Economy

Will SBI’s Post-Retirement Health Insurance Plan Outgrow its Teething Troubles?

While the State Bank of India has played a pioneering role through its insurance programme, premiums have skyrocketed recently, that too, secretly.

SBI, being the country’s premier bank, has had a pioneering role in the health insurance industry. Credit: Reuters

SBI, being the country’s premier bank, has had a pioneering role in the health insurance industry. Credit: Reuters

The fear of falling ill after retirement and consequently, having to bear an enormous medical and financial burden, is one that haunts every salaried employee in India; not to speak of the vastly larger number of people who work in the country’s unorganised sector.

India’s healthcare system is still rudimentary. While attempts are being made by government and non-government agencies, the gap between the public and the private sector healthcare still needs to be bridged.

While it is impossible to tackle the numerous private and public social security schemes, one useful perspective comes from analysing the emerging health insurance scenario in India’s public sector banks. Predictably, the leader of the pack is the State Bank of India (SBI) which has the largest number of insurable employees.

The family floater group mediclaim insurance policies for the retired employees of SBI have come in two distinct phases: Policy ‘A’ for the existing members of SBI’s retired employees medical benefit scheme and Policy ‘B’ for those employees who have retired after January 1, 2016.

Their approaches are largely similar. Like all health insurance companies, both operate through a third party administrator (TPA). There is no age bar in either of the two policies. Ceilings have been fixed under each category. Ceilings extend to activity – ICU charges are obviously higher than a place in the ward.

The other method of segmentation is in terms of premium paid: the higher the premium, the higher will be the coverage. There are maximum limits prescribed for each category. For instance, the maximum amount of coverage one can get is Rs 25 lakh. The annual premium will be correspondingly higher. These vary between the two schemes but the principles behind allocations over categories are the same. Policy B is the one that is current, as Policy A is being phased out. The policy is open to SBI retirees on the completion of pensionable service in the bank, as well as to their spouses.

Eligible persons can subscribe to the scheme by paying the appropriate premium from their own sources. Sum insurance will not be reduced by the amount utilised during the year. For example, if an individual has taken a cover for Rs 1 lakh and during the year utilises Rs 60,000, for the next year, his cover will be restored to Rs 1 lakh.

Perhaps the most laudable feature of the insurance scheme is that it provides for even those who have a pre-existing condition. In many other insurance policies, patients with pre-existing conditions have to wait for a specific period before getting covered.

The family floater group mediclaim insurance policies for the retired employees of SBI have come in two distinct phases. Credit: Reuters

The family floater group mediclaim insurance policies for the retired employees of SBI have come in two distinct phases. Credit: Reuters

In need of constant improvement

Two important attributes that are necessary for any health insurance policy are transparency and pricing, both of which are interrelated.

In the case of SBI’s ‘Policy B’, its initial pricing was very attractive, so much so that it got a reasonably large number of subscribers. No doubt its other plus points like extended cashless coverage and no upper age limit helped, but the fact that it was construed as being a part and parcel of the bank’s human resource policies helped.

But in less than a year, the insurance company was voicing its concern over its viability.

What made matters worse was that both the insurance company and the TPA were ill-prepared to cope the large number of applications and claims.

The economics of the scheme depends on increasing coverage – that is, enrolling as many as possible at a reasonable premium but still providing reasonable good service to the enrolled.

SBI, being the country’s premier bank, has had a pioneering role in this industry. Others, beginning with other banks and government-owned companies, are already in the process of fashioning their own policies.

Such a pioneering role, however, has its pluses and minuses. A major point of contention is the levels of premium. The insurance provider – in this case, the government-owned insurance company and the TPA – will have to recoup their expenses.

For those who enrolled recently, there was a nasty jump in the premium under each category. It has been reported that many could not afford the increase and dropped out or enrolled at a lesser premium and hence, lower coverage. The government has provided some succor by contributing a flat Rs 6,000 to each of the subscribers.

The point, however, is not just about jumping premiums but the secrecy with which an increase was brought about. Insurance companies say that they have no other option except to raise the premium levels. The levels of premium depend on the number of subscribers. The more subscribers the scheme has, the lower would be the premia in the aggregate. These aspects need to be highlighted and prospective subscribers need to be educated.

For that to happen, subscribers – both prospective and existing – need to be convinced of the benefits. In this connection, the deficiencies in the operational aspects of the scheme are bound to discourage many new subscribers and those who would renew.

For the government and the public sector insurance company, this is hardly new territory. After all, the basic business is service-oriented. It is not for the first time that they have been accused of laxity. In this case, however, it affects them directly and also affects those retiring immediately.

For all its teething troubles, the pioneering post retirement health insurance needs to be encouraged.