Senior Citizens must buy a Health Insurance Cover to Avoid Financial Risk

As medical costs rise, such plans can help elders manage healthcare needs

Many aged individuals are worried about the spiralling cost of healthcare and what it can do to their financial security. With medical inflation growing at 15% per year, the cost of procedures like angiography and gall bladder removal has increased by 50-60% between 2007 and 2012, a recent report released by KPMG and Assocham noted.

In fact, out-of-pocket healthcare expenditure (86% in 2011) dominates their spending. Around 38% of the elderly respondents to the survey in India ranked health and financial insecurity among key fears. Low insurance penetration in India means many senior citizens lack the resources to fund treatment.

Financial experts believe the absence of adequate health insurance, especially among individuals who were banking on their employers’ group health insurance scheme, is the main trigger for the insecurity. “When they retire, they suddenly find themselves without a cover. This is because many retirees find it difficult to buy a new cover at that age because of stiff medical tests and high premiums. According to insurance experts, such individuals have three options to salvage the situation: one, continue with the employer’s group health cover (if it is permitted) by paying the entire premium. Two, shift to an individual cover with the insurer offering the group cover. Three, buy an individual cover.

The first option is the easiest, as it will allow you to enjoy the accumulated benefits, and you will not have to wait for three or four years before your pre-existing diseases become eligible for claims. Also, it will help you save money on the premium, and your claim settlement will be smoother. The only hitch: very few organisations permit it. “If allowed, however, youmust opt for it. You should scrutinise the offer before signing the deal to make sure the terms and conditions are acceptable to you. You need to verify if all the continuity benefits will accrue to you.

The second, and relatively newer, option is to port, or switch, to the retail policy of the insurer who has provided the employer’s group medical cover. IRDA’s portability guidelines cover policy transfers from group to retail, allowing retiring employees to exercise this option. However, the retail policy’s terms and conditions could be different from those of the group cover. Initially, they can only shift to the insurer who provided the group cover. Later, they can switch to an insurer of their choice. Again, this option will secure you a cover for your preexisting diseases, if the period for which you were covered under the group policy exceeds waiting period stipulated in the retail product. However, your premium will be a bit higher than the group cover.

The premiums (in cases where the employer allows continuation under the group scheme) could be volatile as they will be driven by the claims experience of the overall group. On the other hand, if the person uses portability to move to an individual cover, where the premium is based on the standard rate applicable for individual policies, it is likely to be more stable. If you draw a blank with these two options, you can consider buying an individual health cover from an insurer of your choice. However, you have to be prepared for pre-medical check-ups, sublimits, co-pay ratios — where you will have to shoulder a part of the claim burden, and, of course, higher premiums. And despite all this, coverage could still be denied to you. Reading the fine-print is important in case of independent covers, as insurers have been increasingly introducing minor changes, both in terms of restrictions and benefits to differentiate their plans from the market. A plan with a lower premium may come with some limitations such as room rent limits, sub-limits on ailments, cap on surgeon charges, etc that may not be obvious and could prove expensive in case of a claim.