You will need more than insurance

It is important to be prepared with a corpus to meet expenses that arise suddenly.

Health care as a part of your risk management plan is like wearing a helmet while driving a two-wheeler or a seat belt while driving a car. Every individual who understands the importance of health but doesn't pay attention to healthcare management is equally at sin as the indisciplined driver.

Your healthcare management plan should include strategies not only for the present but also for your future. This is because; biologically, your body immunity is set to decrease, mishaps apart. All those with a health insurance policy are like a disciplined driver. However, people mostly choose their medical covers based on the tax savings that the premiums offer.

It is very important to delink your medical cover from tax savings and look at Section 80-D of the Income Tax Act in this regard as an additional benefit from taking medical cover, not the other way round. If you make a health plan based on tax exemption, you could be ignoring your future healthcare today. And, it would affect your finances then

IS A MEDICLAIM ENOUGH?

Does it suffice to take a health cover alone? No. Going back to the driver's example, wearing a helmet or seat belt alone isn't enough to save you from collisions. You also need to drive carefully. So, too, with a health cover: you have to chalk out your plan for securing your present and future health management.

An upper limit on the sum assured (typically Rs 5 lakh) and not all medical claims being fully honoured are just two of the many reasons why a medical cover may not be the ultimate solution to your healthcare.

For example, there have been many cases when insurance companies discontinued the policy of customers after the insured fell prey to illnesses such as heath-related problems and cancer. Else, they levy astounding loads on the premiums to cover such individuals.

Beside this, there are lot of medical routine medical expenses that your insurance may not cover. This include routine check-up, dental expenses and medicines. And, if the family has elderly member, these costs would escalate every year.

DO-IT-YOURSELF GUIDE TO SETTING-UP YOUR HEALTH FUND
Step 1	Ascertain the beneficiaries for your health fund: Typically self, spouse, children, dependent parents
Step 2	Define your contribution for the present health corpus: Approx Rs 2 – 3 lakh would be a good start
Step 3	Set-up the Corpus:  The lumpsum can be put in a bank fixed deposit
Step 4	Define your contribution for the future health corpus: Approx Rs 5,000 a month should be a good start
Step 5	Set-up the SIP: Go for a diversified equity mutual fund. You may also put a small amount in pharma fund
Step 6	Review the health fund: At least once a year depending on the expenditure incurred or healthcare costs

In one of the not-very recent surveys, it was reported that while the US, Japan and Australia report 14 per cent, 20 per cent and 16 per cent, respectively, as the money spent on their healthcare from their own pockets, Indians are reported to be spending close to 80 per cent in the same category.

So, what else are you required to do? The only solution is that individuals tackle it themselves. The best strategy is to set-up a healthcare fund in your initial days, which you can use either later in life or in case of emergencies.

HEALTHCARE FUND

Your healthcare plan should clearly outline the beneficiaries; it will help to quantify the fund. The beneficiaries typically include spouse, children and dependent parents.

Individuals should ensure their contributions to the fund are two-sided. A lump sum contribution (preferably), to start with, will take care of short-term expenses. This could be a lump sum of Rs 2-3 lakh. You can put this money in a bank or company fixed deposits (FDs).

Following this, you can start a monthly systematic investment plan (SIP) towards this fund. You can start investing Rs 5,000 in a well diversified equity mutual fund for this.

This fund should be reviewed at least once a year in the light of the medical costs incurred during the year and on any surprises that come to light in your annual medical check. Special attention should be paid to any diseases/medical irregularities detected in parents or very close relatives during the year.

Please refer to the box (do-it-yourself guide to healthcare planning) to understand this.

STRATEGIES This fund is expected to help you meet the medical costs in your future. According to a McKinsey report, the total consumer spending on healthcare had increased at a compounded annualised growth rate (CAGR) of 14 per cent from 2000 to 2005. With increasing affordability and shifting disease patterns, this rate would have definitely increased by now.

It is also reported that medicines occupy close to 18 per cent (rank 3) of an average Indian’s spending on medical costs.

One strategy is to start a small monthly SIP in a pharma fund, say Rs 2,000 of the Rs 5,000 you are investing towards the health fund. This strategy, in a way, will work as a hedge against the rising prices of medicines by investing in companies whose profitability is linked to medicine prices. Some of the noted pharma funds have given returns to the tune of 25 per cent over the past five years.

In sum, for a long and healthy drive in life, without having to pay heavy fines, take adequate precautions apart from wearing a seat belt or helmet.

The writer is a certified financial planner