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Is building health fund realistically possible?

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29 Sep, 2021 by  Kautilya Bhardwaj
Health insurance premiums are getting unaffordable even for masses who decided early in their lives to get themselves insured.

This is the biggest argument settling the debate of health insurance vs health fund. Sounds reasonable.

But even if we look at the other end of the debate, the health fund, at max, can also grow only 12-15% (with 100% exposure to equity, which shouldn't be the case provided liquidity) as against a medical inflation of 15-20%.

Now, if we are targeting to build such a fund, here are the stats that needs to be added to list of arguments -

  1. One'll need 2-3 years of contributions to build a 1 time usable corpus of 5-10L considering savings of 50%, all going towards this goal.
  2. One'll need to fund this goal every year with ~20% of their savings just to make it relevant for medical inflation.
  3. There is no way to refill this corpus once used without compromising on other goals.

The situation is worrying & overwhelming!

What can be a reliable & realistic solution to the above problem.

PS: Argument for super top-up is very well taken & looks good for now. However, I'm skeptic about it as well; coz with time if avg bill amount passes the threshold I expect it's premiums to shoot sky as well.

Health Insurance

2 Answer

30 Sep, 2021
CEO, Insurance Samadhan

Dear Kautilya

Cost of premoum need to evaluated post tax benefits under section 80 D .

Ideally , you should have

1. An emergency fund

2. Health insurance of Rs 5 lalh

3. Super Top up of Rs 50 lakh with deductible of Rs 5 lakh .

4. Critical illness of Rs 10 lakh .

This package is good enough for 90 % of risks . Increase duductible to reduct cost of super top up .

Build emergency fund for all exigencies .

Hope this clarifies


Insurance Samadhan

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Regional Director, Amicus Insurance Broking

Quite an interesting question. In other markets like the US, there is a concept of Health Savings Account (HSA). This account has tax benefits so contributions to the HSA are tax deductible. Withdrawals from the HSA are not taxed provided the end use is for medical reasons.

HSA is a convenient tool for which can be used in combination with high deductible health insurance policies or top up plans.

One can dispense with the low deductible/nil deductible base policy and fund the lower intensity hospitalisation needs from the HSA. Severe and high cost hospitalisation events can be funded by the top ups. This becomes very cost efficient, particularly when you advance in age and your base policy becomes costly.

In the Indian context however, there are no HSA’s. In the absence of tax benefit, motivation and discipline to save in a separate corpus for emergency medical needs would be missing and a few people would be able to do it. It’s easier said than done.

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