Sunday, December 23, 2007

Twilight gloom

Seventy-two-year-old Nikhil Mukherjee had approached The Telegraph in April when he got to know that his insurer was going to charge him Rs 26,000 as premium this year against Rs 13,500 he paid last December to renew the medical insurance policy he bought eight years ago.

Many elderly people, including Mukherjee, started thinking of discontinuing their medical insurance policies as one insurer after another started making health insurance unaffordable for what they called the “high risk category” by raising premium rates by more than 100 per cent.

Panel formed

Concerned about the situation, the Insurance Regulatory and Development Authority (IRDA) had constituted a committee to look into various issues, including incidents where people above 60 years were denied cover by many insurers, particularly the private sector ones.

The committee submitted its report early this month.

The report, however, has nothing much to offer to senior citizens, except for the fact that it had recommended that no senior citizen should be denied a health insurance policy by any insurer.

The committee has recommended that insurers should look at a base premium of Rs 3,000 (per annum) per Rs 1 lakh sum assured at an entry age of 50 years.

The renewal premium for each subsequent year with no claim would be increased by an age loading factor of 2 per cent of the base premium. A 60-year-old person who wants a health insurance with a sum assured of Rs 1 lakh will have to pay a premium of Rs 3,600.

No change

The premium rate suggested by the IRDA-appointed panel is not very different from what National Insurance Company or United India Assurance Company is charging for its senior citizen medical insurance schemes. Both the public sector insurers charge a premium of between Rs 4,100 and Rs 4,200 on a sum assured of Rs 1 lakh for a 60-year-old who wants to buy a fresh policy.

Another public sector insurer, New India Assurance, is also coming out with a medical insurance policy exclusively for senior citizens with a premium rate of around Rs 3,800 per Rs 1 lakh sum assured. Private insurers that offer individual health insurance plans exclusively to senior citizens, however, charge a higher premium in the range of Rs 5,000 or more per Rs 1 lakh sum assured.

Therefore, even if the committee’s recommendations are implemented, the premium cost for senior citizens won’t come down appreciably.

Low-cost plans

The panel has, however, suggested low-cost limited benefit plans instead of existing mediclaims that are mostly indemnity plans in nature. Benefit policy plans provide lump sum amounts on diagnosis of a specified disease for treatment or surgery.

For example, in a hospital cash plan, an insurer pays a fixed amount for each day of hospitalisation.

Benefit plans cost low because they come with in-built controls such as less policy administration and claim settlement costs on the part of the insurer. Misuse of insurance money is also low in these kind of plans as the insured gets a fixed pay regardless of the actual expenditure — any expenditure over and above the amount would have to be borne by the insured.

Cost control

Though the committee has identified affordability and accessibility as the two most important issues in senior citizen health insurance, it dealt more with cost control measures such as co-payment by the insured, capping entitlements under expenditure heads, introducing deductibles and co-insurance.

Co-payment, deductible and co-insurance mean the insured also pays part of the expense(s) covered under the insurance plan. According to the committee, these are all in-built measures to control costs and misuse of insurance policies. Once these excess costs are controlled, the premium will come down.

According to B.D. Banerjee, a member of the committee, a restructuring of existing products is a more likely outcome rather than an all-round reduction in premium rates if the panel’s recommendations are accepted.

So, if you don’t want to pay much, you will have to be satisfied with plans that offer limited benefits such as only the cost of getting treatment in a general ward.

If you would like to get your prostate operation covered during the first year itself of the policy commencement, you will have to pay higher.

In short, senior citizens will be offered a variety of products, but will have to choose the benefits according to their paying capacity.