Health insurance premiums set to register 25% increase

Health insurance premium is set to increase in the range of 15 % to 25 %, even as life insurance premiums are reduction over the years. The rise in healthcare premium cost is attributed to a high rate of claims to premium ratio of more than 100 %, as per a recent survey covering 55 % of the companies.

In the survey, Healthcare Trends 2010 by Towers Watson, a global multi-practice consultancy, all respondent companies with claim costs between 125 % to 150 % faced premium increase to the extent of 25 % to 50 % this year as against only 9 % last year. One of the key drivers of healthcare costs is medical advancement and technology.

The rise in premium is worrisome as majority of surveyed employers have not made any condition for strategizing employer-employee contribution towards premium and claims costs, claim from special hospital network only, reward/penalization for health status, treatment with alternative medicines, etc.

positive practices that tend to bring down costs of group health insurance premiums are not very popular in India. For instance, co-pay arrangements require employers to deduct a certain amount from the employee's salary towards sharing the premium cost. As this practice is not widespread in India, the cost of health insurance premiums is largely borne by the employer.

"Despite passing on a part of the claims cost to employers by raising premiums, Health Insurance companies are also finding it difficult to cross finance healthcare with other profitable insurance products such as fire, motor etc. This compels the insurance companies to align their premium in accordance with the market trend, leading to increase in premium costs for employers", said Kulin Patel, Head - Benefits, Towers Watson India.

Parental claims form 60 % of the claims for the companies that offer reporting to spouse, children and dependent parents in addition to employees. As per claims data for the last 3 years, 50 % companies are observed to be experiencing a high claims ratio of 100-150 % and rise in the premium in the range of 15-25 %. Interestingly, almost 80 % of employers who offer cover to dependent parents and report premium escalation in the range of 15-25 %, have no premium sharing provision in place or planned for the future.

The health insurance premiums have also seen an uptick because the increase in medical costs in India over the past 4 years has been in double digits. The survey also expects the costs to exceed price inflation in the medium term.

The survey signals a possible change from the "one size fits all" approach of employers while designing healthcare benefits, to a more targeted approach, thus enhancing its perceived value. The survey also observes an industry practice of incorporating sub-limits for various covers, with nearly 58 % of participants confirming such a practice. This is a good initiative to limit the risk experience on some of the common cover items like maternity, cataracts etc.

In order to address the rising claims ratio, companies have started capping maximum yearly limit on total claims amount and applying sub-limits on certain claims. "Corporate buffer tops the list of actions that employers have undertaken to ensure an efficient healthcare benefit system, coupled with a tie-up with TPAs," the survey said.

Source: [pharmabiz]