COVID-19 impact | Group health insurance premiums may rise 10-15%

The coronavirus (COVID-19) outbreak has led to a spike in healthcare costs in the country. Medical bills are going through the roof for patients while hospitals blame it on additional costs incurred to check infection. Amidst all this, the insurance premiums for group health covers may also go to 10-15 percent in the next six to seven months with rising claims.

“There are group insurance policyholders incurring higher charges for COVID-19 treatment. But even for regular procedures, individuals are choosing high-end hospitals increasing the claim amount. This is adding to total costs,” said the head of underwriting at a mid-size private insurer.

Group health covers are taken by corporates for their employees. The premium is dependent on the number of employees, profession and location of the facility. It can range between Rs 1,500 to 5,000. The policies are renewed on an annual basis.

Moneycontrol had reported earlier that from January 2020 there would be a premium increase in group health covers by 15 percent.

Why is an increase proposed again?

From March 2020 onwards, the number of COVID-19 cases in India has been on the rise touching 56,342 reported positive cases on May 7. With every hospitalisation, the costs in the hospital go up with the need for additional personal protective equipment, gloves, face shields and masks.

These costs are spilling over to the non-COVID-19 patients as well. So even individuals admitted for a regular surgery are being charged COVID-19 charges. This is because regular outpatient departments in hospitals are shut, elective surgery postponed and hospitals say this is the only way to recover costs.

This has directly impacted the insurance companies who are partly bearing the higher costs incurred by insured patients in the hospital.

Also Read: Live updates from COVID-19 in India

“COVID-19 spread across the world has led to a hike in health claims globally. Reinsurers who are bearing the brunt of higher claims by insurers are planning to hike rates. This will be passed on to customers,” said the chief executive of a health insurer.

In India, about 1,200 claims are reported to be received so far for health insurance related to COVID-19 amounting to approximately Rs 25 crore.

Considering the risks involved in the business, almost all general policies are reinsured by insurance companies. In other words, they buy a cover for themselves in case the insurers themselves are hit with a large claim.

But isn’t there a rise in the insurance pool in group health?

Insurance works on a concept of pooling. The premiums paid goes into a pool and the claim gets paid out of this common pool. The idea here is that the pool should have a mix of young, old, sick and healthy to ensure that there aren’t too many claims. Higher the number of people in the pool more is the ability of an insurer to pay the claims.

Group health insurance is a product that is among the most popular among Indian corporates. This is used as an attraction tool to hire candidates and often covers the employee and his/her spouse, children and parents. There has been a 20-25 percent rise every year in the number of corporates opting for medical cover for the staff.

However, the COVID-19 situation has sent insurance companies into a tizzy. There have been reports of employees opting for expensive hospitals and consultations for regular ailments.

“The symptoms of COVID-19 include fever, shortness of breath, dry cough and runny nose. Individuals who would otherwise not visit a hospital for any of these symptoms are now choosing to do in fear of the virus outbreak. This has also pushed costs up,” said the head of claims at a state-owned general insurer.

Insurance executives also said the co-pay element will see a further increase. Co-pay means the policyholder would have to bear a cost of the claim; which could between 10-50 percent.

Further, coverage for additional persons including spouse, child or parents could be chargeable. For most organisations, group health coverage includes family members free of cost.

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