In recent times, key aspects related to health insurance – premiums, claim processes and settlements – have not been easy for many policyholders, at least going by their outpouring in social media.
Sharp premium increases (30-40 per cent rise, even without prior claims), too much back and forth communication with the third-party administrator or the insurer on approvals and outright claim rejections or part payments have made many wary about the utility of their policies.
“We should accumulate our own medical fund or corpus instead of wasting money on health insurance premiums,” or so goes an argument, to avoid all the hassle dealing with various entities.
However, this view has serious implications for the personal finance of policyholders.
Here, we look at the challenges and potential mistakes that could crop up when a medical fund is favoured over a regular health insurance policy.
But there are some situations, where indeed a medical corpus could come in handy. We highlight a few such pertinent situations.
Medical fund not a panacea
If you are one of those policyholders looking to substitute your health insurance policy with a medical corpus, you need to understand the serious shortcomings behind the idea.
First, deciding how much you need to save for a medical treatment itself is a huge challenge. Various treatments and procedures cost different amounts across hospitals and cities. You will also have to assess the costs for family members based on their medical history, which is certainly not easy.
A thumb-rule based approach may not be enough in deciding a sufficient corpus. Even if you manage to arrive at a suitable figure, you may still need time to save up.
Second, you will have to factor inflation into your calculations, as medical costs tend to rise much faster than the general inflation. So, you will have to periodically keep increasing your corpus requirements based on medical inflation (which could be in double-digits). Doing so without disturbing your other financial goals may be quite challenging.
Third, unlike health insurance policies that replenish the sum assured every year, once you exhaust your medical corpus fully or partly for any treatment, you will have to accumulate the required amount afresh. Besides, what if your health condition necessitates regular hospitalisation, especially as you age?
Fourth, in the case of any critical illnesses, a health insurance rider will pay you a lump-sum and a regular medical cover is available to the extent of the sum assured. In such cases, your medical corpus may be wiped out in one go and you could be left stranded with insufficient funds.
Then, there is the operational angle.
In the case of extreme emergencies such as accidents or critical medical conditions requiring immediate treatment, where the person saving the corpus is the affected party, withdrawing the amount may be challenging.
Much of the problems associated with health insurance claims can be greatly reduced by following a few aspects consistently. Making complete health disclosures during policy inception and updating as soon as there is a change, choosing network hospitals, understanding exclusions and waiting periods for specific illnesses, following timelines on informing insurers and taking approvals before treatment and paying premiums on time are important steps for ensuring reasonably-smooth claim experiences.
Complimenting health insurance
Having made the earlier arguments, there are situations in which having funds in addition to your health insurance can be quite useful.
First, in case the premiums are too high in relation to the actual sum assured – as it happens in the case of senior citizens – you can consider having a medical corpus of a reasonable size handy. For example, for a ₹3-lakh sum assured, if the premium is north of ₹50,000 annually, with additional co-payment clauses and exclusions, it makes sense to accumulate a corpus.
Second, in regular health insurance policies, there are waiting periods of two-three years for pre-existing or a few other ailments. In such cases, if you need treatment during the waiting period that your medical insurance does not cover, a corpus will come in handy.
Third, even when health insurers settle claims, they exclude some parts of the hospital bill such as consumables. Then, there are cases where if room rents are more than the ceiling approved by the insurer, the bill is settled on a proportionate basis. Besides, there may be other offhand expenses. You would end up paying 30 per cent of the hospital bill from your pocket.
In such cases, having a large medical corpus to pay the portion not covered by the hospital bill can be helpful.
In some cases, insurers may not issue a policy for those with certain medical conditions. Such persons have no option but to compulsorily have a medical fund.
Apart from these, you would need a medical corpus for outpatient department (OPD) treatments such as visits to doctors, medicines for blood pressure, diabetes and other such ailments. Most of these factors apply to senior citizens.
In the final equation, it is clear that a medical fund is not a standalone solution to hospitalisation, but can augment a good health insurance policy.