Understanding How Your Health Insurance Price Is Calculated

Health insurance financially protects you during health crises. It is a safety net ready to catch you if you stumble in the maze of hospital or other medical costs. However, to ensure you get coverage during the hour of need, you pay a fee, i.e., a ‘premium’. It is the periodic payment you make to keep your health insurance active.

But why does it come with varying price tags?

The price of health insurance depends on the plan you sign up for. Of course, plans with broader coverage are costlier than those with limited features. However, is this all? Let’s dive deeper into the different factors that play a role in deciding the premium the insurer quotes you.

Core Factors Affecting Health Insurance Premium Calculations

Age

The younger you are, the lower your health insurance price for health insurance plans in India. Why? Statistically, younger individuals are less likely to have serious health issues. Research by the National Council on Aging (NCOA) reveals that almost 95% of people aged 60 and above suffer from at least one chronic disease, and about 80% are dealing with two or more such conditions. On the contrary, only 22.3% of 18-34 year olds reported having more than one chronic condition.

Pre-existing Diseases

If you’ve had a health issue before buying insurance, insurers see these conditions as a higher risk, which often translates to higher premiums.

Number of Members Added to the Plan 

Adding more members to your health insurance plan can affect your premium. Each additional member, whether it’s a spouse, child, or parent, is another person the insurer is taking a risk on. 

Medical History 

When your family history can affect your health by bringing in diabetes, developing a disease such as cancer, etc., insurers will charge higher premiums owing to increased risk coverage.

Certain past medical conditions and treatments can also affect your premium. For instance, a history of cancer treatment, even if successful, might lead to a higher premium due to the increased risk of recurrence.

Features and Limitations on Products

Higher coverage limits, lower deductibles, and international coverage can increase the health insurance price. Plans with more limitations or exclusions are more wallet-friendly.

Co-payment Clauses

With co-payments, you split medical bills with your insurer – you pay a portion, they cover the rest. Higher the co-payment, lower will be the premium. 

Cumulative Bonus or Restoration Features

Cumulative bonus rewards claim-free years with higher coverage, while restoration refills your used coverage in the same year.  The attractive bonus and restoration features may come with an increased premium. 

Waiting Period & Specific Disease Coverages

Certain illnesses have a waiting period before coverage kicks in, ensuring the policy isn’t misused for pre-existing conditions. Lower waiting periods and broader coverage of diseases can also hike the premium. 

Additional Factors Influencing Health Insurance Price

Policy duration, added features, and the range of network hospitals are critical determinants, while insurers may offer discounts for healthy living or no-claim periods. 

Premium Payment Options for Health Insurance

The two most common payment options for health insurance are:

Annual 

Think of the annual premium payment option as a one-time investment for year-long peace of mind. Paying your premium annually often comes with discounts. It’s like buying a year’s subscription to your favourite magazine: You pay once and enjoy uninterrupted service. 

Monthly 

On the other hand, monthly payments offer a more manageable approach. It is like a monthly mobile plan—you pay smaller, more frequent amounts, which may be easier on your wallet but could add up to a slightly higher total cost over the year. 

‘Premium’ should not be the only factor while deciding on Health Insurance Plans

Many people consider cheaper plans over other plans. Some might think expensive plans are better than cheaper health insurance. Both are wrong since health insurance is best only if it meets your needs. 

Undercover due to cheaper plan

Imagine wearing a raincoat that’s too small during a rainstorm. Unpleasant, right? Similarly, undercover in health insurance means your policy might not fully protect you against all health eventualities- because of copayment, exclusions of certain treatments, and more. This often leads to lower premiums but at the cost of high out-of-pocket expenses.

Overcoverage due to expensive plan

On the flip side, imagine wearing a raincoat fit for a giant. It’s safe, but is it practical or comfortable? Overcoverage means your health insurance covers more than you need, and your premiums for comprehensive health cover could be higher than necessary. 

Key Takeaways

Knowing how health insurance price is calculated helps you choose a health insurance plan that balances your health needs and financial considerations. This empowers you to strike a balance between financial responsibility and access to quality healthcare. So explore your options thoroughly on platforms such as PhonePe and make the right choice for you and your growing family!