With the healthcare costs seeing an all time high, are we prepared for life's contingencies?
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"95% of the Indians do not have enough health insurance"

With the healthcare costs seeing an all time high, are we prepared for life's contingencies? 

  • February 12, 2016  
  • |  
  • UPDATED   16:55 IST

It would not be wrong to say that even a routine visit to doctor to get a remedy for a small illness like cold and cough burns a hole in the pocket of an average middle class man. In such a scenario, how do we avail the best of the treatment to stay in the pink of health or what should be the right amount of medical cover? Let's take a look.

We have to accept that most of us are under-insured and partially prepared to meet the expenses of medical emergencies. While some of us get the medical cover under our employer's health insurance schemes, the amount of the cover is still inadequate. To get into the nitty-gritty of things, BigDecisions.com, a financial advisory platform, conducted a study which showed that close to 95% of the Indians that come under the middle class category do not have enough health insurance cover from some of the most common ailments and procedures.

The degree of under-insurance in the 25-35 and 35-45 age groups is around 60-62% and it is even higher, 69% precisely, in the over 45 age group which is also known as the high risk group. The aforementioned data are collected in a survey which was conducted in eight cities among 10,000 consumers between the age group of 25-45 and CTC ranging from 6-36 lakh. It showed that the insurance coverage was barely touching Rs 3 lakh.

What's the reason?

If you are thinking that the under-insurance is because of the rise in the rates of insurance premium, then you are wrong. Figures show that in the last four years, the rates of premium have increased by a mere three - four per cent with a CAGR of 2.79% for sum insured  of Rs 2-3 lakh and 3.29% for Rs 5-10 lakh. So what is the actual reason? The primary reason behind the insufficient amount of cover is that people haven't revised their health cover after they have bought it and in case of coverage sponsored by employers, it has stagnated.

The study says that Indians who are full-time employees in a company are of the notion that the coverage that they receive under the company's group scheme is sufficient. As a result of this, they have ended up paying hefty medical bills whenever they have experienced a medical emergency.

While the statistics show that 22% of India's population is insured, it is majorly on account of the different government schemes. The harsh reality is that only five per cent Indians are insured. Out of which, two-thirds are under-insured. In recent times, the minimum expense of a major medical procedure is Rs 3 lakh in private hospitals and if the hospital is a corporate one, the cost will only rise higher because of cross-referrals and multi-disciplinary treatments.

The same study also shows that in coming times, the healthcare costs are bound to catch up with other developed foreign countries. It also shows that the percentage of the claims reimbursed or paid vis-à-vis the amount of the medical bills is falling, especially when it is above Rs 3 lakh.

The way out!

So what should you do so that you and your family are not under-insured? First of all, you should realize that times are changing faster than ever and the medical procedures have become exponentially expensive so you better be prepared for any eventuality. In order to figure out the exact amount of health cover, you will have to keep in mind the age and gender of your family members and the city that you are currently residing in. You should check the amount of health cover once in three years and revise it the very moment the number of family members changes. Also, in addition to the coverage provided by your employer, you should buy top-up covers which are cheaper than the general medical insurance policies and increase the amount of coverage.

A rainy day fund should also be in place which should preferably cover financial commitments for a period of at least six months. You can invest in liquid funds or bank deposits for such a type emergencies. The fact that on buying health insurance, you can get a tax exemption of up to Rs 25k, you should factor it in too as you will be effectively paying lesser for the insurance coverage. 

The columnist is Naval Goel, CEO, PolicyX.com