What is the difference between a personal senior citizen plan and voluntary parents’ insurance offered by employers?

Article was originally published in?moneycontrol.com

Buying insurance for parents is a tricky topic for many. More often than not, the topic of insurance for parents comes up when a health problem is discovered, either with parents themselves or with someone in the family. In most such cases, the regular health insurance option is no longer available. Insurer’s underwriting?for regular insurance plan is relatively stringent, which leads to rejection of applicants with adverse medical history. That’s why, insurers offer a separate plan especially for senior citizens. Such plans have more restrictions than the regular plan but more accessible. At the same time, many private sector employers also offer an option to employees to enroll their parents in a voluntary group health insurance scheme. The question then arises, which plan should an employee opt for?

Number of health insurance plans for senior citizens is about one-fourth of that offered for young adults. Within those, the special senior citizen plans are offered by only a few insurers. The senior citizen plans are usually offered only to people above a specific age, around 45. While the plan features varies across insurers, the core product construct is similar. However, the voluntary group plan for parents offered by employers can vary substantially. So, making an apple to apple comparison between the two plan types is difficult. The intent of the article is to familiarize the reader with key terms that can help choose between the two plan types. Below are some broad distinctions between these two plan types.

The group insurance plan has several advantages over the personal senior citizen plan. Firstly, the issuance is guaranteed. Employers open up enrollment for the scheme for all their employees. The group formation is generally subject to a minimum enrollment ratio. Once the group is formed, and if an employees is willing to pay the premium, then the issuance is guaranteed. No further medical information or history of parents is asked from the employees. In the case of the personal senior citizen plan, insurers do a complete medical underwriting. This involves asking for the medical history of the parent and in some cases needs a medical check-up before the policy is issued. In case of a personal plan, if the medical condition is adverse, the insurer will refuse to grant cover. . The second advantage of the group plan is that usually there are no waiting periods. All diseases are covered from the first day itself, irrespective of whether these were pre-existing or not. However, the personal plan carries multiple waiting periods. The solace is that the waiting period for pre-existing diseases in a senior citizen plan, typically one or two years, is lower than that of regular health insurance plan.

Third major advantage of the group plan is the level of copay. Group plans may carry a co-pay between 10 to 20% on each and every claim. This is a reasonable cost sharing provision. However, the special plans meant for senior citizen may carry a higher copay of 20 to?30%. This leads to a significant outgo at the time of claim. Some plans may apply copay only on non-network hospitals. The fourth advantage of the group plan is the increased sub-limits. Capping such as those on room rent are generally higher for group plans compared to senior citizen plans. Also, most group plans carry high or no disease wise limits. The disease wise restrictions in a senior citizen can be restrictive.

The senior citizen plan scores well on three areas. First, most plans provide a no-claim bonus for every claim-free year.?This is an excellent way to increase the sum assured in a cost-effective manner. Second, the personal plan is life-long renewable, irrespective of your claim history. The group plan is linked to your employment with the current company, and in case the company plans to stop the plan, then your coverage would stop. The third advantage is in the relative predictability of the renewal price of a personal plan. Pricing of an individual plan is fixed for a certain category of people, generally based on age. Your personal claim history does not influence the renewal price. However, in case of a group plan, the claim experience of the complete group determines the renewal price.

Generally, one in every 8 employees covered in a group plan for parents files a claim in a year. That is a high claim incidence and underscores the importance of having coverage for senior citizens. Unfortunately, availability of group plans is still limited. Among the medium to large companies, only one in two firms offer a voluntary parents coverage. The proportion is even lower for smaller firms. Wherever such a plan is available, I recommend opting for it. If not, one should consider buying atleast the personal senior citizen plan.