Build a health contingency fund to meet out-of-pocket medical expenses

Talk to any senior citizen and you will be surprised by the huge financial burden they face from health care expenses during their retired life. The average senior citizen couple spends close to Rs 2 lakh on day-to-day health care expenditures every year. 

Growing need: With medical science advancing, we may end up living longer than our parents. However, that could turn into a curse, owing to our sedentary lifestyle. As age advances, we are likely to suffer from chronic lifestyle diseases that may require significantly larger day-to-day health care expenses after the age of 50. This could be a major concern with no relief from health care inflation that has been galloping at double-digit pace year-on-year over the past decade. Thus, the need for insurance plans that cover day-to-day health care expenses is growing.   

Day-to-day health care expenses on medicines, diagnostic tests and doctor consultations account for around 83 per cent of the country’s total $100 billion health care market. But even  the government health care schemes, including Ayushman Bharat, provide only hospitalisation cover. They do not provide cover out-patient department (OPD) expenses. 

Fragmented health care market: The outpatient health care market in India is fragmented and disorganised. An insurance scheme for OPD expenses requires the integration of various ecosystems that deliver health care — doctors, diagnostic labs, pharmacies and hospitals — into a cashless payment platform. While health care technology start-ups have been developing such integrated platforms, they face the challenge of adoption. Many renowned and popular doctors and health care centres have not subscribed to technology platforms and their ways, perhaps because they do not need such platforms to get patients. 

Slow adoption of technology: Hospitals, diagnostic labs and pharmacies have adopted technology to bill and to generate reports. However, doctors and specialists (who initiate health care interventions) have been slow to adopt technology . While multiple solutions are available, most doctors still use traditional methods of issuing handwritten prescriptions and receipts to customers, in their private clinics and even in large hospitals. Even though multiple health-tech companies are working at integrating doctors, diagnostic centres, pharmacies and other providers through technology, adoption has still not picked up, especially within the doctor community. 

India has around two billion OPD transactions a year—largely without the usage of technology. It is difficult to set up and run a payer-funded cashless programme for such high-volume, low-value transactions. Insurers today source and fund an insignificant portion of the total billing generated by doctors. Hence, their ability to influence doctors and specialists to use a particular technology platform is low. 

Lack of national-level health care records: Unlike developed countries like the USA and the UK, India does not have organised national level health records. Lack of updated, credible health data makes it difficult for insurers to underwrite and price risks accurately. This has resulted in most OPD covers being ineffective on premium charges. The additional cost of the product is almost equal to the annual OPD cover. Many of these covers are also restrictive. They come with waiting periods of three-four years, or offer low limits for each consultation.  

High risk of fraud: Insurers have been running the current format of health insurance (covering only hospitalisation) for close to two decades now. Despite investing heavily in technology and putting in place operational controls, a significant portion of the claims paid out each year remain fraudulent. OPD expenses are a totally different ball game. Without technology and systems in place, they will be further plagued by fraud. Hence, insurers are wary of introducing such benefits or covers in the country. 

Current offerings: Insurers have been taking note of the growing demand for OPD coverage. But currently, only a handful of them offer useful OPD benefits as standalone or add-on plans:  

GoActive Plan from Max Bupa: It offers 10 doctor consultations capped at Rs 500–600 per consultation and an annual medical check-up for all adult members of up to Rs 2,500. 

Health Wallet from Apollo Munich: It reimburses the OPD expenses through its Reserve Benefit. This reserve benefit can be utilised for paying consultation fees, diagnostic tests, pharmacy bills, dental treatment, and so on. 

Manipal Cigna’s ProHealth (Protect, Preferred, Premier and Accumulate): It offers OPD as a fixed amount, depending on the health insurance policy opted. The benefit ranges from Rs 500-20,000.

Then, there are tax-saver policies like ICICI Health Protect Plus or Star Health Gain that serve the purpose of maximising tax benefits. These policies charge you insurance premiums to the extent of deduction available under income tax, which they use to provide you with a health insurance policy and a fixed benefit for covering outpatient health care expenses.

What’s the future?

The current insurance offerings for outpatient expenses are initial experiments based on the industry’s limited expertise, limited data availability on customer health care profile and records, and limited technology and organised outpatient network infrastructure. 

The health tech and the insurance industry have been working closely to build a solution comprising relevant benefits, robust systems, processes, and a cashless network to dispense these benefits efficiently. It will require a few years of integration and experiments before we see relevant and cost-effective solutions on OPD expenses. Besides meeting customer demand, relevant OPD products are also likely to boost demand from younger customers who otherwise do not see much value in buying hospitalisation insurance. 

Restrictive covers

• OPD covers available today are not cost effective for the patient
• The amount of cover they offer is limited  
• Doctors, hospitals and diagnostic centres have not got adequately integrated via technology platforms
• Pricing these products is difficult due to the lack of credible, updated data
• This segment is also more prone to fraudulent claims
• Once effective OPD covers are covered, both younger and older customers will find them useful

The writer is director-health, life and strategic initiatives, Coverfox.com