Covid-19 cases in India have tripled in the one month since ‘Unlock.1’, raising the specter of community transmission. While citizens prepare to avoid this infection with masks and social distancing, one cannot rule out the possibility of exposure to the infection altogether. In the event exposed, an estimated 6% -7% of patients may need medical treatment in a hospital, bringing to the fore the question – are households prepared to manage the financial impact of Covid-19 medical treatments?
Private / group employee’s health insurance
Most private sector employees in India are covered by employers under group health insurance with a ‘family floater’ that covers specified family members. The cap for coverage under a family floater scheme is built on the premise that there is a slim chance of multiple family members requiring coverage within the same policy period. But, the assumption that the family floater cap would be sufficient to cover the health insurance needs in a pandemic, such as Covid-19, is inherently flawed. There is a higher risk, now more than ever, that the employee’s group insurance fails to cover all of the health insurance requirements of a household, leaving employees exposed to not only the pandemic but also the medical costs that come with it.
What can employers / individuals do?
If you already have a group insurance / personal insurance coverage, check if the sum insured is adequate to cover expenses likely to arise, particularly if you have elderly family members who are more likely to need hospitalization, if infected. You will need to check with your insurer if they will permit increasing the sum insured in a family floater cover.
If you are not currently insured, other insurance schemes announced recently such as ‘Arogya Sanjivini’ or Covid-specific schemes such as ‘Corona Kavach’ / ‘Corona Rakshak’ may help to mitigate risks.
The advantage of a group health insurance is that the age limit for elderly family members who are most likely to need the insurance cover is higher than with individual / Covid-specific policies where the age limit is usually 65 years of age.
Tax exemptions / deductions
The income-tax rules currently exempt premium costs of specified health insurance schemes from being treated as a taxable benefit (‘perquisite’) where incurred by / reimbursed by employers to provide insurance cover to employees and specified family members. However, despite the insurance cover, employees may need to foot the bill, with co-pay obligations / exclusions in the policy such as capped room-rates, consumables, non-proven treatment costs. If the employer were to reimburse such costs on humanitarian grounds, this could still be treated as a perquisite. Covid-19 is likely to have such significant ramifications for the general public that the Government should consider notifying Covid-19 as a ‘prescribed ailment’ under Rule 3A. This could then enable the reimbursement of medical costs by an employer to be exempted from income-taxes.
Individual taxpayers who incur health insurance costs are allowed to claim a tax deduction [section 80D of the Income-tax Act, 1961] as per specified limits, but these limits may need to be revisited in light of the pandemic.
