Strategies to cut your Health Insurance Premium

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With Covid on the rampage and claims likely to shoot up in the coming months, health insurance premiums are predicted to rise. This may be a one-off reason, but have you wondered why you keep paying more for your health cover at renewal? Among the various factors, insurers are allowed to review and revise costs every 3-4 years while phasing out old products and introducing new ones, as well as due to the high health-care inflation. The other reasons for a premium surge are your increasing age, which leads to an onset of medical problems; claims history, where any claim you make is an indication of imminent medical issues; and health status, wherein you develop an illness after your last renewal.

Since these reasons seem out of your control, does it mean the cost of your health insurance will continue to rise during your lifetime? While you may not be able to curb the surging cost, there are various smart strategies, options and discounts, which if availed of, can lower the premium significantly. A good long-term strategy is, of course, to buy insurance early because at that stage there is little possibility of developing a health condition and subsequent loading. This means that you will not only serve out the waiting period for pre-existing diseases by the time you actually contract an illness, but also gain loyalty and no-claim bonuses, reducing your premium costs significantly.

If you are young and don’t have any insurance, you can also start with standardised products, mandated by the insurance regulator in the past few years, to reduce your costs. You can buy a standard product like Arogya Sanjeevani as it does not cost much and gradually increase the sum insured over time.

Besides, there are several other dis counts and options that allow for substantial cuts in premium. These benefits, if combined, can amount to as much as 40% of discounts, but people don’t usually pay attention or take notice, Director, Underwriting, Products & Claims at Max Bupa Health Insurance. Here, then, are some of the obvious and not-so-obvious strategies and discounts that customers can avail of to bring down their health insurance costs. Find out which of these are applicable to you or the ones you can use in conjunction to bring down the cost. But be careful that they don’t take away from your plan benefits and consider the pros and cons before cashing in on these.

1. Combine Health plan with Top-up and Super Top-Up options

One of the best strategies to cut premium is to combine your basic indemnity plan with a booster plan. If you have a basic plan, but want to upgrade to higher coverage, it can be very expensive to buy another basic plan. A good option is to go for a combination of basic and booster plans.

What this means is that after you exhaust your basic plan, the top-up plan will come into force. More importantly, the price difference will be substantial. For instance, if you have an existing plan of 5 lakh, which cost Rs 6,621, buying another Rs 5 lakh plan will cost a total of Rs 13,242. If, however, you go for a top-up, it will cost you only Rs 9,156. A super top-up will be slightly more expensive, but will still cost less than the price of two basic plans.

This combination is very useful for extreme events like liver transplant or surgery, where you require a high sum insured.

More so in the current Covid conditions, where a basic Rs 5 lakh plan may not suffice for a long hospitalisation, but opting for another Rs 10 lakh plan may not be financially feasible. In such a case, opt for a top-up plan of Rs 15 lakh, with a deductible of Rs 5 lakh. If you get a high hospital bill of say Rs 11 lakh, you will first use the Rs 5 lakh from your basic plan, and the remaining Rs 6 lakh will be paid by the top-up plan.

In case of a super top-up plan, the claims for an entire year are added up while considering the deductible. So if you are hospitalised three times, the combined bill of say Rs 13 lakh will be considered for the Rs 5 lakh deductible. In a top-up plan, on the other hand, the deductible will have to be exhausted each time for the top-up amount to be considered.

2. Calculate your Coverage needs 

Calculate how much life insurance you need before you start to compare rates. Your family may need coverage to pay regular bills, but they may not need to pay off the entire mortgage or pay the full cost of college for the children. 

Also, if your children are older or your spouse works, you may need less coverage than someone who is the sole breadwinner and has young children. 

Run your numbers through a life insurance calculator, such as the Life Insurance Calculator on Insure. 

You should also review your needs every few years or when you have any life changes, such as if you have another child or buy a new house with a larger mortgage.

4. Use co-pay & deductible options

Most insurers these days offer the options of co-pay and deductible, both in-built and voluntary, to customers. It is a way for insurers to cover their risks, and for customers to bring down their premiums.

The co-pay usually ranges from 10-30% of the claim amount. What this means is that if you pick a plan with co-pay, you will pay a percentage of the claim from your own pocket, while the remaining amount will be paid by the insurer. What it also means is that it will bring down your premium. For instance, the annual premium for a Rs 5 lakh plan from Care Health Insurance for a 30-year-old is Rs 7,283, while the premium for another one of its plans with a 20% co-pay is Rs 6,548, a difference of Rs 735.

While co-pay is a percentage of the claim, the deductible is a fixed amount that you have to pay from your pocket before the insurer pays the remaining amount. In this case too, your premium amount will come down (see table). So if you raise a claim of Rs 2 lakh, and have opted for a deductible, then you will have to pay a fixed amount, say Rs 5,000 or Rs 10,000, before the insurer pays the remaining sum.

You may cut down on your premium, but remember that you will be paying this amount from your own pocket each time.

5. Don’t buy a Guaranteed Issue Policy if you’re Healthy

Some insurers offer “guaranteed issue” policies. These policies don’t require a medical exam and can be issued quickly. 

A guaranteed issue policy may seem like a good deal because it’s easier to get coverage. However, insurers generally assume that people who apply for these policies may have medical issues. 

Guaranteed issue policies may be your only option if you have health issues. Otherwise, you should try to get a traditional policy with a medical exam. A policy with medical underwriting will result in lower rates than going with a guaranteed policy.

6. Take family discount, but don’t include parents

Most insurers offer discounts ranging from 5-15% for insuring more than two family members in the same individual policy for a fixed sum insured. Also known as family floater health plans, these are a good option to cut down your insurance premium. “Enrolling more family members helps the insurer cut administrative costs and pass on the incentives to the customer, who can avoid anti selection.

While such policies are cost-effective in covering a nuclear family comprising two adults and children, it may not be a good idea to cover grandparents in the same policy. This is because the premium in a family floater plan is decided on the basis of the oldest member’s age, and including grandparents will shoot up the premium (see table). Among the best ways to insure your parents is to either buy individual policies for both of them, or a separate family floater plan for the couple before they turn 50. Even if you buy two separate family floater plans for yourself and your spouse, as well as for your parents, the premium will be lesser than if you were to buy a combined family floater for the four adults.

While family floater is the preferred and more well-known policy, there is another plan known as multi-individual policy. In such a policy, if two family members buy individual policies from the same insurer, they get a discount on the total premium. However, even after the discount, these policies are 10-15% more expensive than the family floater plans. These are primarily for individuals where the severity of illness or frequency of claims is different, and could possibly work as an option for your senior parents.

Since the chance of all the family members falling sick all at once is rare (discounting the current Covid scenario), a family floater plan works best as a larger sum is available to all the members at a low cost. Besides, most health plans these days provide the restoration option, wherein the entire sum insured is restored if exhausted.

7. Present a strong case if you have Medical Issues

Because of medical advances and insurers’ research, some medical conditions that caused insurers to reject people automatically in the past may now be insurable. 

Rather than declining someone who had a heart attack or cancer, for example, insurers now look for more details about the condition before deciding whether to issue the policy and how much to charge. 

If the person had a heart attack and had a stent put in, no heart damage, rigorous control of cholesterol and blood pressure and they’re seeing their doctor, the life insurer will look at that very favorably. That heart attack is different from someone who has not taken care of themselves and continues to smoke.

The criteria can vary by insurer, so it’s imperative to shop around if you have medical conditions. 

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