Health Care Insurance--Are you Covered for Your Retirement?

Financial Planners and advisers advocate buying insurance coverage—be it health and term—at the beginning of the career so as to lock in at a low premium. We will restrict the scope of this article to health care policy only.

But one point that is missed out or mostly overlooked—especially by the investor/insured is whether the cover that they acquire now will remain relevant in their twilight years? This coupled with the tendency of the insured to abhor high coverage in the initial years (and even later in life) usually exposes them to insufficient medical coverage.

The young people who do buy health cover and/or term plans usually slip into a sense of misplaced complacency by thinking that they have (sufficient) cover to talk about—lasting even in their retirement years.

No doubt the policy taken today will be sufficient for next 3-5 years. Whether the cover will be sufficient beyond that is debatable---because of health cost inflation. Beyond this initial shelf life of say 5 years, the fate of my health care will be in the hands of the insurance company and my financial position.(Since after the first 5 years of the job, liabilities also increase on account of marriage/home loans and other obligations). To bring home the point, say a 30 year old person takes a health cover of Rs. 3 lacs today. Assuming he retires at the age of 65 and health care inflation averages 10% p.a., his health cover requirement at the retirement will be Rs. 84.30 lacs.

Presently health care insurance is bought on under mentioned considerations:-

• Health care insurance is one which is required mostly in post-retirement years. Hence, it’s a truly long term investment spanning over 30-35 years without any tangible returns/benefits

• It’s a common knowledge that hospitalization costs are increasing. With the state of government hospitals in a pitiable condition presently, without any scope for its drastic improvement in foreseeable future, hospitalization expenses may become unaffordable for a common man.

So the point to ponder is how much health insurance is sufficient to financially support you and your loved ones, so that you may have a peaceful retirement life?

The answer lies in following points:-

Costs of common surgeries and hospitalization costs in India

Medimanage Research team (www.medimanage.com) has come out with a research on comparative costs of select surgeries between 2007 and 2012. The findings are as under:-

Sl. No.	Treatment	Costs		% age increase
		2007	2012
1.	Cataract	16,000	24,000	50%
2.	Angiography	14,000	22,000	57%
3.	Coronary Artery Bypass Graft (CAGB)	1,65,000	2,35,000	42%
4.	Appendectomy	28,000	42,000	50%
5.	Piles	21,000	35,000	67%
6.	Gall Bladder removal	32,000	52,000	63%
7.	Prostrate Surgery	37,000	62,000	68%
8.	Angioplasty (with 2 stents)	1,55,000	2,45,000	58%

(Source: - Medimanage.com)

It is evident from above that healthcare costs have increased by 10% on an average per year. We at AIMS believe that with rising prosperity, demand for good healthcare facility will only increase at an increasing rate. Absence of government aided health care facility coupled with few good modern healthcare centers/hospitals slated to come up in near future, there will be an upward bias on healthcare costs for time to come.

Future Costs

Let’s see how healthcare inflation can blow a hole in your finances at retirement. A healthcare insurance of Rs. 4 lacs today, @ 12% inflation, you will need a sum insured of Rs. 12 lacs per member. In 20 years at say 5% inflation you will need to insure yourself for nearly Rs.20 lacs. For calculation of floater coverage assuming 50% adhoc coverage for every adult member and 10% for every child, you will need the following coverage:-

			50% additional	10% additional	10% additional
Age	Year	Self	Self+Spouse	Self-+Spouse+1 Kid	Self-+Spouse+2Kids
40	2022	12 lacs	18 lacs	19 lacs	20 lacs
50	2032	20 lacs	30 lacs	32 lacs	34 lacs
60	2042	33 lacs	50 lacs	53 lacs	56 lacs

(Source:-Medimanage.com)

A middle class person would either have to “afford”, “plan” or “pray” to afford health coverage of Rs. 50 lacs+ for his post retirement years.

Is there a solution to as to “afford” or “plan” health insurance available? (Alas, we do not have any solution for “pray” except but to pray).    If there is a problem, there ought to be a solution also. Solution lies in following steps:-   

• Healthy Living: - Healthy living is the 1st.step to your health insurance. Healthy living involves regular exercise, a proper diet plan, and avoiding ill-habits. A lifestyle covering all the aforementioned habits today is a sure way to avoid high hospital bills in future. (Read Physical Fitness for Financial Health)
• Buy Health Insurance (re-imbursement) along with a critical illness plan (replacement). HDFC SLI Critical Care Plan is an example of the latter type of cover that we strongly recommend to our clients to supplement traditional mediclaim insurance (re-imbursement) 
• Plan a healthcare contingency fund by way of SIP in Mutual Fund 

The following is approximate outgo for an individual aged 30 years to insulate himself & his 

family members from medical expenditures:-

Type of Plan	Sum Insured	Tenure	Costs p.a.
Mediclaim	5,00,000	30	6,000 (approx.)
Critical Care Plan	15,00,000	30	10,000(approx.)
Health Care Contingency Plan	35,00,000	30	24,000 (approx.)

It is said that health is wealth. So why not insure your wealth by insuring your health. After all, you will be able to enjoy your retirement only if you are healthy (wealthy & wise). 

So to be healthy and wealthy during your retirement, be wise today.(Read :- Health Insurance--a necessity)