New Health Savings Plan by IRDA - How it Works

The Insurance Regulatory and Development Authority of India (IRDA) has come up with a new health insurance product to speed up the penetration of health insurance in India. The product will be launched soon in the insurance market. The product is expected to cater to the needs of the people living in rural and semi-urban areas. 

Normally, two options are available for a person who wants to buy a health insurance cover.  Either he/she can opt for an indemnity plan or for a critical illness cover. An indemnity plan covers hospitalization expense of the policyholder while a critical illness plan provides cover against the treatment of particular critical illnesses mentioned in the policy. A critical illness cover repays the sum assured to the policyholder who can use it for a variety of purposes. 

New health savings plan suggested by IRDA:

The new health savings plan designed by IRDA carries the same features that an endowment life insurance plan has. However, the only difference both is that the cover offered by the new health insurance policy can be used only for covering medical expense. Also, this new plan will come with a savings component which makes it different from regular insurance plans. The plan will provide cover only for health related expenses. The policyholder will get an account with this plan wherein he/ she can save money for future medical expenses. 

The suggested health savings account will provide interest on your savings. However, you cannot use this account like your normal savings bank account. For this health savings account, premiums will be divided into three components.  The first component of premium will be for risk charges for health insurance, the second component will be for expenditures, and the third will be for savings component. You will be able to renew the health insurance cover offered by the plan. However, the risk charges may vary at renewals. Premiums paid under this health insurance plan will be exempted from income tax under section 80D of the Indian Income Tax Act. You can get tax exemption up to Rs. 20,000 every year.

The plan will help you save and get cover for your medical expenses. The investments made by you with this plan will grow over the years, and you will be allowed to withdraw your savings at maturity. However, you will be allowed to withdraw savings only to meet your medical expenses. 

Risk coverage by the plan: 

The plan will basically function like a top up plan. For example, if you have a health cover of Rs. 3, 00,000, and you exceed that amount, the plan will provide you with extra cover.  Also, the insurance provider may choose to provide cover for specific critical illnesses which are not covered by regular health insurance policies. 

Know the charges: 

This new health insurance savings plan requires a minimum investment of Rs. 25,000.  The plan is likely to have a three-year lock in period. Also, 15% of your annual premium will be paid as agent commission in the first year. Going forward, it will be 10% in the second year and 5 % in the third, fourth and fifth years.

No doubt, this new health savings plan will help you save money for your emergency medical expenses. But, there are a few limitations which we cannot overlook. Firstly, the savings done through this plan could be used only for medical emergencies.  Secondly, as the minimum premium charged by this plan is Rs. 25,000, it will be difficult for common people to afford and reap the benefits of this new health insurance plan. Compared to what you pay for a regular health insurance plan, this new health insurance is expensive. With a regular health insurance plan, you can get coverage up to Rs. 5, 00,000 by paying an annual premium of Rs.5,000.

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Is Being Covered by Your Employer’s Health Insurance Enough?

Most of us don’t take health insurance because our employer covers us under group insurance policies resulting in gratuity. In fact, most of us are also unaware of the extent of the coverage provided by the group health insurance provided by our employers. What happens if we have to pay out of our own pockets in order to cover our medical bills entirely?

Advantages and disadvantages of employer’s health insurance

Before we get ahead of ourselves, let us understand the ups and downs of relying entirely on the health insurance provided by our employers.

• We receive the insurance provided by our employers at much lower premiums than individual health insurance policies. Not just that, the health insurance coverage provided by our employers is available to us without any restrictions. 
• Added to that, group health insurance policies do not have strict restrictions on persons with past medical histories. Even age is not a barrier to get a group health insurance plan under our employers.

That said, the cons of depending on our employer’s health insurance policy alone outplay the pros.

• Our health insurance, under our employer’s master policy, is only valid as long as we are still under their employment.
• We are not covered under any policy in the instance that we are between jobs. Our family is open to risk as long as we are not employed with an organization.
• Furthermore, if the organization fails to make premium payments, the health insurance policy can be voided.
• Since the health insurance provided by employers comes under group insurance plans, they tend to offer limited coverage. These policies are designed to cover all of the employees employed with the organization, hence may heed to sub-limits under various heads.

When our employer’s health insurance plan is not enough

What happens when we are faced with certain unfavorable conditions, wherein, the health insurance plans availed under group health schemes may not provide adequate coverage?

What’s more is that a new breed of companies that are springing up are withdrawing from caring for elder parents of their employees. Where does this leave our parents when we are away working towards our futures?

Important riders under the categories of pre and post illness costs such as doctor’s fees, nursing care, ambulance charges, daily cash allowances, diagnostic tests, etc. may not be provided under the health insurance policies provided by most employers. These expenses amount to a large sum during a medical emergency.

Premiums on post-retirement health insurance policies are usually very high. A person needs health insurance most pressingly in the waning post retirement years. Employers offer health insurance for the younger years of our lives when most of us are at our health’s peak.

What could be an all-round solution?

To supplement our employer’s health insurance policies, we must opt for an individual or floater health insurance policy. Individual health insurance policies can be customized to suit the variant needs of different individuals of a single organization. They provide us with riders that fit our specific preferences. We could look into the various available options of top-ups, fixed benefit policies or even indemnity-based regular health insurance policies.

Example to explain:

Under the HDFC Ergo Health Suraksha policy, company assures us of no sub limits on the doctor’s fees, diseases, hospitals charges such as room rents, etc. Health Suraksha policy also provides coverage like in-patient treatments, hospitalization costs, pre and post hospitalization costs, check-ups and treatments.

All of this is provided to us at reasonable prices. HDFC Ergo Health Insurance attempts to administer comprehensive health insurance plans that fits every single one of our budgets.

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Health Insurance now being Sold at a Park Near You

Almost every one of us know that a call from the number starting with 1409 is from our nagging neighborhood telemarketers. Companies have realized that these calls are mostly ignored and therefore have started to visit the customers face to face during their morning walks in the park.

The national capital has already been a witness to such an even on a cold day where customers were warming up to the new approach in spite of the cold weather. While one of the marketing respondents was advising a customer about her obese weight and its long terms effects, Kotak Mahindra Bank was making its presence felt by showcasing their products.

Max Bupa took maximum opportunity in selling their insurance products all across the town at Lodhi Garden. In fact Kunal Sharma aged around 65 says that it is a common sight to see companies marketing their products during their morning walk these days. Companies too have had positive response to this new approach. A Bajaj Allianz representative says that customers are more willing to spare a few minutes during their morning walk as they are not distracted much when compared to dining out or at an amusement park.

Anika Agarwal, head of marketing at Max Bupa says that they are able to target customers easily as it is a known fact that people walk in the morning for good health. Max Bupa has started a fitness initiative in the name of Walk for Health to promote a healthy lifestyle. The company conducts regular mini events across various locations in the capital city which includes Lodhi Garden and Siri Fort besides other parts where they get most number of walkers. The company has noticed a steep rise in the number of people during the weekends as most walkers come with their families to enjoy the morning walk. The company has also set up kiosks and free health camps to get the customers attracted towards their products.

Delhi has always been a city of morning walkers with a lot of importance being given to the availability of parks but the new marketing bug is fast catching in the other parts of the country as well. For example, in Chennai morning walkers are liable to be approached by insurance agents to offer services like free health check-up and in the process try to sell their products.

The new approach would surely do well as customers are spoilt for choice and sometimes even confused to choose the right health insurance policy. The new approach would go a long way but only if company’s maintain the thin line between suggesting customers the best health insurance and nagging them to buy their products. In today’s busy schedule the last thing customer’s would expect is to someone annoy their only possible moment of having a peaceful time. As of now the companies are doing a good and hopefully keep it this way without turning the new approach into yet another sales pitch.

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