Managing Your Health Insurance Premium Costs

A more equitable health insurance market is leading to a heavier burden on younger ,healthier policyholders.Many health insurance policyholders have seen their premiums go up 15-35% in this financial year, as insurance companies, including public sector firms, revise their premium rates.

The new health insurance regulations implemented by the IRDA in October last year,including the abolition of claim-based loading and the introduction of the lifelong renewability clause,are some of the main reasons why premiums have risen sharply.The first refers to the practice of increasing subsequent premiums for those who make claims. The lifelong renewability clause  is to ensure that older people with health issues  continue have access to health insurance.Apart from this, the new health insurance guidelines also allow insurance companies to raise premiums only when a policyholder moves to a new age band. Moving away from claim-based loading and mandating lifelong renewability means that younger people pay more. There is some cross-subsidisation otherwise it becomes impossible for senior citizens to afford health insurance.Most claims come in the age group above 60 years but companies cannot load premium beyond a point for this age group.

Other reasons for the rise in premia is due to the adverse claim ratio and growing  inflation in health care costs. The increase in claim ratio is the result of charging patterns of hospitals, increasing number of claims especially cancer claims. Health cost inflation is in the range of 12-16%pa.

Here are some ways to cap the rise in your health insurance premium:

Opt for a plan with sub-limits or opt for voluntary deductibles. Some companies provide an option to the customer to modify the premium. For example, ICICI-Lombard customers have an option of flexible premiums, where the customer can opt for the sub-limit plan or opt for voluntary deductibles, which help lower the premium by Rs 1,000-3,000, depending on age and the extent of insurance cover. Similarly, Bajaj Allianz’s product offers a 10% discount in premium if you choose a voluntary deductible —an amount you have to shell out before the insurer pays up — of  10,000. The rate of discount goes up in line with the deductible amount.So if you have a health cover from your employer, buy a health plan with a deductible, but with an option to waive the same with payment of premium at renewal. It will help convert your high deductible policy into a regular cover by paying the applicable premium at renewal if you lose your employers’ group coverage.

You are lucky if you live in some areas of the country.Companies like L&T Insurance, Max Bupa and SBI General offer differential, zone-based premiums.Opt for these if you have the chance.

Online life insurance products, primarily term plans, have become popular as insurers offer steep discounts on premiums of such products. However,the concept is relatively nascent dor health insurance. Some companies have started offering online health cover in the last one year, and you can take advantage of it. You can expect a discount of up to 10% if you buy health policies through the online channel.

Insurers like ICICI Lombard and Max Bupa offer discounts in premiums if you decide to pay premiums for two years at one go. Typically, health insurance policies are annual contracts, renewable every year. For instance, Max Bupa offers a discount of 20% if you buy a two year cover. ICICI Lombard’s plan allows you to save up to 10% on premiums, if you choose to pay for two years. However, one major disadvantage of paying the premiums for two years is that you won’t be able to claim tax benefits under section 80D for the health insurance renewal premium in the second year, which would have been possible under annual policies.

Also you should opt for top-up or high deductible plans as add-ons to the existing health cover. This will be significantly cheaper than increasing the base sum insured as such plans get triggered only after you have exhausted your base cover.