Health insurance is an essential part of modern healthcare systems. Whether you buy private medical insurance or an individual health insurance policy, it’s important to understand not only what your plan covers but also who is responsible for the actual treatment contract. In other words, when you walk into a hospital or clinic for care, who is ultimately contracting with the doctor or hospital for your treatment?
Many policyholders assume that because they have insurance, their insurer handles all aspects of their medical care. However, the reality is a little more nuanced. Let’s explore how treatment contracts work when you hold private health insurance and what this means for your rights and obligations.
What is a health insurance contract?
A health insurance policy is a legal contract between you (the insured) and your insurance company (the insurer). Under this agreement, you pay a premium in exchange for financial protection against certain covered medical expenses. The insurer promises to reimburse you or directly pay healthcare providers for specified services such as consultations, hospitalisation, surgeries, and medications.
This contract clearly defines:
- Covered services
- Exclusions
- Claim procedures
- Payment limits
- Policy tenure and renewal terms
It is important to understand that the health insurance policy itself is not a treatment contract. Instead, it is a financing mechanism that supports your ability to pay for treatment.
Who holds the treatment contract?
When you obtain medical services—such as visiting a doctor, undergoing surgery, or being admitted to a hospital—you enter into a separate treatment contract with the healthcare provider. In this contract:
- You, the patient (or your legal guardian), agree to receive services.
- The healthcare provider agrees to deliver care.
- You are ultimately responsible for paying the provider, whether you are insured or not.
The insurance company is not a party to this treatment contract. Rather, it acts as a payer who will cover some or all costs as per your policy terms. This means that even if your insurance claim is denied, you remain legally obligated to pay your doctor or hospital.
How does this work in practice?
When you seek treatment, two separate legal arrangements are at play:
- Treatment contract: You and the healthcare provider agree on medical services and payment.
- Insurance contract: You and your insurer agree that covered expenses will be reimbursed or settled directly.
If you opt for cashless hospitalisation, the insurer settles eligible bills directly with the hospital (subject to policy conditions). But even here, your treatment contract is still between you and the hospital. The insurer’s role is limited to payment facilitation.
Why is it important to understand this distinction?
Understanding that the insurance company does not hold the treatment contract helps you:
- Recognise your personal liability if claims are denied.
- Avoid assuming that insurance approval is the same as a guarantee of payment.
- Be proactive in clarifying treatment costs with your healthcare provider.
- Ensure you review pre-authorisation requirements and obtain approvals when needed.
Many policyholders have faced unexpected out-of-pocket expenses simply because they assumed the insurance company was responsible for negotiating or confirming treatment contracts.
What happens when claims are denied?
Since the treatment contract is independent of insurance coverage, if your claim is denied (for example, due to an exclusion or lapse in coverage), you must still pay the provider. This can happen in situations like:
- Treatment of an excluded illness.
- Exceeding sum insured limits.
- Not completing pre-authorisation procedures.
- Policy expiry or non-renewal.
If your insurer denies the claim, the provider may bill you directly, and you have no legal grounds to refuse payment simply because insurance was involved.
Is this different in government or employer-provided insurance?
While the principles remain similar, in some employer-provided group insurance or government schemes, hospitals may have agreements with insurers or government authorities to settle bills directly. Even then, your treatment contract is technically with the hospital, but payment and settlement mechanisms are streamlined through the third party.
For example, in certain government health schemes, empanelled hospitals have signed agreements to treat beneficiaries at fixed package rates. However, you may still be responsible for non-covered services or consumables.
What about network hospitals and cashless services?
Cashless treatment simplifies the payment process. In such cases:
- The insurer has a service-level agreement with the network hospital.
- You do not pay the hospital upfront for covered services.
- The insurer pays the hospital directly based on pre-authorisation.
Even here, you are still a party to the treatment contract. This is why hospitals require you to sign admission forms, consent forms, and discharge documents.
How can you protect yourself?
Here are steps to avoid confusion:
- Read your policy document: Understand inclusions, exclusions, and pre-authorisation requirements.
- Check network hospitals: Always confirm if your provider is empanelled for cashless services.
- Get pre-authorisation: For planned treatments, obtain insurer approval before admission.
- Clarify treatment costs: Ask your healthcare provider to give you a cost estimate.
- Maintain records: Keep copies of bills, prescriptions, and insurance communication.
- Be prepared for co-payments: Some policies have a co-payment clause requiring you to pay a portion of expenses.
Conclusion
When you hold private medical insurance or individual health insurance, it’s crucial to understand that your treatment contract remains directly between you and the healthcare provider. Your insurer simply facilitates the payment as per your policy terms.
Recognising this distinction ensures you are prepared for potential out-of-pocket expenses and helps you take a proactive role in managing your healthcare. Always review your policy documents carefully, verify your hospital’s status, and keep clear communication with both your insurer and your healthcare provider. This approach will help you navigate treatment confidently without unexpected financial surprises.
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