Will EMIs for health care substitute health insurance?

Adhil ShettyBankBazaar.com

Kumar, a retired state government employee was out on his routine evening walk with his friends when he collapsed to the ground. His friends rushed him to a nearby hospital immediately. He was diagnosed with a heart ailment and suggested an immediate surgery. Kumar with his limited pension was clearly not in a position to pay for the hefty amount required for the surgery costs with no health care insurance. Thankfully the doctor at the hospital shared with the family a plan to opt for the surgery by paying the cost in easy installments over a period of time.  The family signed the papers and the associated EMI clause.  Let us look at this concept of EMI for health care!

Health Care and EMIs: EMI for health care is a novel concept in India but has been in place for a long time in other developed nations. The rising medical costs and the fact that only a limited few people opt for medical insurance in the country, EMI for health care has the power to become a helpful tool for the majority in the years to come. Such EMI option for heath care was available only for certain cosmetic surgeries like dentistry, transplants, plastic surgeries and the allied cosmetic surgeries till recently.  But the new EMI for health care route helps patients to finance various medical surgeries and buy medical equipment like stents for heart, lens for cataract surgeries etc directly from the medical suppliers in monthly installments. The benefit of such a setup is that people with no health care insurance would also have a window of opportunity to opt for treatment without getting caught up in the process of raising capital during emergency situations.

Working overview of EMI facilities: While in the West health insurance companies are actively offering the EMI scheme, in India hospitals and multinational medical device manufacturing companies like Meditronics are offering EMI services for special cases, in tie ups with NBFCs. The EMI scheme comes with around 10% interest and with an EMI as low as Rs. 1000 per month. They do not seek any security or collateral for such a ‘treat now, pay later’ scheme, but the family of the patient must have at least one working member. The Tata Capital backed Mya Health Credit is the only NBFC directly working in this field, offering health care finance for expenses above Rs.75000/- after gauging the repayment capacity of the patient or his family.

EMI for health care versus Health Insurance: There has been a lot of talk in recent times about how health care EMI option can be bad for health insurance companies in the long run. Financial experts and health insurance analysts believe that while EMI for surgeries is a good idea, the health insurance model is going to stay firmly embedded in the system. Since medical costs are rising with each passing day, health insurance still offers a better protective cover for a range of diseases than EMI option which must be considered only as an emergency protection plan.Health insurance also continues to be a stronger product since it offers a widespread coverage against a large number of diseases. Health insurance can take care of the expenses incurred due to hospitalization, including ambulance charges, consultation fee of visiting doctors etc. EMI for healthcare is available only for a selected few ailments in limited hospitals.

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Adhil Shetty

CEO|BankBazaar.com

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EMI for healthcare is usually offered only for people in the low income group to make sure they are not deprived of medical treatment due to their financial hardship. Financial experts believe that both instruments have their own strong points and the health insurance industry is unlikely to feel any negative impact with EMI for healthcare.

Health Insurance EMIs v/s Health Care EMIs Various health insurance companies allow users the option of opting for a health insurance through EMIs via credit cards. Such a set up allows the user the advantage of opting for life insurance without paying up a onetime hefty premium. Since the amount of medical cover opted gets reflected in the premium costs, such a set up allows users to pay for the annual premium in monthly installments.

This is also a helpful financial tool but comes with its own set of advantages and disadvantages. One of the biggest benefits of a health SIP is that it allows users to opt for health insurance in the first place rather than skipping it completely, making them vulnerable to high medical cost in case of an emergency medical requirement. Health insurance though SIPs also offers tax benefits under section 80D of the Income tax Act as regular health insurance.

The downside of health insurance EMIs: Health Insurance companies are offering health insurance EMIs only through credit cards. This effectively means that all EMI payments come with an additional extra cost in the form of fee charged by credit card companies for each transaction. While the charges may be nominal per month, the annual charges when accumulated make the health care policy slightly expensive compared to a one time annual premium payment method. All credit card payments also charge an extra transaction fee which the health insurance company pays back to the credit card company. But the insurance companies usually passes on the transaction fee costs to the insurer escalating the final price of the health policy. Another disadvantage of paying health insurance premium as EMIs using a credit card is that if the user opts for an auto renewal mode, the company would deduct the amount each month. This effectively means that the insurer may find it a little complicated that usual, if he/she is unhappy with the service provided, or want to switch the company.  Another thing to note is that in case one misses a deadline for payment of any EMI, there is a hefty interest plus late fee which can escalate the overall price of the health insurance policy.BankBazaar.com is an online marketplace where you can instantly get the lowest loan rates , compare and apply online for your personal loan, home loan, car loan and credit card from India's leading banks and NBFCs.