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11 Key Factors That Affect Your Health Insurance Premium Costs

factors that affect your health insurance plans

Health insurance premiums are influenced by several factors that can vary depending on the individual and the policy. Today, health insurance is starting to gain a lot of importance in India, especially in urban areas. This is in part due to the rising cost of medical treatment, and the recent COVID-19 pandemic. While it can serve as a financial safeguard in case of unexpected medical emergencies, one important thing to consider is the amount of premium that you need to pay for this coverage.

Your health insurance premiums will be calculated based on many different factors and circumstances. Knowledge is power, and knowing the factors that will impact the price of your premiums can help you to get the most out of your policy. In this article, we'll explore the major factors that affect health insurance costs.

Team Digit

What is the Insurance Premium Factor?
Factors Affecting Premium
How to Calculate Premium?
Choose the Right Health Insurance
Economic and Market Influences
Things to Know
Frequently Asked Questions

What is an Insurance Premium Factor?

An insurance premium factor is a variable that insurers consider when determining the cost of health insurance premiums. These factors include personal attributes such as age, health status, lifestyle choices, and broader considerations like geographic location and regulatory environment.

By assessing these factors, insurers estimate the risk associated with providing coverage to an individual or group, ultimately influencing your premium.

Top 11 Factors That Will Affect Your Health Insurance Premium

what are the factors affecting your health insurance cost

Several factors affect the cost of health insurance premiums. These include both individual characteristics and external influences. Let's explore some of the most significant factors:

1. Age of the Insured

One major factor in determining premiums in health insurance is your age. This is because as one ages, it means a higher chance of mortality, hospitalization, and medical expenses.

Thus, while a 50-year-old person might have to pay a premium of ₹6,208/year (for a sum insured of 3 lakhs), a 25-year-old person would have to pay a significantly lower premium of around ₹2,414/year.

In addition to this, some insurance companies put an age cap in place for individuals buying a new health insurance policy of 65-80 years, as the older one gets, the more difficult it is to determine their risk factors and health-related expenses.

2. Type of Plan Chosen

Your health insurance premium will change depending on the type of health plan you choose. For example, a family floater plan usually costs less than an individual policy, as the chances of one individual falling sick is higher. However, in a family floater plan, remember that the premium will be based on the age of the oldest member covered.

On the other hand, individual policies offer tailored coverage but generally come at a higher cumulative cost if insuring multiple people. Additionally, the level of coverage and added benefits like maternity or critical illness riders also impact premiums.

3. Sum Insured

The sum insured that you opt for will also affect your health insurance premium. Since the sum insured is the maximum amount you can claim from your insurer for medical expenses, a lower SI can result in a lower premium, and vice versa for a higher SI.

However, if your total medical bills exceed your SI amount, you will have to pay the extra cost out of your own pocket. Therefore, you must choose your SI carefully as you don’t want to increase the amount you have in case of emergency.

4. Habits and Lifestyle

Bad habits like smoking, chewing tobacco or snuff will also impact your premium. These habits will increase the chance of lung infections, cancer and other critical illnesses, meaning that smokers will have a higher health insurance premium than non-smokers.

This increase for smokers can be almost double those for non-smokers. For example, if a 25-year-old non-smoker might have to pay ₹5,577/year for a sum of ₹1 crore, a smoker of the same age would pay around ₹9,270/year for the same amount.

5. Pre-existing Diseases

When a person suffers from pre-existing medical conditions which have had a long-term effect on a person’s health, such as diabetes, high blood pressure, or asthma, they will likely have more hospital expenses as well as higher medical bills. This means that they will have to pay a higher premium compared to healthy people of the same age group, as they are.

The amount your premium increases will depend on the pre-existing condition that you have, as well as its severity as noted by a doctor.

6. Co-payment

In health insurance, a co-payment is the percentage of the claim amount that you will have to pay. For example, if you have a 15% copay, your insurer will pay out 85% of the claim amount, while you handle the rest. So, it is like you and your insurer are splitting your medical bills.

Some health insurance policies have a mandatory co-payment clause, while others will let you choose your copayment amount. It is important to note that while a higher co-pay will lower your total premium, you will have to pay a larger amount during claims. But with a lower co-pay you will have a slightly higher premium, but you will pay less during claims.

7. Add-On covers

Additional covers (also called add-ons or riders) are additional coverages that you can opt for in addition to your existing health insurance policy to enhance its benefits for an additional premium.

When you opt to customise your health insurance with add-on covers like a Maternity cover, Critical Illness cover, or Personal Accident cover, you will have to pay an additional premium.

However, according to the IRDAI, the total premium for all add-ons availed under a single health insurance policy can’t exceed 30% of the original premium amount. So, if your premium was ₹5,000/year, and you decide to include 5 add-ons, the additional premium can’t be more than ₹1,500.

8. Family Medical History

If your direct family members (like parents or grandparents) have shown a history of illnesses like heart diseases, cancer, Alzheimer's, etc., that puts you at a higher risk of contracting these illnesses yourself. This will increase the rate of your premium.

This assessment helps insurers predict potential healthcare costs and determine your eligibility, premium rates, and coverage options. Being aware of your family's medical history can also guide you in selecting a policy that offers the best protection for your specific health risks.

9. Where You Live (Zones)

Every geographic location will be different in terms of risks, medical costs, and other environmental factors like pollution, climate, etc. In India, different cities are divided into zones, classified based on that city’s medical expenses. The higher the medical expenses in a city, the higher its zone, and the higher your premium will be.

The different zones in India and examples of their premium increase are as follows:

Zone A	Zone B	Zone C
Delhi/NCR, Mumbai including (including Navi Mumbai, Thane and Kalyan)	Hyderabad, Secunderabad, Bangalore, Kolkata, Ahmedabad, Vadodara, Chennai, Pune and Surat	All Cities apart from A & B belong to Zone C
Premium of ₹6,448	Premium of ₹5,882	Premium of ₹5,315

10. Obesity

Insurance companies consider individuals that are overweight (where their weight is based on BMI) as being more prone to illnesses such as diabetes or hypertension. And, since this might lead to a higher chance of them making health insurance claims in the future, they will be charged a higher premium.

Some health insurance plans may limit coverage for obesity-related treatments, including bariatric surgery, weight-loss programs, and medications.

11. Nature of Your Work

The amount of risk that you’re exposed to at work will also factor into the premium. Those with safer jobs like office work will have to pay less than those who work at a construction site or in a factory where the risk of being injured is higher.

Once you know about the various factors which can affect the amount of health insurance premium you pay, you will know what to expect when you buy or renew your insurance. And, after you have considered all these criteria, you can use a health insurance premium calculator to calculate your insurance premium amount online.

How to Calculate Health Insurance Premium using a Calculator?

A health insurance premium calculator is an online tool that provides health insurance premiums for different plans. The calculator derives the policy premium using your age, family members to be insured, sum insured, policy tenure, and similar factors.

Most people rely on their insurance companies to give them details on their premium payments.

One would settle for one insurance policy just to avoid the research process. This is where the role of a mediclaim policy premium calculator comes into play. It is both time-saving and an effective tool.

How to Choose the Right Health Insurance Plan?

how to select the right health insurance plan

With various options available, evaluating different plans based on your healthcare needs and financial situation is important. Here are a few tips that will help you in choosing the right plan:

Tips	Descriptions
Evaluate Coverage Options	Assess the coverage options, including the scope of benefits, network of providers, and specific services covered. Ensure the plan aligns with your healthcare needs.
Analyse Out-of-Pocket Costs	Examine deductibles, copayments, and coinsurance to understand your potential out-of-pocket expenses. Balance premium costs with your ability to manage spending.
Check the Provider Network	Ensure the plan's network includes your preferred doctors, hospitals, and specialists. A broader network offers more flexibility in choosing providers.
Consider Prescription Drug Coverage	Review the plan’s formulary to see if your medications are covered and at what cost. Some plans may offer better coverage for certain drugs, affecting your expenses.
Review the Plan’s Flexibility	Consider how the plan handles referrals to specialists and out-of-network care. Flexible plans allow easier access to specialised services without referrals.

What are Economic and Market Influences on Health Insurance?

Economic and market influences are crucial in shaping health insurance premiums, impacting costs beyond individual factors. Here are the key influences:

1. Healthcare Costs

The rising cost of healthcare services and prescription drugs is a primary driver of increased insurance premiums. As healthcare providers charge more for services, insurers must adjust their premiums to ensure they can cover the anticipated medical claims.

2. Insurance Market Competition

The level of competition among insurance providers in a given area can significantly influence premiums. In highly competitive markets, insurers may offer lower premiums to attract customers, leveraging cost efficiencies and streamlined services.

3. Regulatory Environment

Government regulations have a profound impact on health insurance premiums. Requirements such as covering specific essential health benefits, accepting applicants regardless of pre-existing conditions, and adhering to minimum loss ratios can lead to higher premiums.

4. Economic Conditions

Economic factors affect health insurance premiums, including inflation, unemployment, and overall economic stability. During periods of economic downturn, insurers may face higher claims costs as more individuals utilise healthcare services, increasing premiums.

5. Reinsurance and Risk Pooling

Insurers often use reinsurance to manage risk, particularly in volatile or high-cost markets. The cost and availability of reinsurance can affect premiums, especially in markets where catastrophic claims are more common. Additionally, the composition of the risk pool is important.

Things to Know About Health Insurance Premium

If you're considering purchasing a health plan and need clarity about its costs, here are some important facts to understand:

Things to Know	Description
Premium Factors	Health insurance premiums depend on various factors, including your age, pre-existing health conditions, overall health status, and lifestyle. These elements are assessed to determine your premium rate.
No-Claim Bonus (NCB)	You may benefit from a lower premium thanks to the No-Claim Bonus, which rewards you with a discount for each year you do not claim. This can reduce your overall premium cost.
Premium Calculator	You can estimate your health insurance premium using online calculators. These calculators can help you compare plans and understand potential costs based on your personal details and coverage needs.
Coverage for Pre-existing Conditions	Health insurance can cover pre-existing conditions, such as diabetes, from the day your policy starts, depending on the plan and insurer. Be sure to review the terms and waiting periods associated with such coverage.

Understanding the factors affecting health insurance premiums is crucial for managing your healthcare expenses effectively. These factors, from age and location to lifestyle and health history, play a significant role in determining the cost of your insurance. Evaluating your options and adjusting based on these factors can lead to more affordable and suitable health insurance solutions.

FAQs on Factors Affecting Health Insurance Premium

All

What are the main factors that will affect my health insurance cost?

There are a number of factors that might affect the amount of premium you have to pay for your policy. The major ones are:

Age of the Insured
Medical State
Pre-Existing Conditions
Smoking Habits
Occupation
Place of Residence
Obesity
Family Medical History

Will a lower premium payment automatically mean that the insurance policy will have insufficient coverage?

No. Since the price of the health insurance policy will vary from one insurance provider to another, and based on the above-mentioned factors like age, SI, etc. As a result, the insurance cover offered by one company can be more affordable than the other.

Will you also have to pay GST on your health insurance premium?

Yes, usually there is a GST of 18% which is charged on the premium for health insurance.

What factors influence my health insurance premium?

Health insurance premiums can be influenced by various factors, including age, location, health history, and lifestyle choices. Insurers also consider the type of coverage and the plan's deductible when determining the cost.

How does age affect my health insurance premium?

Generally, older individuals pay higher premiums because they are more likely to experience health issues that require medical attention. Premiums often increase with age due to the higher risk associated with older populations.

Does my location impact my health insurance premium?

Yes, where you live can affect your premium. Health insurance costs vary by region due to differences in healthcare costs, local regulations, and the availability of medical services in your area.

How does my health history impact my health insurance premium?

Individuals with a history of chronic illnesses or pre-existing conditions may face higher premiums because they are considered higher risk. Insurers use this information to estimate the potential cost of providing coverage.

What role does my lifestyle play in determining my premium?

Lifestyle factors such as smoking, excessive alcohol consumption, and obesity can lead to higher premiums. Insurers may charge more if your lifestyle increases your likelihood of health issues.

How does the type of health insurance plan affect my premium?

Different plans offer varying levels of coverage and benefits. Plans with lower deductibles and more comprehensive coverage typically have higher premiums, while high-deductible plans may have lower premiums.

Can my occupation affect my health insurance premium?

In some cases, occupations that involve higher physical risks or hazardous conditions may result in higher premiums. Insurers may consider the risk level associated with your job when setting your rate.

How do family size and dependents impact my health insurance premium?

Adding dependents to your health insurance plan, such as a spouse or children, can increase your premium. The more people covered under the plan, the higher the overall cost.

Does my credit score have any impact on my health insurance premium?

While credit scores generally do not directly impact health insurance premiums, they may affect your ability to obtain insurance or the cost of supplemental policies.

Can I lower my health insurance premium?

Yes, you can lower your premium by choosing a plan with a higher deductible, maintaining a healthy lifestyle, or qualifying for subsidies or tax credits.

How do health insurance premiums differ from term insurance premium calculations?

Health insurance premiums are calculated based on age, medical history, and sum insured, while term insurance premiums primarily consider age, coverage amount, and policy duration.

Is the premium for senior citizens higher in health insurance compared to life insurance?

Yes, health insurance premiums rise significantly with age due to higher health risks, whereas life insurance premiums are generally fixed at the time of purchasing plans.

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11 Key Factors That Affect Your Health Insurance Premium Costs

Table of Contents

What is an Insurance Premium Factor?

Top 11 Factors That Will Affect Your Health Insurance Premium

1. Age of the Insured

2. Type of Plan Chosen

3. Sum Insured

4. Habits and Lifestyle

5. Pre-existing Diseases

6. Co-payment

7. Add-On covers

8. Family Medical History

9. Where You Live (Zones)

10. Obesity

11. Nature of Your Work

How to Calculate Health Insurance Premium using a Calculator?

How to Choose the Right Health Insurance Plan?

What are Economic and Market Influences on Health Insurance?

1. Healthcare Costs

2. Insurance Market Competition

3. Regulatory Environment

4. Economic Conditions

5. Reinsurance and Risk Pooling

Things to Know About Health Insurance Premium

FAQs on Factors Affecting Health Insurance Premium

What are the main factors that will affect my health insurance cost?

Will a lower premium payment automatically mean that the insurance policy will have insufficient coverage?

Will you also have to pay GST on your health insurance premium?

What factors influence my health insurance premium?

How does age affect my health insurance premium?

Does my location impact my health insurance premium?

How does my health history impact my health insurance premium?

What role does my lifestyle play in determining my premium?

How does the type of health insurance plan affect my premium?

Can my occupation affect my health insurance premium?

How do family size and dependents impact my health insurance premium?

Does my credit score have any impact on my health insurance premium?

Can I lower my health insurance premium?

How do health insurance premiums differ from term insurance premium calculations?

Is the premium for senior citizens higher in health insurance compared to life insurance?

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