Parental coverage in group insurance: In or out?
High claims incidence Opt-in/opt-out framework Need to be better informed Parental insurance is usually a sensitive topic, both for human resource (HR) managers and employees
High claims incidence Opt-in/opt-out framework Need to be better informed Parental insurance is usually a sensitive topic, both for human resource (HR) managers and employees. Depending on how you segment the data, 30-50% of mid- to large-size companies offer their employees health coverage for parents.The sensitivity is owed to the fact that a substantial chunk of these companies recover the cost of coverage from the employees’ payroll, mostly in the form of a monthly deduction from salary. The annual cost of covering two parents for average hospitalisation benefits range between Rs.30,000 and Rs.50,000, depending on the size of the group and past claim history.The premium for parental insurance is an order of magnitude higher than the hospitalisation insurance cost for employee, spouse and children. If the cost is borne by the company, any increase hits the HR budget. If this is borne by the employee, they are faced with the dilemma of whether to opt for this coverage or not. High absolute cost can sometimes deter the employee, but opting out may not be the best decision for a few reasons.First, it is important to see the cost in the right perspective. Group policies, generally, have no waiting period. So, claim can happen on the first day of coverage. That’s why parental insurance witnesses significantly high claims incidence. For instance, for a voluntary parents’ insurance plan, the claim incidence can be around 25-33%.
This means every fourth person is making a claim. Another way to interpret is that the likelihood of an individual making a claim once in four years is extremely high. The claim incidence includes a wide variety of hospitalisation cases, cataract being the most frequent. Then there are elective surgeries, like knee and hip replacement, and more severe ones, such as heart bypass surgery, cancer, and stroke. This statistic itself establishes the need to maintain a coverage for parents at all times.The second comparison that employees make is the premium comparison between the group rates and the individual premium. Considering that individual plans are exempt from the 18% Goods and Services Tax (GST), the group rates can, at times, seem more expensive than the retail rates. However, this is only half the truth. A large number of senior citizens find it difficult to get individual insurance covers. With age, many develop chronic ailments such as diabetes and hypertension. Insurers may increase premiums or decline coverage to people with such medical history. Sometimes, cases with history of minor surgery such as kidney stone removal, are declined. So, while the premium comparison is made between the group rates and the lowest available individual rate, the possibility of getting coverage is lower. Under a group plan, however, coverage is guaranteed. There is no case-wise medical underwriting or need for declaration of health history for individual members.
The BriefWire