Group Health Insurance

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Often you take into account multiple factors while finalizing a health insurance procurement deal including pricing, service levels, insurer’s brand image, etc. So how can you assess if you are paying a fair price for group health insurance? On the pricing aspect, you can evaluate fairness based on the following factors –

 

  1. Claim ratio – CIaim ratio or loss ratio is defined as the ratio of claim amount settled to the total premium paid (including endorsement premium) during the course of policy. The below table lists how the industry perceives claim ratio –

 

Claim RatioCategory
 < 75%Low
> 75% but < 90%Optimum (Healthy)
> 90%High
> 120%Bleeding

 

If the claim ratio of your policy falls in the optimum category, it is likely that you have paid a fair price for your group health insurance policy. Maintaining a claim ratio in the optimum range, i.e. between 70% to 90%, has long term benefits for the insured including premium sustainability and continuity. Once the claim ratio crosses 120%, the policy is said to be bleeding, i.e. insurer has incurred large losses on the business and is likely to raise renewal premium significantly.

 

  1. Comparison with individual premiums – Comparison of group premiums with individual premiums is a good benchmark to evaluate premium fairness. Typically group premiums are significantly lower at lower age brackets (approximately 25% cheaper for age brackets below 40 years) and either match up or are higher than individual premiums at higher age brackets (age brackets greater than 60 years). The reason for higher group premiums for higher age brackets is due to day one coverage and liberal enrollment feature in a group policy.

 

Competition – In general the procurement process mandates seeking quotations from multiple channels for comparison. Competition automatically brings the best deal to the table in terms of pricing, coverages and services.

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