Is High-Value Health Insurance A Value Proposition?

When medical emergencies knock at your door, the cost of treatment can prove to be quite overwhelming, even if you are covered by insurance. It may be a good idea to consider raising your health insurance cover, provided you can bear the higher premium burden, says Jay Sampat.

KEY POINTS:

• Most experts opine that a cover of Rs 10 lakh will prove inadequate for treatment of any critical illness, especially in the metros. Hence, if an individual can afford the premium, he/she should opt for higher-value health cover.
• In case of high-value policies, there may not be any caps or sub-limits on the room rent. However, many high value policies come with a room category cap, allowing only the lowest category private room in the hospital. Moreover, just like health policies with a small sum assured, these policies also have a co-pay clause at 20 per cent for senior citizens.
• If an individual cannot afford the premium for a high-value policy, he/she should try to add a top-up health cover to the existing Rs 5 lakh or Rs 10 lakh cover. The maximum top-up cover available in the market today is of Rs 15 lakh.

In most cases, discussions around price rise in India are limited to food and fuel inflation. Other forms of price rise that can burn a hole in your pocket rarely find their way into routine conversations. Take, for instance, healthcare inflation. This seldom gets talked about despite the fact that it can push up your healthcare expenses and annual health premium, besides reducing the real value of your health cover.

It is for this very reason that these days many individuals wonder whether their health cover of Rs 5-10 lakh will be adequate in case of a medical emergency. Such fears are not unfounded. For example, an organ transplant, say of the liver, can cost up to Rs 40 lakh. New medicines for critical illnesses can also cost several hundred rupees per tablet. Most insurance companies offer a maximum health cover of only Rs 10 lakh. However, the times are changing indeed, with companies like Religare, ICICI Lombard and Max Bupa offering health insurance products with a cover of up to Rs 50 lakh.

Most experts second the view that a cover of Rs 10 lakh will prove inadequate for treatment of any critical illness, especially in the metros. In cities like Mumbai, room rents in premier hospitals are as high as Rs 5000-8000 and a room in an ICU would cost at least three to four times the normal room rent. Hence, if an individual can afford the premium, he/she should opt for higher-value health cover.

For many people, however, managing monthly budgets is a big issue. In such a scenario, a health cover of Rs 50 lakh (premium range of Rs 27000-50000 for a 35-year-old individual, depending upon the product and the number of family members covered by the policy) can prove exorbitant. Moreover, renewal premiums will be higher because of inflation and rising healthcare costs.

Maintaining a middle path is very important and you should certainly not channel all your savings towards health insurance premiums. From a financial planning perspective, risk is only one of the components that includes term insurance, health insurance and home insurance. A retail investor cannot afford to spend Rs 30000 only on a health insurance policy when he/she doesn’t have adequate funds to build a retirement corpus, save for children's education, etc.

If an individual can't afford the premium, he/she should try to add a top-up health cover to the existing Rs 5 lakh or Rs 10 lakh cover. The maximum top-up cover available in the market today is of Rs 15 lakh. Another way out for people who can't afford the premium for high covers is to start building a corpus of Rs 5 lakh for medical emergencies, which can be used for the treatment of minor illnesses.

Of course, having a large health cover does not mean that all medical expenses can be claimed. To maximise the benefit from a policy, adequate attention must be paid to elements like the network of hospitals, sub-limits in the policy, exclusions, waiting period for pre-existing diseases, additional benefits such as maternity cover, neonatal cover, dental treatment and so on.

In case of high-value policies, there may not be any caps or sub-limits on the room rent. However, there may be a definition of the category of the room covered by the policy. Many high value policies come with a room category cap. Such a cap allows only the lowest category private room in the hospital. So, even if you opt for a 5-star hospital, you are compelled to opt for the lowest category of private rooms. Moreover, just like health policies with a small sum assured, these policies also have a co-pay clause at 20 per cent for senior citizens. If you opt for a tier-1 hospital for medical treatment, the 20 per cent ratio to be borne by the patient will be a heavy sum.

Due to advances in medical science, the treatment of serious illnesses is now possible, albeit at a substantial cost. If the cost of your coverage is entirely borne by your employer, ensure that you understand your policy. If you pay yourself, you are already aware of the bite it takes out of your budget. If one is not adequately covered, the cost of treatment could wipe out one’s savings and investment. Hence, individuals with an adverse family health history should go for a higher sum assured if they can afford it.