Buy Health Saving Plan to enjoy health insurance & savings

With ULIPs regaining lost popularity, life insurers have gone one step ahead by providing Unit Linked Health Care Plans or Money Back Health Insurance Plans, combining investments and health insurance. The popular plans in this category are ICICI Prudential's Health Saver, Birla Sunlife's Saral Health and LIC's Health Protection Plus.

Health Savings Plans by General Insurers

General insurance companies currently provideonly traditional health care policies. When compared to these lump sum pay methods and money back plans of life insurers, they do not offer any long-term plans or similar attractive offerings.

Now with the passing of the Insurance Amendment Bill 2015, the health insurance segment can now offer stand-alone products with long-term plans. A slew of innovative products are expected in this segment in the coming months. With a higher FDI cap now, some new health insurance companies too are expected to set their foot in India with Health Savings Plans, which are popular in the West.

Cigna TTK is the first to announce a Health Savings Plan in the general insurance segment in India, though the specific contours of the product are yet to be revealed.

How it works

Unit Linked Health Plans (ULHPs):Like mutual funds, ULHPs are managed investments, where you can allocate your invested amount in different funds based on your risk appetite. One can choose the premium they wish to invest and enjoy the assured Sum Insured as per the plan’s provisions. The premium payment period varies for different companies, ranging from 5-10 years and the coverage offered in most cases is life-long.

As an instance, in ICICI Prudential's Health Saver, one can opt for an annual coverage of Rs. 2 lacs, Rs. 3 lacs, Rs. 5 lacs, Rs. 7 Lacs or Rs. 10 Lacs, and pay the premium as per the recommended slab. The minimum premium payment period is 5 years and coverage is lifelong.

Health Savings Plans (HSPs):Health Savings Plan offer a blend of an investment account as well as a health cover. Under this, a part of the premium is allocated towards a savings or investment account, while the rest is utilized towards offering a protective cover. While the exact percentage of allocation towards savings or investments and health insurance will vary from company to company, typically a health savings plan would allocate 30-40% of the premium for savings.

As an illustration, let us say you need health coverage of only two lakhs as your employer also insures you. So, if you are opting for a health savings plan, 30-40% of the premium may go towards a saving account, and the rest would offer cover against medical expenses.

In both plans, the money invested in the savings account can be used to cover any related medical expenses that are not covered under a traditional medical policy, like doctor’s consultation fees, post-hospitalization expenses, treatments for pre-existing illness, or similar.

Where do they invest?

The money accumulated in the savings account for the health savings plan is invested across bonds and equities to earn returns on investment. In case of a ULHP, investors can either choose their funds as per their risk appetite or go by the recommendations of the fund manager.

As this is a new concept in general insurance, the jury is still out on the extent of equity exposure versus investment in government bonds that health insurance companies would resort to. However, the policyholder is sure to reap decent returns on their investments.

Health savings plans can never be a substitute for your investment needs, or coverage needs for that matter. On the other hand, there are certain deductibles in health insurance–exclusions pertaining to pre-existing diseases, doctor’s fees, etc. These can be covered through a health savings plan as you can use the money pooled.

In the Budget 2015-16, there has been an increase in the limit for tax deduction for investments in health insurance to Rs. 25,000. Now, as health insurance plans are poised to offer good returns while retaining the protective coverage element, the sector is likely to witness positive momentum in the coming months, offering a win-win situation for the common person as it allows them to look beyond just protection when it comes to insurance products.

Disclaimer:- The Health Savings Plans of general insurers referred to in this article have not been launched in the market yet. At present, the product features outlined are preliminary findings.