Why Employer Health Insurance is not Enough?

Most employers offer health insurance to their employees. However, this cover may not be sufficient in some cases. You may need an additional cover for certain aspects of your treatment such as co-pay clauses, room-rent limiting clauses, etc.

Getting a job in a good company means you’re entitled to a bunch of benefits in addition to your salary – one of the more important perks is the fact that your employer will provide you (and, in some cases, 2 members of your family) with best health insurance.

But is it enough?

As we all now, insurance providers will only pay out the promised amount only if they absolutely have to. They protect their money using the fine print in their offer document, and pay out what they promised only once they have no more fine print to hide behind. While getting the insurance providers to honour their agreements for regular insurance policies is hard enough, it’s even harder when claiming through an employer-group policy.

Companies and employers, too, seek to minimize costs, by providing bare-minimum coverage insurance policies to their employees. Policies that include co-pay clauses, for example, are usually cheaper, and more attractive to companies who focus on the bottom line of the P & L account, rather than their employee’s wellbeing. Even a bare minimum insurance policy can still be used as an “insurance benefit” to lure or retain employees.

A recent report by ICICI Lombard Insurance Company revealed that as many as 76% of insurance policies offered by employers have co-pay and room-rent limiting clauses. The fine print is a tool that insurance providers use to limit or even nullify their liability.

Here are some things you may have overlooked in your employer’s insurance policy, and also why you may need additional cover.

  • Co-pay clauses: This means that the insurer will only cover a part of the total expenditure incurred, and the insured party will have to pay the rest. This effectively reduces the total benefit of even having insurance cover, as the financial burden is just lightened, not eliminated. Most regular insurance policies do not have co-pay clauses, and offer a higher total amount of financial aid.
  • Room-rent limiting clauses: This clause basically means that your room rent per day in the hospital will only be covered up to a certain amount, which is usually as low as half the total rent. This clause also means that the cover will only extend as far as the room rent alone, and nothing inside the room like nurse and doctors expenses – which form the major chunk of the expense.

Clauses in the policy document are only one of the many methods which employers and insurer employ to limit their total liability. There are many other reasons that you may require additional coverage through a separate insurance policy, like:

  • Employment status: Your employer’s insurance coverage will only protect you as long as you are employed with the company. The second your employment stands terminated for whatever reason, your insurance cover stops. Between the time you have no employer insurance and find another policy, you will be out of insurance cover and liable to pay every penny for hospitalization. Having a as an individual will cover you despite your employment status.
  • Number of persons covered: The health insurance policy you get from your employer may or may not cover your dependants. In India, a very important aspect of owning a health insurance policy is so that you dependant parents, or children, can be brought under the coverage of the policy. The whole point of owning insurance is so that you will have to pay little or no amount when you (or your dependants) are faced with hospitalization. Employer and company insurance policies are group policies which may only cover the employee.
  • Employer insurance is a perk, not a right: Insurance cover offered by your employer is a perk. It’s a benefit and a tool used to retain employees and sweeten the employer-employee relationship. The employer can pull the insurance cover without having to worry about any legal ramifications whatsoever. Should you be faced with hospitalization when your company decides to save money and stop paying premiums, you will be stuck in a right fix.
  • Post-retirement coverage: As mentioned earlier, you will only be covered for the duration of your employment with the company. After your retirement, which is when you’ll need insurance coverage the most, you will not have the benefit of insurance cover. Getting a policy after the age of 50 is an extremely arduous task, and requires medical tests to be undertaken. Getting a new insurance policy after the age of 50 also means that you will be signing a form that says there will be no coverage for “pre-existing medical conditions” – which effectively means that the insurance provider has no liability or responsibility towards you, should your hospitalization be due to a disease or medical condition that you’ve had before taking the policy. 80% of hospitalizations for senior citizens are for pre-existing conditions, and this does not help you at all. Getting a private insurance cover in your youth, which extends beyond your retirement age, is how you need to play this.
  • Changes in the terms and conditions of the employer policy: Employers and insurers work together to save money and limit their liability. At any time, they could change the terms and conditions in your policy to remove certain types of coverage, or include clauses that don’t cover pre-existing medical conditions, or certain types of illnesses. They could also remove your dependants from the coverage, or basically do whatever they want with the policy from cutting benefits to the bone, or even raising them (which is unlikely).
  • Total effective cover: Group policies taken by employers for their employees don’t cover too much, financially. It’s likely that the total coverage (if all terms and conditions are met) could be up to Rs.1,50,000 or Rs.2,00,000 (if you’re lucky). For serious illnesses and long hospitalizations, this amount will hardly be 20% – 30% of the total expenditure.

It’s definitely a benefit having insurance cover from your employer, and of course, insurance providers and policies differ between companies.

Your company could have an excellent group health insurance policy, or a really bad one – you need to analyse the policy document to know exactly how much coverage you have, and how good it is.

It’s advisable to always treat your employer’s insurance policy as a secondary cover, should your primary policy (that you take as an individual, with no connection to your company) run out.

GST rate of 18% applicable for all financial services effective July 1, 2017.

Disclaimer: Premiums may vary depending upon factors like age, location and prevailing taxes/GST.

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