Health insurance for senior citizens is a hard puzzle to solve. As we age, the probability of hospitalisation and associated expenses increases. So, from a consumer’s perspective, it makes sense to get medical insurance with good coverage. But for insurers, seniors policies are not as lucrative because most policyholders will more likely make a claim. On top of it, unlike life insurance, every health insurance policy is renewable for life. Insurers cannot stop servicing high risk customers once they’ve been given a policy.
At PrimeInvestor, we decided to curate a separate list of health insurance policies for senior citizens. What we found is that insurers try to mitigate the conundrum by setting a trade-off between benefits and a higher premium.
You can find the recommended list of health insurance policies for senior citizens here. In this article, we explain the options available and what we think is the best approach to meeting medical expenses for senior citizens.
Spoiler alert: there is no single magical policy that addresses every concern 🙂 You may have to mix and match options to get an adequate cover.
What are the options?
For seniors looking to get health insurance, there are six possible routes to take.
#1 Getting a family floater policy
An easy-to-get coverage for seniors is to include them in the family floater policy. This will keep things simple. But on the flip side, such policies usually cap the maximum number of adults in a family floater policy to two. This may rule out adding parents to the family floater policy for married couples.
#2 Adding parents to the employer provided insurance policy
Companies buy group health insurance policies for employees. Group policies usually come with no waiting periods for pre-existing diseases, lower premiums and better benefits. Some companies (their group medical policy) allow employees to add parents to their group policy. This may be at no additional cost or a partial cost to the employee. Go through your company’s group medical insurance terms. If it allows inclusion of parents in the policy at a reasonable premium and there are no co-payments and not too many sub-limits, it is a good idea to enrol your parents into this group insurance policy. But this is subject to a few caveats.
- Company provided medical insurance is tied up to the employment contract. Once you switch jobs, the insurance cover (for your parents as well) ceases to exist. Conditions such as waiting period will apply again if your new employer offers a different policy.
- You may not be able to customise/increase the coverage even if you are willing to pay an additional premium for it, as the company may offer only limited cover linked to your role and compensation.
- The company can switch the group insurer leading to a change in features/benefits.
#3 Buying senior citizen specific policies
Some health insurers offer a separate class of senior citizen specific policies. These are designed to reduce the premium (and the insurer’s risk) by applying various limitations. The common limitations are:
- Limited maximum sum insured
- Co-payments on claims, where the patient has to share in the bill
- Sub limits on how much can be claimed under specific procedures or room rent
It is best to avoid policies with limits on the maximum sum insured. Some of the senior citizen specific policies have a maximum sum insured of just Rs 1.5 lakh, which will fall well short of a potential claim amount. You can avoid these as there are other options with sufficient coverage.
The table below details the common procedures and their costs for the case of senior citizens.
Co-payment means the policyholder has to pay part of the bill upon every claim. There are senior citizen policies with and without co-payments.
Most of the senior citizen policies have sub limits on specific procedures and hospital room rents. Please note that a room rent limit may affect the overall amount that can be reimbursed, as the limit on room rent is applied proportionately to other charges. For example, if a hospital room costs Rs 5,000 per day and the policy’s room rent limit is Rs 4,000 per day; if the total hospital bill is Rs 50,000, the maximum claim payable by the company could be Rs 40,000.
Co-payments and sub limits are something that cannot be completely avoided in the case of senior citizen policies, and perhaps help to keep premiums affordable. Here are a few examples.
Star Senior Citizens Red Carpet Health Insurance Policy
National Senior Citizen Mediclaim Policy
#4 Using a basic health insurance policy
By design, health insurance policies are renewable for life. Most of the policies allow maximum age of entry till 65. There are also some policies with a higher or no specific maximum age of entry, which means that senior citizens can access them. This option opens up a sufficient variety of policies for seniors without too many restrictions. The policies also allow higher sum insured. The catch is in the premiums rising steeply with the age of entry. Let’s see a few examples:
Policy: HDFC Optima Restore
Policy: ICICI Lombard Complete Health Insurance Plan Health Shield
#5 Defined benefit policies
Defined benefit policies are those which pay a flat sum irrespective of the actual claim amount. The payment could be based on the number of hospitalisation days or based on the type of disease/illness. Unlike normal health insurance policies, defined benefit plans are not renewable for life. LIC Arogya Rakshak is renewable only upto age 80. A defined benefits policy, by nature, is not suitable as your only health insurance. The actual medical bill for a procedure could be higher than the benefit provided by the policy.
We have reviewed a defined benefit policy LIC Arogya Rakshak earlier. Let’s see how the premium stands for senior citizens
Policy: LIC Arogya Rakshak
#6 Your own medical fund
The various limitations above reiterate the fact that for seniors, a health insurance cover can only be partial comfort. Considering the probability of a health emergency is high, and the health insurance might still ask us to pay part of the bill or even reject the claim, it makes sense to have a separate emergency fund dedicated to this purpose. There’s also the possibility that a good part of the actual expenses incurred for a senior citizen’s health emergency may not be reimbursable by a health insurance policy. This could include treatment at home, nursing care, attenders in the case of dementia patients and so on.
At today’s prices, we feel around Rs 10 lakh is a good starting amount for a senior citizen healthcare emergency fund. Periodically add to this to account for healthcare inflation. Just like in case of other emergency funds, park this money in instruments where safety and liquidity are high and don’t worry about maximising returns.
Once again, please note that this is the cost of the hospital bill only. As anyone with experience in dealing with a health emergency of senior citizens should tell you, the hospital costs are just a part of the actual costs incurred and a lot of actual costs should not even be covered by the healthcare policy. This includes the cost of a home nurse to take care of the elderly, setting up health facilities at home for domiciliary treatment, etc.
How to build healthcare cover for seniors
Given the above, it makes sense to choose one of the below combinations to plan for healthcare protection for senior citizens.
Option 1
If you think you can afford a higher premium and are also able to setup a healthcare emergency fund, you can follow this:
- If your children are able and willing to add you into their company healthcare policy, exercise this option after going through the benefits of the policy.
- Buy a basic healthcare policy that allows entry of senior citizens. This ensures the continuity of health coverage by not being completely dependent on company provided health care policy, which can get terminated during a job change. Maintaining a healthcare policy also helps to build history, and to complete any waiting periods for pre-existing and other diseases.
- Maintain a dedicated healthcare emergency fund, and add to it periodically to account for healthcare inflation.
- If at a point in the future, you feel the health emergency funds have grown to a significant amount and the health insurance policy premium has gone up a lot with your age, you will have the option of discontinuing the policy and adding the premium amount to the emergency fund.
Option 2
If you are not in a position to afford higher premiums or setup a large enough emergency fund, you can follow this:
- If your children are able and willing to add you into their company healthcare policy, exercise this option after going through the benefits of the policy
- Buy a senior citizen specific healthcare policy. This ensures the continuity of health coverage by not being completely dependent on company provided health care policy, which will get terminated during a job change. Maintaining a healthcare policy also helps to build history, and to complete any waiting periods.
- Make a plan to meet any co-payments or additional payments that may arise as part of a health emergency through a separate fund or you may buy a defined benefit plan.
- Set aside a fixed amount to build a health emergency fund. Use SIP to target calculator for planning this.
Managing multiple policies
As you might have noticed above, one can have more than one health insurance policy. There are rules to be followed when using multiple health insurance policies.
- Disclosure: It is the policyholder’s responsibility to inform the health insurer about any other health insurance policy you hold. Failing to do so, the insurer may reject your claims. The insurer, before any payments, will confirm that the claims are not paid by any other indemnity plans.
- Selection: With two health care policies, if the claim amount is less than the coverage amount of both the policies, it is the policyholder’s choice to decide which insurer to file a claim with, among the two. Suppose you have added your parents to your company health insurance with a coverage of Rs 3 lakh and you have also taken a second health insurance for parents with a coverage of Rs 10 lakh; if the parent met with an illness, for which hospital expense was Rs 2 lakh and your second health insurance has a co-payment clause of 20%, it makes sense to claim the company health insurance to avoid co-payments.
If the total medical bill is greater than the individual coverage of both plans, you can claim both insurers and the insurers, among them, will decide how much to compensate based on a contribution clause. - Defined benefit plans: These plans don't come under the contribution clause of indemnity plans as it is in a different category. The basic health care policy and senior citizen policy fall under indemnity plans, which aim to pay the actual bill amount, subject to the sum insured and other conditions. Since defined benefit plans don’t pay as per hospital bills, we can claim both the indemnity plan and defined benefit plan. Here the assumption is that we have chosen an indemnity policy with restrictions and the defined benefit policy is used to help with meeting any co payments.
While the above article will help you know the options available for a policy appropriate for senior citizens, preparing for a health emergency for your senior years goes beyond just buying a policy. A health emergency fund plays a key role in a senior citizen’s health portfolio. If you are currently young, make a plan to convert part of your investment portfolio into your health care fund for the golden years. If you are in your 20s, you can start with as low as Rs 1 lakh and try to accumulate say Rs 5-10 lakh over a 10-year period and allow the money to grow post that. You can pass any balance in it as an inheritance.
