This becomes critical for people buying a new health insurance policy or servicing an existing policy to factor in future premium hikes before committing for long term health cover. “In the recent past as many of our clients have reached out to us with similar feedback about their health insurance premium. If an individual’s financial plan did not account for the possible rise in health insurance premium, there is a chance of derailment of the entire financial goals of the individual due to the increase,” says Abhishek Kumar, a SEBI registered investment advisor and founder of SahajMoney.
21% people saw health insurance premium increased by 50% or more
“21% of health insurance policy owners indicated that the increase in premium was 50% or more in the last 12 months while 31% indicated that it has risen by 25-50%,” as per the survey. It was also mentioned by survey that for 2% people the insurance premium rates increased in the range 0 to 10% and for 15% people the insurance premium was ‘same as last year’.
A comparative study was also done by the survey researchers with their own 2022 survey about personal health insurance. This study concluded that “The personal health insurance policy owners who had seen an increase in their premium by over 25% has dipped from 62% in 2022 to 52% this year.” What it means that the percentage of policy holders affected with significant premium hikes, has come down by 10% this year when compared to 2022 survey.
However, such steep hikes remain a cause of concern for policyholders. According to the survey, “Personal health insurance policy holders are deeply concerned with a significant rise in premium in 2024 after already experiencing high double digit increases in the last 2 years.”
As per the survey, doctors and hospitals owners are a frustrated a lot as well as the patient is occupying a room which can be used to admit and treat another waiting patient.”The problem that patients face when the health insurance gets delayed is something which not only hampers the doctors but also the patients who need immediate attention because of the space usage,” says Dr Narendra Vankar, CEO and Founder, Quantum Corphealth.
What can individuals do about rising health insurance premiums?
There are multiple avenues available to health insurance policyholders which can all help in bringing down the health insurance premium cost.
Steps policyholders can take to reduce their health insurance premium
- Buy a three-year term health policy: “So when you buy a three year policy, you lock in the premium for the entire period and it will not increase. Typically this helps you save money because you get an upfront discount up to 15% on buying such a long tenure policy. Hence, there is no premium revision due to inflation or age until the policy tenure is over which is three years in this case,” says Siddharth Singhal, Business Head – Health Insurance, Policybazaar.com.
- Co-pay (deductible): “As a last resort, if individuals are finding it hard to pay for the health insurance premium then they can look at going for a policy with a deductible option. In such policy insured persons in case of filing a claim must share a certain amount out of the covered expense before their insurance policy starts paying for covered expenses,” says Kumar.
- Porting of policy to another insurer: “As a customer if your premium substantially increases then you can look to Port into other health insurance companies’ policies also,” says Singhal.
Kumar however advises that porting of policy to hop onto a lower premium paying policy is not a sustainable practice which yields results in the long term, although it may work for the short term.
“Sooner or later each and every health insurance provider would adjust their premium to reflect the rise in medical cost so porting the policy based on just low premium might not be a sustainable strategy in the long term,” says Kumar.
Kumar explains with an example. He says that suppose if an insurer A has a better insurance pool currently due to better underwriting of risk compared to Insurer B. So if Insurer A might not have to adjust its premium currently and if say insured from Insurer B are able to port their policy to Insurer A then sooner or later due to poorer insurance pool Insurer A would also raise the premium which would negate the effect of porting the policy.
Why are insurance companies increasing the health insurance premiums by such a high margin?
Insurance underwriting experts say that medical inflation is the primary reason behind rise in health insurance premium cost.
As per Brijesh VB, head of underwriting for an insurance company in Dubai, UAE, “Rising health care cost added by Inflation which is nearly 14% India is the main reason for increase in the Health insurance premium. 18% of the GST premium also affects the overall insurance cost.”
There are other factors too. As per Shilpa Arora, co-founder and COO of Insurance Samadhan, a platform aimed at helping aggrieved policyholders, “Insurance premiums tend to increase every year based on factors such as a policyholder’s age, prevailing medical inflation (14%), and several others factors. We have seen that premiums have increased significantly in the last couple of years, which is unfair to consumers, especially those from low-income groups.”
Higher number of claims during corona period has also been one of the factors for insurance companies to raise the premiums.
“In India, the health insurance sector also faced significant impacts due to the pandemic. The surge in COVID-19 cases led to a rise in health insurance claims, particularly for hospitalization and treatment expenses. Insurers in India experienced increased costs due to the higher frequency and severity of claims,” says Sharad Bajaj, COO, InsuranceDekho.
How will the rise in health insurance premiums impact senior citizens?
As per an ET report, specifically for senior citizens the health insurance premiums are set to rise in the range of 10 to 15% this year.
“Such a steep hike in insurance premiums is bound to impact consumers negatively. The increasing premium burden, which is likely to further increase with age, could make many senior citizens and low-income groups lose out on their insurance coverage due to their high costs,” says Arora.
Arora further added that individuals who plan to purchase their first coverage at a later age may find the coverage beyond their affordability, and end up shouldering the entire risks.
“In such a situation, those with a medical corpus or retirement fund may find a way to tide over the financial liabilities. However, individuals with limited savings might not be able to cope and struggle to access required medical attention,” she said.
Kumar says that a person should check how much health insurance premium they would end up paying as a percentage of their total income or pension and accordingly adjust their discretionary expenses. For example a person earning Rs 10 lakh as post tax income is currently spending Rs 10,000 as premium for a Rs 10 lakh health insurance cover then he/she is spending 1% of his/her income on health insurance premium. Hence we compare how much they would pay with increased premium. So if their premium has risen up to Rs 15,000 then he/she would pay 1.5% of income towards the premium. As a result, to manage this they should cut down on their discretionary expenses proportionately to manage the rise in premium which takes away 1.5% of their income now from earlier 1%.
Steps hospitals can take to help reduce the burden of increased health insurance premium
According to a health insurance company spokesperson who did not wish to be named, “We have seen cases even during covid time where there was not much of a treatment as such but the hospital bills were about Rs 10 to Rs 15 lakh. The customer was given a paracetamol or few other things and then the bills were charged like anything. So now if the bills are charged like anything then how the health insurance company is supposed to pay for that by keeping the premiums the same,” says the person quoted above who did not want to be named.
According to Arora, “standardising treatment protocols and implementing transparent billing practices can help hospitals contribute to lower premiums for supporting policyholders while promoting inclusivity in the industry.”
