Hospital bills have risen significantly in the past two decades. This is clearly reflected in the healthcare inflation reported by 2017 Global Medical Trends Survey Report: It stood at 12.5 per cent in 2016. The cost of treating lung cancer, for instance, has risen from around ~2 lakh in 2000 to ~5 lakh in 2017. Health care inflation has had a direct impact on health insurance premiums. Various insurance companies recently increased their premiums by 20 per cent for the younger age group and by as much as 100 per cent for senior citizens. Apart from healthcare inflation, five other critical factors have led to insurance companies hiking their mediclaim premiums: Introduction of new technologies and treatments: Scientists and researchers have done a commendable job of introducing several new technologies for the treatment of diseases and critical surgeries. However, progress comes at a price. The cost of these new treatments and technologies is often higher. This forces health insurance providers to shell out a higher amount when a claim is made. The insurers then pass on this cost to customers in the form of higher health insurance premiums. Lifetime renewability: To provide relief to senior citizens, the Insurance Regulatory and Development Authority of India (IRDAI) has introduced new regulations whereby insurers have to provide lifetime renewability for all their health policies. This has been a major reason for the drastic rise in mediclaim premiums. Previously a typical health plan would end at the age of 70 and thus save the insurer from paying any claims. However, now the number of claims payable is bound to increase. Discontinuance of claim-based loadings: According to the new regulations, now the insurer cannot increase your premiums on renewal, based on claims made in the previous year. Even if you have made any claims in the previous year, the insurer can now only reduce the cumulative bonus in the exact proportion of the increase in the previous year. In short, now premiums will change based only on age and not on claim history. This has forced insurers to switch to pricing their products based on the overall experience of all the policies. Increase in number of senior citizens: An increase in the number of senior citizens in the insurance pool has also led to rising premium costs. Senior citizens face several serious health problems and require extra care and treatment, which are costly. The frequent occurrence of illness leads to more claims. This makes health insurance for senior citizens costlier. Lifestyle-related diseases and critical illnesses at younger age: Due to the fast-paced life people live nowadays, more and more cases of heart diseases, diabetes, stroke, cancer and other diseases occur. These claims are also forcing insurers to hike the premiums they charge. Understanding how insurance premiums are calculated will tell you more about the reasons for the rising cost of mediclaim.
Below are some of the key factors that determine your health insurance premium: Age, the most crucial factor: As one gets older, the chances of health-related problems also increase, which in turn raises the probability of a person making a claim. Insurers develop profiles to determine the insurance premium cost, based on age and other factors. For instance, for the profile of children aged two to six years, the insurer tries to calculate the average number of doctor visits along with vaccination costs. In another profile of adults aged between 45 and 55 years, insurers look for frequency of check-ups, certain surgeries, medical tests, accidents, and other medical needs to arrive at the premium amount. This makes age the most significant factor for determining the cost of mediclaim (See table: Premium Watch). However, apart from age, there are also some other important factors like body mass index, medical history, geographical location, and pre-existing medical conditions which play a major part in calculating the premium. Let’s turn to steps you can take to reduce cost of mediclaim premium. Go for a family floater plan: The premium of a family floater tends to be lower than that of an individual mediclaim plan while providing health coverage to your entire family. Family floater plans generally provide a restoration benefit, so that if one of your family members exhausts the entire sum assured, the restoration feature gives back the entire sum assured if another member needs it. Use the portability feature: This feature is available from all insurers and one can use it when necessary to switch to a more pocket-friendly plan. This way you can carry the accumulated benefits from your previous insurer to the new insurer while saving a good amount of money on premium cost. As seen in the table, the cost of mediclaim for senior citizens is considerably higher, the reason being their higher age and higher claim ratio. They should prefer an insurer that does not change its premium rates frequently. Buy a top-up: To rein in the impact of inflation on your health cover, add a top-up or even a super top-up. Use the sum assured of your base plan as a high deductible for your top-up plan. At the same time, you will be able to get a higher cover to beat inflation while keeping the premium lower than if you were to raise your basic sum assured. This strategy can also be used by senior citizens to bring their premiums down considerably and get a higher cover. Avail of lifestyle-based incentives: In recent times, insurers have also started offering discounts and incentives at the time of renewal to customers, who maintain a healthy lifestyle. For instance, if the insured achieves the targeted step count on the insurer’s mobile application in the given time interval, he gets a discount on his renewal premium. Staying healthy by changing your lifestyle is the guaranteed way of beating the rising inflation cost. However, we know that medical emergencies can come knocking on your doorstep unannounced and wipe off your savings. So, it must be your top priority to get yourself and your family covered with a health insurance plan at the earliest. A delay can prove costly since rising age and increasing medical costs will ultimately lead to higher premiums. Staying well-informed about how the policy premium is going to vary across your lifespan will help you save every rupee you can.
The writer is director-health, life and strategic initiatives, Coverfox.com