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Benefit Plans under Health Insurance

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What is a Fixed Benefit Health Insurance Plan?

A fixed benefit health plan is one where a fixed benefit (claim), which is the sum insured is paid out to cover expenses for a predetermined illness or condition that has been insured under the said policy. The fixed benefit plan should ideally be used as a supplement to the regular health insurance policy since it provides an additional source of funds during a pre-insured health incident. Ideally a Fixed Benefit Policy should be purchased by the insured in addition to the regular health insurance indemnity plan. There could be some expenses which are not payable under the regular health insurance plan that can be covered by the Fixed Benefit plan. With the rising cost of Healthcare (due to medical inflation) and many Lifestyle diseases affecting individuals, it is preferable for the insured to have Fixed Benefit plan in place to support the financial impact of an unforeseen medical emergency. Plans like Critical Illness, Personal Accident, Hospital Cash, Heartcare, Cancer Care, Diabetes Care etc come under the Fixed Benefit set of plans.

The other important reason to invest in a Fixed Benefit plan, is that these plans are normally for serious ailments, whose treatment costs are significantly high. So if one is impacted with a claim for such an ailment, the impact can create financial stress for the insured and his/her family. So apart from medical instability, financial instability can also create a serious impact. It is imperative to remember that while a fixed benefit health insurance plan covers a defined medical event, it does not cover expenses relating to pre-hospitalization and post-hospitalization expenses, and other day-care expenditures.

Why should one buy a Fixed Benefit Health Plan?

As mentioned earlier, an individual can opt for a specific coverage (Sum Insured) under the Fixed Benefit plan based on their existing coverage under a regular health insurance policy. This Fixed Benefit plan will be an additional cover to ensure that expenses not covered under the regular plan are taken care of. The specific reasons one needs a Fixed Benefit Plan include:

There are very few if not any pre conditions that govern the claim settlement under this Fixed Benefit plan. Once the specific illness/defined condition happens, the policy pays out the Sum insured irrespective of the expenses actually incurred by the insured member. So in the case of a Critical Illness cover, on diagnosis of a covered Critical Illness, the policy will pay the insured the defined Sum Insured irrespective of whether the insured has availed any treatment, or surgery or the expenses incurred for treatment.
The payout/settlement will be released as a lumpsum payment by the insurance provider without considering the actual expenses incurred for the covered condition. This provides financial assistance to the insured when required.
The documentation at the time of a claim under the plan is very minimal given that the policy covers defined illnesses/conditions for which supporting documentation needs to be provided for the claim to be settled.
Since this plan is customisable, the fixed benefit health plan works as a supplementary cover for expenses that are not covered by the regular health insurance plan.
Many a time, expenses that are not related to hospitalization, cannot be claimed by the insured like loss of income, loss of job – this is where a fixed benefit plan comes in handy to support the insured financially.

What are the limitations of the Fixed Benefit Plan?

Some of key limitations of the Fixed Benefit plans are as follows:

The coverages under a Fixed Benefit Plan are normally restricted to a specific incident / illness / condition (Critical Illness, Personal Accident or Hospital Cash) and hence can be restrictive when compared to a Regular health plan which has a wider coverage for other ailments. For instance under a Critical Illness plan, the illnesses are defined and there is no coverage for any other illnesses other than those defined.
The coverage can sometimes be less than a regular plan. For example, if an insured has a Hospital Cash policy with a coverage of Rs 3,000 per day, and the insured is hospitalised for 5 days, this policy will pay Rs 15,000…Assuming that the insured incurs an expense of Rs 40,000, the remaining Rs 25,000 will not be payable…but in the case of a regular plan, the entire amount of Rs 40,000 will be paid under the hospitalisation expenses.
Once a claim is registered and settled under a Fixed Benefit plan, the coverage under the plan will expire…this is different from a regular plan which will continue to remain in force even after a claim is settled and the policy can be renewed lifelong.
The cost of a Fixed Benefit plan is generally higher than a Regular Health insurance policy.
Survival Period – Some fixed benefit plans like Critical Illness have a Survival period which the insured must cross in order for the benefit to be payable. If the insured unfortunately does not make it past the survival period, then the claim doesn’t become payable.

What is the Need for Fixed Benefit Plans?

It is not always important that a hospitalisation may only be for general treatment or a minor ailment that demands a stay for few days. There even can be some kind of medical emergency that apart from requiring extended stay at the hospital, needs great amount of funds to cope with the loss of income during the recovery stage. This is quite common when someone is diagnosed with a life-threatening disease such as cancer, paralysis or kidney failure.

Now, while the average cost of treatment of cancer may range between ₹10 lacs and ₹25 lacs based on the stage of cancer and the proposed line of treatment. Similarly, the treatment of heart-related ailments in India can cost you anywhere between ₹4 lacs and ₹10 lacs or even more in case of a heart transplant surgery. Incurring such massive expenses at one shot can be really difficult for an average Indian household, and especially for a family with a single bread winner. In order to combat such massive costs of treatment and at the same time keep pace with the inflation rate, insurers came up with the concept of ‘Fixed Benefit Plans.’

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Fixed Benefit Plans Vs Indemnity Based Insurance Plans

Just a quick table to compare the features of Fixed Benefit and Indemnity Plans. An indemnity-based plan is a health insurance plan that reimburses the policyholder the cost of medical expenses.

Fixed Benefit Plans	Indemnity Based Insurance Plans
Pays a lumpsum upto Sum Insured on the occurrence of the covered event – personal accident, critical illness etc	Reimbursement/cashless settlement only upto the actual expenses incurred irrespective of the Sum Insured
These plans cover only a limited / fixed set of benefits which are defined in the plan	Most indemnity based health insurance plans offer wide ranging coverage for sickness to the insured
Policy / Plan expires in the event of a claim and the Sum Insured being settled to the insured	Policy continues even after a claim is paid, coverage will remain upto the balance remaining Sum Insured (or back to 100% SI with Restore Benefit plans)
Fixed Benefit plans normally do not have a co-pay or deductible. Full Sum Insured settled to the insured	Indemnity plans have a co-pay / deductible based on the plan chosen by the insured
Some Fixed Benefit Plan like Critical Illness have Survival periods (normally 30 days) after which expenses/SI becomes payable	No Survival Period. Expenses from Day 1 of hospitalisation are payable under this plan.
Premium for these plans are relatively higher	Premiums based on coverage/SI chosen, but cheaper when compared to Fixed Benefit plans

In summary, is it easy to conclude that there are advantages and disadvantages of both Indemnity and Fixed Benefit plans, and it is strongly recommended to buy both plans for your protection since they are complementary in nature.