Planning for healthcare expenses

Sridhar Iyer’s (28) parents are diabetic since several years and that is the sole reason which has prompted him to buy health cover of Rs 5 lakhs for himself as he is aware that sooner or later he might end up with the same illness as diabetes is a hereditary disease. Since Sridhar’s parents cannot be covered by any medical insurance, he has kept Rs 5 lakhs separately in an FD solely to meet any medical expenses that might arise for his parents. While Sridhar has been sensible enough in planning his own and parents unexpected medical expenses, Ashish kumar (37) did not have the foresight to do so. Ashish’s wife (35) was recently diagnosed for thyroid. Ashish is now trying to get her insured but chances are that either the insurance company will consider the illness as pre existing and not cover it for 3-4 years or they may permanently exclude thyroid treatment for her. 

Each family’s situation is unique. One needs to assess the situation and accordingly plan for health related expenses. Healthcare costs have been steadily increasing over the years and to avoid any massive drain of savings or investments one needs to plan well in advance. 

Some analysis of healthcare costs.


 

Treatment

2012 Cost

2007 Cost

Increase

1

Cataract

24,000

16,000

50%

2

Angiography

22,000

14,000

57%

3

Coronary Artery By pass Graft (CAGB)

2,35,000

1,65,000

42%

4

Appendectomy

42,000

28,000

50%

5

Heamorrhoidectomy (Piles)

35,000

21,000

60%

6

Cholecystectomy (Gall Bladder removal)

52,000

32,000

63%

7

TURP (Prostate Surgery)

62,000

37,000

68%

8

Angioplasty (PTCA) with 2 stents

2,45,000

1,55,000

58%

 

Source : Medimanage.com

     
Given below are a few situations where adequate planning can ensure that you are prepared.
  1. Taking health insurance: Unexpected hospitalization expenses can be best covered by health insurance. It is very economical too to insure ones family at younger age. For eg, a family consisting of parents (upto age 35) and 2 children can be insured for a decent family floater insurance cover of Rs.4 lakhs for approximately Rs.12000 p.a. In families consisting of old parents, efforts need to be taken to insure them as early as possible lest they might become uninsurable after a particular age. Even in cases where parents have crossed 60 years, there are a few insurance companies which cover them but it comes along with a co-payment clause, which means that a part of the expenses have to be borne by the insured. These insurance policies cover upto 70% of the hospitalization cost which is still good. Most salaried people are covered by group mediclaim cover provided by the employer. Here too some employers provide the facility to cover old parents by paying a nominal additional premium. One should take advantage of this facility as old parents get covered even without doing any medical tests. 

  1. How much cover should one go for :  There is no standard thumb rule for this but since in today’s times young and old alike can be prone to sickness, one can decide depending on the income and responsibilities of that person. Increasing stress and sedentary lifestyle has ensured that more and more young people under 35 years suffer from sickness such as diabetes, hypertension, etc. At the beginning of your career in the 21 to 25 years category, one can start with a Rs 2 – 3 lakhs medical cover and enhance it later once you get married or grow in your career. For the high income earner in this young age, a Rs 5 lakh mediclaim cover will be ideal. For those with a young family (28 – 35 years) a family floater insurance policy of 3- 5 lakhs can be taken and increased gradually. Again depending on your income, you can even take a Rs 10 lakh floater which is now easily available for a family of 4 (2 adults and 2 children) for an approximate premium of Rs. 17500 p.a.  For people in the higher age category such as 40 and above individual health cover will be better as each member in the family will have a separate cover. 

Comparison of approximate premium for different age groups


Age group

Individual health cover

Annual premium

% increase over slab premium

*Annual % increase in premium

30 – 35 years

300000

4000

0

3%

36 – 45 years

300000

4500

12.5

46 – 50 years

300000

7000

56

51-60 years

300000

10000

43

* Annual % increase in premium taken from age 30 to age 60

Age group

Family floater cover for 2 adults & 2 children

Annual premium

% increase over slab premium

*Annual % increase in premium

30 – 35 years

300000

8000

0

3%

36 – 45 years

300000

9500

18.75

46 – 50 years

300000

14500

53

51-60 years

300000

18000

19

* Annual % increase in premium taken from age 30 to age 60

  1. Should one opt for add on health covers: Add on health covers such as a critical illness provide a onetime benefit in case one suffers from a critical illness such as cancer, specific heart related ailments, etc. It should be ideally taken by people whose parents have a history of hereditary diseases and should not be a substitute for mediclaim. Some health insurance policies offer critical illness along with the mediclaim and are often economical than standalone critical illness policies. Depending on your income and affordability one should take this cover only after you have taken a mediclaim policy. 

  1. Creating a health corpus : For uninsurable parents and especially if they are suffering from various medical ailments, it becomes necessary to create a health corpus to cater to their unexpected hospitalization expenses. Apart from parents, even other members suffering from uninsurable ailments for which regular medication is suggested and which may also result in hospitalization, need a health corpus fund. The size of the fund can depend on the affordability of each family. It can range from Rs 2 lakh to Rs. 5 lakh or even more. This money needs to be maintained either in liquid fund or fixed deposit which can be redeemable at short notice. For those who cannot set aside such a big amount can start a recurring deposit or an sip in debt funds to create a corpus over a period of time. It is better to be prepared than repent later. 

Article written by 

Steven fernandes

Certified Financial Planner

https://www.business-standard.com/article/pf/plan-early-for-health-related-expenses-112110400021_1.html

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