deductible.
    Co-payment: The amount that the insured person must pay out of pocket before the health insurer pays for a particular visit or service. For example, an insured person might pay a $45 co-payment for a doctor's visit, or to obtain a prescription. A co-payment must be paid each time a particular service is obtained.
    Coinsurance: Instead of, or in addition to, paying a fixed amount up front (a co-payment), the co-insurance is a percentage of the total cost that insured person may also pay. For example, the member might have to pay 20% of the cost of a surgery over and above a co-payment, while the insurance company pays the other 80%. If there is an upper limit on coinsurance, the policy-holder could end up owing very little, or a great deal, depending on the actual costs of the services they obtain.
    Exclusions: Not all services are covered. The insured are generally expected to pay the full cost of non-covered services out of their own pockets.
    Coverage limits: Some health insurance policies only pay for health care up to a certain dollar amount. The insured person may be expected to pay any charges in excess of the health plan's maximum payment for a specific service. In addition, some insurance company schemes have annual or lifetime coverage maxima. In these cases, the health plan will stop payment when they reach the benefit maximum, and the policy-holder must pay all remaining costs.
    Out-of-pocket maxima: Similar to coverage limits, except that in this case, the insured person's payment obligation ends when they reach the out-of-pocket maximum, and health insurance pays all further covered costs. Out-of-pocket maxima can be limited to a specific benefit category (such as prescription drugs) or can apply to all coverage provided during a specific benefit year.
    Capitation: An amount paid by an insurer to a health care provider, for which the provider agrees to treat all members of the insurer.
    In-Network Provider: (U.S. term) A health care provider on a list of providers preselected by the insurer. The insurer will offer discounted coinsurance or co-payments, or additional benefits, to a plan member to see an in-network provider. Generally, providers in network are providers who have a contract with the insurer to accept rates further discounted from the "usual and customary" charges the insurer pays to out-of-network providers.
    Prior Authorization: A certification or authorization that an insurer provides prior to medical service occurring. Obtaining an authorization means that the insurer is obligated to pay for the service, assuming it matches what was authorized. Many smaller, routine services do not require authorization.
    Explanation of Benefits: A document that may be sent by an insurer to a patient explaining what was covered for a medical service, and how payment amount and patient responsibility amount were determined.

Prescription drug plans are a form of insurance offered through some health insurance plans. In the U.S., the patient usually pays a copayment and the prescription drug insurance part or all of the balance for drugs covered in the formulary of the plan. Such plans are routinely part of national health insurance programs. For example, in the province of Quebec, Canada, prescription drug insurance is universally required as part of the public health insurance plan, but may be purchased and administered either through private or group plans, or through the public plan.

Some, if not most, health care providers in the United States will agree to bill the insurance company if patients are willing to sign an agreement that they will be responsible for the amount that the insurance company doesn't pay. The insurance company pays out of network providers according to "reasonable and customary" charges, which may be less than the provider's usual fee. The provider may also have a separate contract with the insurer to accept what amounts to a discounted rate or capitation to the provider's standard charges. It generally costs the patient less to use an in-network provider.