4 Ways of reducing your Health Insurance Premiums

With the increase in service tax from 10% to 12% in the recent budget, your health insurance premiums are bound to rise. Other factors that’ll see sustained increase in health insurance premiums are medical inflation and the adverse claim ratios in existing contracts. (read a previous post on reasons for health insurance premium increase) As a rise in health insurance premiums is inevitable, just like salary increments and rise in food costs, this post reflects on various methods that consumers can use to reduce their health insurance premium.

Method 1 : Search for the best deal

This service is best provided by insurance web-aggregators like policybazaar.com, insuringindia.com, myinsuranceclub.com, medimanage.com etc. Most insurance comparison website provide the premium of various health insurance plans and also give a snapshot of key features such as pre-existing waiting period, maternity, critical illness cover, hospitalization sub-limit, medical test age and maximum renewal age. If you prefer to talk to an agent, all insurance comparison websites have a toll-free number where officers are ready to take calls & give relevant information. Some also provide a chat facility if you’d like your interactions to be non-intrusive.

These websites are a great start in your search. A few caveats –

a) The insurance comparison websites may not feature all insurance companies that offer a health insurance policy. And although the recent web aggregator guidelines has a provision that require insurance companies to authorize what is stated in insurance comparison websites, it is better to use the information there as a guide and visit the insurance websites to verify the information.

b) The comparison websites donot offer a detailed list of benefits of the health insurance policies. So while it may say "Maternity cover - Yes", it wont discuss the sub-limits associated with the maternity cover. Often, the analysis is restricted to premium, pre-existing waiting period, maternity, critical illness, medical test age and maximum renewal age. This is not sufficient for consumers to make a decisive comparison between insurance companies offering a health policy. The idea should not be to look at one or two parameters and decide on a health insurance policy. This requires a more detailed look at the benefits offered in the health plan, which is available in insurance websites.

c) The insurance aggregator websites also donot feature the exclusions and policy wordings of health plans. I strongly believe, this should be available in the insurance comparison website as knowledge of these is a very important part of insurance solicitation. Infact, the policy wording document is the basis of a valid insurance contract between the policyholder and the insurance company.

Method 2 : Use health insurance portability to switch insurers without compromising on accrued benefits

IRDA’s health insurance portability guidelines allow consumers to transfer of one’s existing health insurance policy to a new insurance company. Most importantly, the transferee shall not lose any benefits that were accrued in the previous policy such as pre-existing disease waiting period and other waiting periods pertaining to specific diseases like cataract, tumor, hernia etc. (refer to my earlier post on health insurance portability for more specifics and the health portability process)

All insurance companies have a different pricing depending on their cost structures and future outlook of claims. This gives you an opportunity to shop around for a more inexpensive policy without having to compromise on your accrued benefits with regards to pre-existing diseases waiting period, waiting periods, waiting period on standard exclusions (most insurers have a 1 or 2 year waiting period for some ailments) and cumulative bonus accrued.

Portability can be done during renewal time – just make certain that you start this process about 45 days prior to your existing policy’s expiry date.

Method 3 : Use a top-up or super top-up health insurance plan to complement your existing health insurance policy or your company medical policy

Consumer often have multiple health insurance policies to provide for a higher sum insured cover. Additionally, organizations where they work, might also provide health insurance covers under the group medical program. While having a larger cover is always a good thing, but to pay more for it than what is required might not be too wise.

This is where a top-up or super top-up policy (also called high deductible) comes into the picture. It not only helps you with a higher sum insured protection but also helps reduce health insurance premiums.

Please note that a top-up and a super top-up policy are policies with very different constructs. A top-up health insurance policy provides hospitalization cover for a single illness or for a single claim over and above the deductible amount. On the other hand, the super top-up health insurance policy is more comprehensive as it provides cover on an aggregate basis for all claims over the deductible limit. (I will follow this with a post to explain the top-up and super top-up health plans). My preference is for the super top-up plan, albeit it is more expensive than a top-up plan, which is offered by very few health insurance companies. United India introduced this plan in 2009 (super top-up prospectus) and earlier this month, Max Bupa announced a super-top up plan under the name Heartbeat High Deductible plan.

Lets understand how a super top-up plan helps, with an illustration.

Mr. Insurance is a 35-year old salaried person and works for one of India’s largest pharmaceutical companies. Known for it’s employee-friendly practices, the pharma company has given a medical cover of Rs. 3 lacs which covers Mr. Insurance and his spouse and 2 children. As this is a part of company benefits, Mr. Insurance doesn’t have to pay anything from his pocket. In addition to this, Mr. Insurance also has a mediclaim policy of his own which covers him, his spouse and 2 children for a sum insured of Rs. 3 lacs and costs him Rs. 11,000 per year.

On an aggregate basis, Mr. Insurance has a sum insured of Rs. 6 lacs. To reduce his premiums, Mr. Insurance has the option of cancelling his own mediclaim policy and instead opt for a super top-up plan (also called high deductible). Under the super top-up plan, Mr. Insurance has to choose a deductible amount which indicates the level to which Mr. Insurance can manage his medical expenses using his savings or his company medical insurance policy. In this case, lets assume that Mr. Insurance opts for a 2-lac deductible and a 5-lac sum insured. This super top-up policy for all 4 members of the family comes at just Rs. 5,000 per year.

This way, Mr. Insurance now has his aggregate sum insured of Rs. 6 lacs. And at an annual premium that has reduced by 55% (Rs. 6,000).

Method 4 : Re-visit the benefits offered

A harder look at your existing insurance contract might throw some surprises. Here are some opportunities -

- You might have a policy which has a pregnancy cover which needs apply to you (for men) and yet would be consuming a sizable portion of your premium.

- Your family floater is calculated on the age of the eldest member. If the primary insured is in a different slab as compared to other members, you might be in for a rude shock on the excess premiums you are paying. For example, the husband might belong to the 36 to 40 years age group while other members might be in the below 30 years age bracket. However, in calculating the premium of a family floater plan, the 36 to 40 year age group will be used.

- Your policy might have a zone wise pricing. So while you were in North when you initially bought the policy (North zone premiums have a loading), your transfer to South allows you an opportunity to discuss with the insurance company for a non-loaded premium

A steady rise in health insurance premiums should always be expected esp. in our country where the social system is under-developed. Do utilize some of the above techniques to reduce your premia. And remember, the government does give you a significant discount in the form of tax deductions (Section 80(D)) which one should always encash on.