Benefit Plans under Health Insurance

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.’

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.