You’ve probably heard horror stories from friends and kin about hospital and surgical (H&S) claims being denied or claim amounts not being entirely reimbursed by their insurers. Industry players stress that insurers do not attempt to minimise payments to claimants.
The main condition is that the claims must be genuine.
“Insurance companies want to be in the business for the long term, and establishing a good reputation is important for us,” says Tan Chue Chau, appointed actuary at Manulife Insurance.
Sharon Chong, managing director of Moneywise Wealth Planning & Consultancy, stresses that insurance companies do not deny claims that are supported by required documents such as medical reports and hospital bills.
Martin Yong, head of life division at State Insurance Brokers, an insurance brokerage firm, says, “It is very straightforward to make an H&S claim. If you’ve declare everything to the best of your knowledge, you will usually be reimbursed. If the insurance company thinks you’re a risky applicant based on your declaration, they would have imposed a loading or not accepted you [as an insured] in the first place.”
Here are the top five reasons why an H&S claim may be denied.
1) The claim is not covered
This problem arises because the claimants are not aware of the exclusion clauses in their policies. “Very often, they’d mistakenly think that a disease is covered, or that they are covered in particular situations,” Yong points out. Insurance agents, when highlighting the benefits of a particular policy to a consumer, should devote some time to explain the exclusions as well.
Congenital conditions, medical or physical abnormalities at the time of birth, are usually excluded, to the surprise of many claimants, says Yong. Most H&S policies do not cover congenital conditions but some insurers do provide them, with conditions on the age of the insured.
“For instance, some insurers state that they do not cover congenital diseases diagnosed before the age of 17. If the claimant is diagnosed after 17, the benefit is payable,” says Chong.
Diagnostic tests are usually not covered as well, though some insurers may pay for certain specified ones. “Insurance exists because most of us are likely to need help to pay for surgery, [and it usually does] not [cover] diagnostic tests,” says Chong.
Another common policy exclusion that is often overlooked is the overseas residence clause. This is pertinent to people who are studying or working abroad for an extended period of time.
“For instance, if you’ve stayed overseas for 90 consecutive days, you will not be compensated if you’re hospitalised anywhere in the world on the 91st day,” explains Chong.
The reasonable and customary charges provision comes into play when a claim is made for treatment received outside the country. In this provision, medical charges should not exceed the general level of charges made by providers of similar standing in Malaysia, Yong explains.
“For instance, say you did a heart surgery is the US, which cost you RM600,000. In Malaysia, the same procedure might only cost you RM100,000. The insurance company will pay you RM100,000, as it is the amount you would have incurred had the surgery been performed in Malaysia,” he says.
2) You have exceeded the coverage limit
Many policyholders are not aware of caps imposed on their medical plans. In addition to a lifetime limit, insurance companies tend to impose an annual limit or an inner limit on H&S policies. For instance, a policy can stipulate a lifetime limit of RM300,000 but limit the amount of claims to RM50,000 a year. (yearly limit)
If your actual hospitalisation bill is RM70,000, you would need to pay the difference and you cannot make any claims for the rest of the policy year.
H&S plans that were introduced more than a decade ago may even specify an inner limit.
“For each benefit of your H&S plan, there might be a limit imposed for claims. For example, if your inner limit for surgery is RM20,000, that’s the maximum that you will receive, even if the actual surgical cost is RM50,000,” says Chong.
Fierce competition among insurers has removed the inner limit clause today.
“Now, most medical plans go by the ‘as charged’ basis, which means that the insurer will reimburse the policyholder the amount charged by the hospital. Clearly, this is much better for the policyholder,” says Yong.
It is also common for policyholders to overlook their eligible benefits, such as staying in a more expensive room than the one specified in your plan.
Says Chong, most insurers have a clause stating that if you go beyond your entitlement, you must pay a 20% co-insurance fee (a fixed percentage, usually up to 20%, of the medical bills).
“Some insurers will require those who stay within their entitlement to pay a 10% co-insurance fee and there is a limit on how much they need to pay,” she adds. Others levy an administration fee, says Yong.
Also, check whether your H&S policy stipulates a “deductible”, which is an amount that you have to pay. “Say you’ve opted for a deductible of RM3,000, and your total hospital bill is RM4,000. The insurer will only pay you RM1,000 [RM4,000 – RM3,000],” Tan explains.
3) Failure to disclose pre-existing illnesses
Failure to mention an existing illness is another common reason for the rejection of a claim.
“For instance, you were diagnosed with a disease and went for an operation a few years ago. If you don’t declare it and subsequently make a claim, you will not be paid if the insurer finds out about it,” Yong explains.
4) Coverage has yet to commence
Most insurers impose a waiting period, during which claims for some specified illnesses will not be paid. “For instance, most insurance companies stipulate a 120-day waiting period for illnesses such as hypertension, tumours, cancers and cysts from the day the policy is issued,” says Tan, adding that this waiting period does not extend to accidents.
When upgrading your H&S policy, do not cancel your old plan until the waiting period for the new one has ended, advises Lim Teong Lay, author of Insurance Planning Guide for Malaysians.
5) Failing to pay your premiums on time
Needless to say, you won’t be covered if you’ve not been remitting your premiums on time. Tan says a policy lapse a month after the premium due date.
Medical plans that ride on a basic life insurance policy or investment-linked policy usually have a surrender value or an investment value that will pay for H&S coverage if the policyholder fails to pay the premiums. Once this underlying value is exhausted, all benefits will be void and claims will not be paid out, says Yong.
Source: By Lim Siew May of theedgemalaysia.com and personal Money magazine #121 September 2011