What is Preventive-Care Health Insurance


Summary

Preventive-care health insurance plans are gaining traction in the market as they encompass a wide range of services targeted at preventing illnesses or detecting them very early so that they can be acted upon effectively. As the saying goes, “Prevention is better than cure.” The adage not only suits health insurance plans but also has great relevance in preventive care in health insurance today.

In general, preventive care in health insurance plans refer to initiatives to prevent diseases or injuries instead of curing or treating them. Also, it refers to the early-stage detection of certain diseases or illnesses that could be cured with less effort and, simultaneously improving the chances of survival.

Preventive care includes regular check-ups, screening tests, administering vaccines, and patient counseling. One can detect and control or prevent hospitalization due to an illness or disease by focusing on preventing diseases.

Take the recent example of the COVID-19 vaccine which was administered to individuals as a preventive measure – this in turn reduced the mortality rate among the affected parties. Other examples of preventive care include regular mammograms to detect early signs of cancer, thereby making the treatment effective and increasing the survival rate.

Preventive care not only ensures the reduction of contracting a disease or illness but also helps individuals by reducing their dependence on hospitals for costlier treatment. As noted above, the primary goal of preventive care in health insurance plans is to identify any abnormalities early and act on them before they become severe.

While the practice of preventive care is extremely prevalent in the West, it has yet to find its roots in India. But, as the penetration of education and health in the country increases, so does awareness. And awareness in turn leads to adoption.

That said, Insurers have started offering regular and yearly free health check-ups for policyholders. Such checks are restricted to policyholders who haven’t made any claims at the moment.

Listed are some of the advantages/disadvantages for Policyholders & Insurers when it comes to Preventive Health Checks –

Advantages for Policyholders:

Maintain healthy lifestyle:

The major advantage for policyholders with preventive care offered in health care is that they know if they have any early signs of diseases or illnesses and can take preventive measures by maintaining a healthy lifestyle. For example, if an individual knows that he has high Triglycerides, which could potentially lead to developing diabetes in the future, he or she would take necessary care to reduce the triglycerides by maintaining a healthy lifestyle.

Of all the diseases or illnesses, heart attacks have been the silent killers these days. People who did not have any prior complications are also suffering sudden cardiac arrest due to various reasons, and such diseases develop over a period of time silently in the body. They can only be detected through regular, relevant tests.

Reduction in Health care expenses:

The other advantage of preventive care for policyholders is that they need not spend heavily in case of hospitalization. Suppose you can control the future occurrence of the illness by taking proper precautionary measures. In that case, it saves many expenses that might have to be incurred due to these illnesses that occur in the future.

Preventive care expenses would not cost much as they require regular check-ups, vaccines, scanning, etc., whereas if admitted to a hospital, it can cost an individual financially, and needless to say, the mental pressure that one should bear at the time of hospitalization.

Dis-advantages for Policyholders:

Increase in Premiums:

The major disadvantage for policyholders with preventive care in health insurance could be that the renewal premium might increase drastically, stating the health condition of the policyholders. Complaints from various quarters of the customers state that their renewal premiums have increased after availing of the yearly medical check-up facility provided to all the policyholders who do not claim in the current policy year.

So, it could be possible that the insurance companies would understand the health condition of the policyholder on a regular basis and charge differential premiums. This would reduce the advantage that one could avail from a health insurance plan as they need to spend heavily for the coverage, and it may deter people from renewing their health insurance plans in certain events.

Renewability Issues:

The other disadvantage that policyholders might face is that the insurance companies may not renew the health insurance plans of policyholders having adverse health conditions. The insurance companies may not publicly admit this. One way they might choose is to refrain from sending renewal intimation to policyholders with adverse health conditions and if they fail to renew the policy on time, leading to policy lapsation.

Suppose the policyholder approaches the insurance company for the renewal. In that case, they may reject renewing the plan and instead ask the policyholder to apply for a new one, paving the way for rejection, citing adverse health conditions or charging heavily, deterring the customer from taking the policy.

Advantages for Insurance Companies:

Accuracy in Underwriting:

One of the advantages for insurance companies implementing preventive care in health insurance is that they could get their hands on the data that otherwise would not be available to them. This data can be used to evaluate and predict the claim occurrence accurately and, in turn, launch tailor-made plans. Underwriting in insurance companies involves charging customers for future anticipated claims apart from the existing/ past claim data.

The preventive health care data would be very useful for the insurance companies when deciding the premium to charge customers. One should not be surprised if the premium calculation happens based on the health condition of the policyholder. For now, the premium is decided based on the details submitted by the insured in the proposal form and the insured’s age. Henceforth, it might shift to the health condition of the insured.

Reduced claims:

The other advantage for insurance companies is that there would be fewer claims as the preventive care process helps the policyholders take preventive measures. When policyholders prioritize preventive care through regular screenings leading to early detection, they will not only reduce their chance of falling ill in the future.

Still, they would also prevent hospitalization expenses that might result from the illness, thereby benefiting the insurance company. Insurance companies may transfer this benefit to the policyholders through reduced health insurance premiums. Insurance companies could reduce their costs to a great extent when the number of claims and quantum of claim amount reduces.

Increased Customer retention:

The other advantage for insurance companies through preventive care is that they could increase the renewal of the health insurance plans. Customers satisfied with the preventive care service would renew their health insurance plans with the insurance company again, thereby increasing the renewal ratio. This could be subject to certain conditions such as reduction of premium, ease of renewability, etc.

Dis-advantages for Insurance Companies:

Frequency of Preventive care:

The major disadvantage of implementing preventive health care could be the ability to draw a fine line between rampant testing and overlooking early signs. For instance, the insurance company should know when, how, and how many times to carry out preventive medical tests. Many preventive health care tests could be done to identify potential diseases, and it is important to know which one to administer to the policyholder.

For example, if a customer has a family history of cancer diseases and if the insurance company conducts preventive care tests for heart-related issues but not for cancer-related issues, then we cannot say that the preventive care is effective. Hence, it is important to understand the type of preventive health care that should be carried out for different customers based on their health profile. It would be very costly for the insurance companies to carry out all kinds of preventive health care for all the policyholders, as the cost of it may overturn the future benefits arising out of it.

Frequently Asked Questions

  1. What is preventive care in health insurance?

    Preventive care in health insurance refers to initiatives focused on preventing diseases or detecting them early for effective treatment. It includes services like regular checkups, screenings, vaccinations, and counseling. This approach aims to reduce illness chances, hospitalizations, and healthcare costs.

  2. What are the benefits of preventive care for policyholders?

    – Maintaining a healthy lifestyle: Early detection allows policyholders to take preventive measures like managing cholesterol levels to avoid future health risks.
    – Reduced healthcare expenses: Early detection and prevention of illnesses can significantly lower future hospitalization and treatment costs.

  3. What are the potential drawbacks of preventive care for policyholders?

    – Increased premiums: Based on health findings from preventive care, insurance companies might increase renewal premiums.
    – Renewability concerns: In extreme cases, individuals with adverse health conditions might face non-renewal of their health insurance plans.

  4. How do insurance companies benefit from preventive care?

    – Accurate underwriting: Preventive care data helps insurers better assess claim risks and design customized plans with appropriate premiums.
    – Reduced claims: By promoting early detection and prevention, preventive care can lead to fewer claims and lower costs for insurance companies.
    – Increased customer retention: Satisfied policyholders who benefit from preventive care are more likely to renew their plans with the same company.

  5. What challenges do insurance companies face with preventive care?

    – Balancing testing frequency: Determining the appropriate frequency and types of preventive tests for different policyholders based on their health profiles is crucial. Excessive testing can be costly and unnecessary.

For more information on preventive care in health insurance, please book a call with Ethika insurance broking and get in touch with our health insurance experts.

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