How to optimise premium for a personal health insurance when an employer-sponsored plan exists

What is a Top-up health insurance plan? 

Top-up plans provide additional sums assured for health insurance. Top-up plans are much cheaper than a regular health insurance policy. This is because a top-up health policy carries a deductible.

Expenses incurred up to the deductible amount are not covered by the plan. Several frequently claimed treatments such as cataract and hernia entail relatively smaller amounts and fall well within the deductible amount. It is for more severe cases such as a heart attack or cancer that top-up becomes more relevant.

A policyholder can claim for expenses up to the deductible amount from their base plan, i.e., the employer-provided group health. Expenses over and above the deductible can be claimed from the top-up plan.

Types of top-up plans provided by insurance companies

There are two types of top-up plans, loosely referred to as standard top-up and super top-up plans. Under the standard plan, the deductible is applied on each and every claim, whereas for the super top-up, the aggregate expenses incurred in the policy year are counted towards the deductible.

For instance, if you incur two hospitalisation claims of Rs 2 lakh each, and the deductible of the top-up plan is Rs 3 lakh, then the standard top-up plan would not admit any claim. The super top-up plan would admit a claim of Rs 1 lakh. In cases of severe illness, multiple hospitalisations are often required in one year. In such cases, a super top-up plan is more beneficial.

Group top-up health insurance

Several companies facilitate a group top-up plan in addition to the regular group health insurance, where employees can enhance their sum assured at their own cost. The major advantages of this plan are that it is cheaper because of bulk buying, and typically does not have any waiting period.

Otherwise, the regular top-up plans have a waiting period of two to four years for pre-existing diseases and specific ailments. The disadvantage of such a plan is that it is tied to your employment. So, while you pay the premium, it is strictly not a personal plan.

Affinity top-up

Similar to the employer-facilitated group top-up plan, several technology platforms now offer group top-up health insurance plans. Technology platforms include payment wallets, HR-tech firms, and health-tech firms. To increase stickiness and retention of their user base, such platforms offer differentiated insurance offerings.

Given the high volumes, such platforms are able to negotiate lower costs. However, such plans would have a waiting period for pre-existing diseases and a few named ailments. Apart from the cost, the other advantage is that this plan is not linked to your employment. You can keep renewing this plan even if you change your employer. However, the risk with affinity policies is that it could be discontinued by the platform (your affinity group – the service provider) or the insurer. In such a case, you would have to migrate to an individual plan.

How to convert top-up health insurance into a standard plan?

A few individual top-up plans now give you an option to convert the top-up to a standard health insurance plan. This significantly reduces your need to buy a personal standard health insurance plan. You could buy the top-up plan now with a deductible, thus saving on premium. On subsequent renewals, if you no longer have coverage for a base plan, you could convert the top-up into a regular plan with the same insurer. Insurers waive any medical underwriting at the time of conversion. So, even if you develop any health condition after taking the top-up, this would not affect policy issuance. Insurers generally offer this facility of conversion after around five years of continuous renewal.

Coverage for critical illnesses only

In some cases, especially for government employees, the employer provides unlimited sum assured and health coverage post-retirement too. The individual could be covered under such schemes by virtue of own employment or that of spouse or parents. The need for a personal health insurance plan is low in such cases. One could just buy a critical illness insurance instead of a personal health insurance.

Critical illness insurance is significantly cheaper than individual insurance, and works as a supplementary plan. If the employee is diagnosed with a critical illness, the full sum assured would be paid to the employee. This would be in addition to the reimbursement from the employer health plan. Such lump sum received from the critical illness plan can help defray increased cost of living due to the critical illness.

Additional Read: Here’s how to claim health insurance from your office cover and personal cover at the same time.

Verdict

All the above suggestions assume that you have good coverage via group health insurance administered by the employer. If your base coverage has substantial restrictions such as room rent capping, disease-wise capping or a copay, then you should seriously consider buying a regular health insurance plan. Proper health insurance coverage is imperative. While the annual premium costs pinch, it helps you avoid catastrophic out-of-pocket expenses when you are most vulnerable.