Corporates pruning health insurance cover for staff

Mumbai: Many corporates, particularly top IT companies and BPOs, are pruning the health insurance coverage for their staff, following sharp increase in premium rates. Some corporates have even taken away parents of employees from their group insurance scheme, restricting the benefit only to the staff.

IT companies, which have traditionally offered substantial health covers for their staff as a human resource incentive, are now choosing to cut costs either by introducing a co-payment structure (where an employee has to partly bear the cost) or by doing away with the cover altogether, they said.

“IT companies are reacting to the twin but unrelated threats of business recession and increase in health insurance premium rates by tweaking benefits and coverage. BPOs, for instance, where traditionally attrition has been high, are cutting down on coverage for parents,” said Mr V.G. Dhanasekaran, Vice-President and Regional Head – South, India Insure Risk Management & Insurance Broking Services P Ltd. India Insure handles several group health insurance accounts.

“Some have either reduced the overall limits or brought in sub-limits within the overall floater limit for parents. Co-payment has been introduced in several policies,” he said.

The insurance restrictions come in the wake of high claims from parents.

“The overall claims ratio in the corporate group health portfolio is high — up to 150 per cent. Around 60 per cent of the claims in this segment come from parents of employees. So, the cover is either being spun out of the scope of coverage or co-payment has been put in,” said Mr Girish Rao, Managing Director, Swiss Re Healthcare Services.

“Covers for employees have also been restricted. So, junior employees may have access only to twin sharing rooms in hospitals, employees in the middle rung may be given a single room and senior officials may have air conditioned rooms, he added.

Owing to their high staff strength, IT, ITeS and BPO companies are the biggest buyers of group policies, followed by other services companies, manufacturers and media houses.

Since the beginning of the free pricing regime, insurance companies have raised rates on their group health policies since they no longer require to cross-subsidise it against the more profitable corporate property insurance policies.

In the last 6 months, premium rates have gone up by 25-40 per cent on group health covers but the claims still far outweigh the premium. Insurers still want to have big corporate names as their clients, even at a cost.

An insurer accepted renewal of the health cover by a leading IT company for Rs 25 crore in spite of it suffering claims of around Rs 35 crore in the previous year.

Likewise, a leading BPO which had reported claims of over Rs 9 crore in the previous year, renewed its policy for just Rs 6 crore.

Some experts argue that the individual customers are paying higher premium and end up subsidising for the corporates.

“While premium for individuals has gone by an average of 10-50 per cent, the increase has not been in the same proportion for corporates,” said Dr Sandeep Dadia, Director, Enam Insurance Brokers.

The health insurance market currently stands at Rs 4,000 crore in terms of premium of which 40 per cent comes from corporate health insurance.

Source: Business Line