Health insurance: Employers try co-payment

Health insurance benefit today is a hygiene factor for employers and they cannot afford to treat it as a talent attraction or a retention tool anymore. The absence of a good program can create an adverse impact in the minds of employees. However in the presence of an average program, one is not likely to give them significant brownie points.

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Over the past few years, as the prevalence of health insurance programs has grown, the cost of the same has also increased steadily and this is forcing employers to look out at the most optimal solution. In response to rising healthcare costs, employers are choosing the most readily available cost cutting mechanism, i.e., putting restrictions on the benefits being offered to the employees. The reduction in the benefits for the employees is evident in more ways than one.

One such prominent restriction is the scope of parental coverage, which has been decreasing in the group health insurance policies offered by the employers. This is in response to the fact that parental claims constitute to a bulk of the claims and therefore premium burden for the employer.

If one takes a larger view at the situation, room rental restriction continues to remain the most popular risk control measure. Controlling room rental costs to reasonable levels, ensures that employees get adequate cover and employers are not burdened with higher claim costs, emanating from the utilisation of high end rooms. In case, a policy has a room rental restriction, the employee is not entitled get admitted to rooms costing higher rentals. In the event that the employee does however decide to use a hospital room with higher rentals, he will have to share the additional cost charged by the hospital. Such additional cost includes not just the higher room rental but also the higher attendant treatment costs, such as doctor fees, operation theatre fees, etc., as hospitals do typically charge a higher treatment cost if the room rental is higher.

Co-payment on claims is an increasingly popular risk control measure adopted by the employers in India, as it results in direct savings by reduction in the value of claims.

Employers prefer both these above measures with a view to driving better sense of responsibility and accountability among their employees. It is widely expected that as employees are made to share a part of the burden of hospitalization costs, they will ensure their benefits are used diligently and therefore in turn control the claims costs.

Premium cost sharing is emerging as another popular design change that many employers are considering, as this makes employees more aware of the benefits being offered and their cost implications. It is also expected to drive more prudent behavior amongst them. These benefits’ changes are driven primarily by cost concerns and also to a large extent by a desire to infuse employees with a sense of responsibility.

Employees also need to understand that as they are the consumers of these benefits, using them judiciously will ensure that these benefits are retained and over time even improved whenever possible. Their organisations may otherwise be forced to cut benefits and introduce restrictions, resulting in the employees and their families getting exposed to unexpected financial hardships in the event of any unforeseen eventualities.

CEO, Vantage Insurance Brokers and Risk Advisors