Health insurance policyholders continue to face rising renewal premiums despite the removal of GST on health insurance last year. According to recent reports, premium hikes of 20 to 30% have become common, with some customers reporting even steeper increases. The confusion has deepened since GST removal in September last year, as many expected the tax relief to translate into lower renewal costs. However, insurers can revise premiums when overall healthcare costs increase, with these revisions generally applied across all policyholders regardless of claim history.
Rising health insurance premiums are prompting many policyholders to reconsider how they protect themselves against medical emergencies. One increasingly discussed approach is to maintain a separate medical fund while relying on a top-up health insurance policy for large hospital bills. The strategy involves keeping a smaller base policy and setting aside money to meet the initial portion of medical expenses, with a top-up plan covering amounts beyond a predetermined threshold. For example, a person may keep a ₹10 lakh deductible and build a medical corpus to meet the first ₹10 lakh of hospital expenses, with any amount beyond that covered by a top-up plan.
The concept rests on a simple calculation where an individual pays an annual premium of about ₹50,000 for a ₹10 lakh health cover. According to reports from The Economic Times, the total premium outgo over 10 years would roughly equal half the sum insured. Policyholders often become frustrated when they make no claims over several years despite paying substantial premiums, while health insurance premiums tend to rise with age, increasing the overall cost of maintaining cover. Setting aside the equivalent amount as a dedicated medical fund may appear to be a sensible alternative to this premium burden.
Choosing a deductible is another effective way to reduce premium costs. A deductible is the amount the policyholder agrees to pay before the insurer starts settling claims. For example, with a ₹25,000 deductible on a ₹2 lakh hospital bill, the policyholder pays the first ₹25,000 while the insurer pays the remaining eligible amount. Since the policyholder assumes part of the financial risk, insurers may offer a lower premium. A ₹25,000 deductible on a ₹10 lakh health insurance policy can reduce the premium by around 20 to 25%. For long-term planning, a super top-up policy can offer another strategy. Instead of purchasing a ₹1 crore base policy, a policyholder may choose a ₹10 lakh base cover along with a ₹90 lakh super top-up.
The biggest challenge lies in predicting future medical expenses, as reported by The Economic Times. Instead of one major hospitalisation costing ₹25 lakh, an individual may incur multiple expenses of ₹5 lakh to ₹10 lakh over a prolonged period. This creates significant risk for households experiencing recurring medical expenses rather than a single catastrophic event. The strategy requires the medical corpus to remain untouched until needed, with the money that would otherwise be paid as higher premiums invested and preserved carefully over time. Its effectiveness depends heavily on income stability, economic circumstances and availability of liquid assets.
Long-term illnesses present another challenge, as conditions such as cancer or kidney disease may require repeated hospital admissions and intensive care, leading to recurring expenses over several years. According to The Economic Times, medical costs extend beyond surgery or hospital stays to include diagnostics, medicines and ongoing treatment. For middle-income families, illness-related loss of income or employment can further worsen the situation, making relying solely on a medical corpus difficult under such circumstances. The current environment of rising health insurance costs, with employers facing the biggest jump in health benefit costs in 15 years, adds another layer of complexity to these financial planning considerations.
