Buy optimal mix of base plan and super top-up to check cost of health cover

If your insurer has hiked the premium rate excessively, consider porting

A few insurers have increased the premiums on their health insurance policies by 10-15 per cent. While rising health insurance premiums are a reality that can’t be done away, customers can adopt a few strategies to optimize their cost.

Rising healthcare costs driving up premiums

Several factors are responsible for the latest price revision. “The most important factor is rising health care cost, or medical inflation,” says Naval Goel, founder and chief executive officer, PolicyX.com.

During the pandemic, insurers had to make a higher level of claims pay-out than is customary. “The incurred claim ratios of insurers went up. That is why in December 2020 the regulator allowed a slightly higher rate of increase than the normal 3 per cent, which does not require regulatory approval,” says Nayan Goswami, head-group business and sales and service, SANA Insurance Brokers.

On December 3, 2020, the Insurance Regulatory Development Authority of India (IRDAI) issued a press release wherein it spoke about allowing premiums to be hiked.

The price increase has not occurred across the board. “While a few insurers have hiked their premiums by 10-15 per cent, others have kept theirs constant,” says Goel.

Compare before you buy

For the same sum insured, premiums vary considerably across insurers. “New customers must compare premiums, together with features, before buying,” says Goel.

They should also make sure they don’t pay for features they won’t require. For instance, families that have had children should not allow themselves to be saddled with a policy offering maternity benefit.

Combine base plan with super top-up

If your insurer has hiked the premium for your policy, and others are offering similar coverage at a lower premium, consider porting.

Customers should also go for an optimal mix of a base cover and a super top-up, instead of continuously raising the sum insured on their base cover. “Doing so can reduce your premium cost by as much as 20-30 per cent, in some cases,” says Goel.

The base cover should be of an optimal amount that is sufficient to take care of mundane healthcare issues, such as fractures, appendicitis, small surgeries, and so on. The super top-up should kick in only in case of a critical ailment. According to Goswami, most people living in metros should have a Rs 10 lakh base cover and a Rs 90 lakh (or Rs 1 crore) super top up.

While a Rs 10 lakh base cover may seem high, remember that its premium is not double that of a Rs 5 lakh cover. For instance, a Rs 5 lakh base cover for a 30-year-old from one insurer costs Rs 6,800. A Rs 10 lakh cover from the same insurer costs Rs 8,200, only 20 per cent higher.

Moreover, if you have a higher deductible (the portion of the hospital bill that will be covered by your base policy, or out of your own pocket before the super top-up kicks in), the premium of the super top-up goes down.

For a 30-year-old with a Rs 5 lakh deductible and a Rs 95 lakh super top-up, one insurer is currently offering the latter at a premium of around Rs 3,000. If the deductible rises to Rs 10 lakh and the super top up is for Rs 90 lakh, the same insurer’s premium for the super top-up drops to Rs 1,021.    

Do the due diligence

Adequate due diligence must be done while purchasing a super top-up.  

“Many customers think the super top-up will have the same features as the base cover, if purchased from the same insurer. The reality is that these are two independent plans that can have different terms and conditions,” says Goswami.

When purchasing a super top-up, study the features as closely as when buying a base cover.

It is advisable to buy the super top-up from the same company that you have purchased the base cover from. If you need cashless claims from two policies, you will have to do it sequentially, i.e., one cashless intimation at a time. This is done to ensure that the same expense does not get paid for more than once. This creates logistical challenges if the two policies are from different insurers. Cashless approval from the second insurer will be received only after the first insurer approves cashless billing from the hospital. Given the time that elapses in cashless intimation, hospital billing and cashless approval, most hospitals require the insured to make out-of-pocket payment to cover interim costs. And once the insured has paid cash to the hospital, claims thereafter are mostly settled on reimbursement basis.

Mistakes to avoid

Just because premium rates of some insurers have gone up, you should not delay the purchase of a health insurance policy. Bear in mind that the premium you pay is likely to be a fraction of the hospital bill, especially in case of a serious or prolonged ailment.

Buy an adequate sum insured at the time of purchase. You may think that you are young and can manage with a smaller sum insured, and will hike it at a later age.  Doing so comes with its own issues.

Suppose that you have a Rs 5 lakh cover and decide to buy an additional Rs 5 lakh. “Insurers will check your current health status. They may or may not give you the enhancement you seek,” says Goswami.

Moreover, the enhanced sum insured of Rs 5 lakh will be treated as a fresh cover. “The waiting period will start afresh for this portion of the cover,” adds Goswami.

Many people rely completely on their office cover, or purchase only a small cover of their own while working. Most organisations offer group health covers in the range of Rs 3-5 lakh, which could be inadequate in case of a serious ailment.

Finally, if you wait until retirement to buy a personal cover, you may find that insurers are not willing to offer you one, especially if your health is poor.

Build a health corpus

Financial experts suggest that family should not depend entirely on their insurance policy to cover medical expenses. Especially as you age, and premiums become high, increasing the sum insured on your health insurance policy, to keep up with medical inflation, may not always be feasible. “Families must supplement their health insurance cover with a health corpus. They should build a corpus of at least Rs 5 lakh, which they can enhance over time,” says Mrin Agarwal, founder-director, Finsafe India. 

Table: Cost of individual super top-up plan

Here the deductible is Rs 10 lakh while the super-top up is Rs 90 lakh (Rs 1 crore in case of Star's policy) for a 40-year-old male

Insurer

Plan  Premium (Rs)

Niva Bupa Health Insurance

Health Recharge 1,090 Reliance General Insurance Health Super Topup 4,869 Star Health Insurance Surplus Gold 4,543

Source: Policybazaar.com

Table: Cost of a family floater super top-up plan

Here the deductible is Rs 10 lakh, super top up is Rs 90 lakh (Rs 1 crore for Star's policy. Premiums are for a floater plan for a 40-year-old male, 38-year-old female and 12-year-old child
Insurer	Plan	Premium (Rs)
Niva Bupa Health Insurance	Health Recharge	1,635
Reliance General Insurance	Health Super Topup	10,150
Star Health Insurance	Surplus Gold	7,918

Here the deductible is Rs 10 lakh, super top up is Rs 90 lakh (Rs 1 crore for Star's policy. Premiums are for a floater plan for a 40-year-old male, 38-year-old female and 12-year-old child