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How to lower your medical insurance costs

Every day, more and more people are waking up to a grim reality - their medical insurance costs are sky rocketing. In this post, I discuss practical and reliable ways to lower medical insurance costs with an important caveat - there is no free lunch (you need to give up some to get some).

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I just filed my ITR and realised that my annual medical insurance premium is 143% of my current monthly expense. This is going to get worse and worse. For the last ten years, I have had a United India Platinum policy for myself, wife and son (after he was born) and a United India Gold policy for my mother.

During this time, we have made three claims - for me, my wife and my mother. I was diagnosed with myasthenia gravis and my mother with Parkinson's.  This rules out portability as no insurer in their right mind will accept the associated risk or at the very least charge me more premium than United does (so that beats the purpose of porting!).

A super top-up or a top-up policy from United is possible, but I have still not considered it. Until 2015 I used to methodically increase the sum insured by the allowed 50,000 each for all members. Last year, such an increase shot up the cost a little too much so I settled for the same sum insured. When my premium is due in a couple of months, I am likely to be in for a rude shock.

Why do premiums increase?

1:  Primarily due to the age of the insured as the risk for the insurer increases.

2: Since IRDA mandated that premiums should not increase due to a claim, insurers hiked the policy rates from day one.  Now they are increasing it further stating increased no of claims and poor profits.

Before the IRDA ruling, only those who made a claim had to suffer. Now everyone insured has to suffer!

Excuse the irrelevance, but whenever I think of health insurance, this Vincent Van Gogh (1885-86) comes to mind.

What are my options if I wish to lower my health insurance costs?

1: Have no health insurance.  What?! Are you serious?

That depends on how much money you can spare for an emergency fund. Suppose you can allocate 3 Lakh or 5 Lakh for a start (if you are in South India, twice as much in the North) for hospitalisations alone and can top it up each month by say 10,000, you can gamble on not having health insurance. Think about the perks - you will get discharged faster! On a serious note, if you can allocate that much money, you can afford the premium, can you not?!

2: How about portability?  Trying to port a policy one because of cost alone is, to be frank, an unwise thing to do.

Many people calculate premiums online and assume that upon porting they will be charged the same! Ha ha! Wish it was that simple! Applying for portability is your right. Approving your application is the right of the (new) insurer. They can simply refuse or charge you much more as mentioned above.

Read more: Health Insurance Portability: What you need to know before porting.

I would strongly recommend against this. Do not jump from the frying pan into the fire.

Remember:  You cannot port after you get the premium due notice that is, the bad news. A good 45-60 days before the due date is necessary to complete the porting (including rejection).

3: How about shifting to bank insurance policies? If something is cheap, then something is wrong with it. Even if feature-wise they are identical to the policies offered by the mother insurance company, the partnership can be dissolved at any time.  Melvin Joseph posted at Facebook group, Asan Ideas for Wealth that National Insurance just terminated their bancassurance contract.

If you already have such a policy, then be prepared for the worst. If you have a normal health policy then stick to it.

4: Stick to your insurer, but talk to them - either via your agent or go in person (you know where you actually to another human being and not to a device).

Request them to offer you a modified policy (with waiting period benefits retained!):
(a) a floater policy if you hold an individual policy (I do, but will not opt for this as 2/4 in my family are not exactly in the pink of their health)

(b) A policy with copay or co-insurance. That is, you agree to pay 10% or 20% or 30% of the hospitalisation costs (it can also be a fixed sum instead of a percentage) and the insurer will pay the rest.  This is usually available for senior citizens, but you can ask them to consider this for younger people too. Sure this means you have to spend in case of a hospitalisation, but hey there is no free lunch. You want to lower costs reliably then be prepared for a haircut.

(c) You can try to add a deductible clause in the policy. That is, you agree to cover the first 1L/2L/3L and then the insurer will cover the rest (like a top-up policy)

(c) Speaking of which, you can opt for a top up or super top policy alone with a low deductible.  You are then gambling on a lower frequency of hospitalisation than premium payment(!).

Note: I am not saying such modifications are a given. But if you state your intentions to be a loyal customer and are willing to give up a thing or two or three, they might accept.  We will know only when we try. This is where a proper letter of intent, followed by a personal visit will help. Not all intermediaries are likely to be competent enough to get this done for you. If you think so, then you can use their services. Would be they be willing, is another matter!

What is the worst that can happen if you make such a request? Would they say the new policy would be treated as "new" with waiting periods reset?  Then if cutting costs is important to you, I say take that chance. I repeat - no free lunch.

In any case, build a large emergency fund. Ignore bullshit thumb rules like "six months expenses worth". Only those who have never faced an emergency, especially a hospitalisation, will take such thumb rules seriously.

Please let me know if there are any other reasonable and reliable options to lower premium costs.

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4 thoughts on “How to lower your medical insurance costs

  1. Chaitanya

    You have always been enlightening us about the perils regarding health both financially and emotionally. Thank you very much Professor.

    Reply
  2. Avadhut

    Hello Sir,

    Awesome article.

    What is Top Up policy? When is it required?
    Co-insurance is possible in senior citizens case? Any idea which insurance company is good for that?

    Reply
    1. freefincal

      Yes co-insurance is possible for senior citizens. I dont know which is good. In a top-up, there is a deductible of say 2 Lakh. This means the first two lakh expenses it will not cover. Any expense after that it will cover.

      Reply

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