Gen Z's guide to health insurance: Here is everything you need to know and why

While chronic illnesses like diabetes, hypertension, and obesity are on the rise among the young, the awareness of health insurance in Gen Z is considerably low. Additionally, the skyrocketing costs of healthcare services make health insurance education even more crucial than ever.

Experts believe that Gen Z must get themselves insured as early as possible for the best support. However, determining which health insurance suits best for you and the process of getting yourself insured can be easily overwhelming.

Mid-day.com roped in experts from the health insurance sector to seek key insights on the same.

Syed Meraj Naqvi, CEO and principal officer, Riskbirbal Insurance Brokers tells Mid-day readers, "Imagine this - you are young and healthy, enjoying your life. Suddenly, an unexpected illness strikes. Hospital bills pile up, medications become a burden, and your savings dwindle. In such situations, health insurance acts as a protective shield. It helps cover significant portions of medical expenses, including hospitalisation costs, surgeries, and often even prescription drugs."

Need for health insurance from a young age
Shilpa Arora, co-founder and chief operating officer, Insurance Samadhan highlights, "Medical inflation stands at 14 per cent in India. The cost of treatment has increased significantly. Unfortunately, this is making quality and timely treatment beyond the access of many, while the limited number of individuals getting treated are often left with a massive financial liability. For instance, even minor surgery can cost up to one lakh rupees. Additionally, in India, the ‘Out-of-Pocket Expenditure' (the direct payment of money by an individual for healthcare services or goods) stands at 47.1 per cent, which is relatively higher than most countries. These aspects make it imperative to purchase a health insurance policy."

The earlier you enroll in a health insurance plan, the better. Arora advises starting as early as possible or as soon as one turns 18. "When it comes to health insurance or insurance in general, those who purchase an insurance policy at a young age tend to benefit in more than one way. For instance, most insurance companies consider young applicants healthier than older adults due to their lower vulnerability to age-induced complications or chronic illnesses, making them lower liability. As a result, insurance providers offer comprehensive coverage at a lower premium amount than what an older adult would typically pay."

"Similarly," she adds, "younger adults are subject to less scrutiny when buying a policy. For instance, some insurers may not require a pre-policy medical check-up if the applicant is very young. However, this clause may differ from company to company. Some health insurance products also offer a cumulative bonus for every non-claim year. Such a bonus often helps increase the sum insured without any additional cost. Since younger individuals are deemed less likely to raise a claim during the policy year, they may become eligible for a claim bonus."

Nikhil Apte, chief product officer, Royal Sundaram General Insurance Co. Ltd tells Mid-day.com, "Typically, up to the age of 25, a child is covered under family floaters; after 26 years onward, the child is covered as an independent and not in the family floater. The real answer to getting covered in health insurance is today, because the hard fact of life is that everybody at some stage will require hospitalisation, so it is important to start today and get the maximum possible insurance."

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Evolution of health insurance packages post-Covid-19
Traditionally, health insurance focused primarily on reactive care, covering hospitalisation and major medical interventions. However, the healthcare landscape is evolving.

Naqvi informs, "With the rise of chronic illnesses like diabetes and hypertension, a proactive approach is gaining traction. Insurers are now offering plans with wider coverage for specific treatments and medications related to these conditions. Additionally, some plans are incorporating wellness benefits like gym memberships, nutrition consultations, and preventive screenings, encouraging a holistic approach to health."

Arora shares some key insights: A quick look at the latest data would show how the cases of diagnosed diabetes and hypertension are on the rise among young adults. For instance, there are around 77 million individuals above the age of 18 years who are suffering from diabetes (type 2) while nearly 25 million could be prediabetics. On the other hand, in India more than one in four have hypertension. These trends are concerning and could add pressure on both policy buyers and insurance providers.

She says, "Previously, health insurance premiums were determined based on the applicant's age and gender. However, considering the changing health and lifestyle trends, more companies are factoring in chronic illnesses to assess applicants' risk profiles and set premiums. As a direct impact, the premiums for younger adults with pre-existing conditions are becoming more expensive."

Today, many insurance providers offer plans specifically designed to cater to these chronic health concerns. These plans factor in individuals' need to undergo regular checkups and consultations to build a comprehensive plan that would focus on chronic management and outpatient needs to help ease medical costs. Hence, most plans accompany benefits that help tackle expenses related to regular checkups, tests, consultations, diagnosis, and medicine purchases along with standard benefits.

Ramit Goyal, chief distribution officer, Future Generali India Insurance Company Ltd reveals interesting figures: The Indian healthcare market, which was valued at $116 billion in 2016, is projected to reach $638 billion by 2025.

The healthcare landscape in India has undergone a significant transformation over the past decade, particularly in the years following the Covid-19 outbreak. The pandemic has brought about a major shift in consumer behaviour with individuals realising that health is an asset that needs financial protection. One of the key changes that the industry has witnessed is the growing preference among consumers for higher sum assured. Say for instance, even till a few years back, a policy with five lakh rupees insured was the most popular choice among people, but today health insurance plans with a higher sum insured say from Rs 10 lakh and above seem to be the preferred option.

Another important point that Goyal mentions is that health insurance today is no longer just restricted to physical but also the mental health of individuals.

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Mental health and health insurance
Goyal shares, "Nearly 14 per cent of the global burden of disease is attributed to neuropsychiatric disorders. In India, it is estimated that 20 per cent of our population suffers from a mental illness, and only 10-12 per cent of them seek aid for their mental health concerns."

Though the level of awareness is still low in the country, it is steadily gaining traction with people recognising the need to address the issue effectively. Insurance companies have been quick to understand this need and provide coverage for mental health in their policies. He adds, "The Mental Healthcare Act of 2017 mandates health insurance policies to include mental health conditions just like physical ones."

Countering this Arora states, "Despite the mandate, the practical coverage and access to it has massive gaps, which often complicates things for patients. For instance, almost all health products list self-harm, suicide, and attempted suicide as exclusions. Additionally, getting claims related to hospitalisation due to cases of mental illness settled is deemed difficult. Similarly, there are several cases when individuals face challenges to avail of a policy cover due to their pre-existing mental illness. This is also a reason why most individuals wish to keep their psychiatrist consultation off the record as they fear their claim for other health conditions would be denied if they declare their mental health issue in the policy form."

"Such a practice," Arora states, "not only withholds crucial information from the insurer but also increases the policy buyer's chance of rejection. However, these issues highlight an urgent need for simplifying the clauses related to mental health insurance and easing exclusions to help individuals avail of coverage and address their concerns."

Tips to educate yourself about health insurance
Rahul Mishra, director and co-founder of Policy Ensure, recommends that Gen Z educate themselves about health insurance through online resources, webinars, and financial literacy programs. He says, "Understanding the nuances of health insurance early on can lead to more informed decisions and better financial planning."
Similarly, Naqvi says, "Researching online through insurer websites and comparison platforms is a great starting point. Additionally, talking to parents or other adults about their experiences with health insurance can be immensely helpful. Don't hesitate to seek guidance from insurance agents or financial advisors who can clarify complexities and recommend suitable plans based on your needs."

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Key factors to consider before making a final choice
Both Naqvi and Apte share some key factors you must consider before buying an health insurance plan:
1. Coverage: This is what the plan actually covers. Look for a plan that includes hospitalisation, outpatient care (doctor visits, clinics), and coverage for critical illnesses like cancer or heart disease.

2. Sum insured: This is the maximum amount the insurance company will pay towards your medical bills per hospitalisation. Choose a sum insured that adequately covers potential hospital costs in your area. For example, a 26-year-old Gen Z may find Rs 20 lakh as a very high sum insured initially; however, considering the long-term nature of the policy it will help get about Rs 40-50 lakh of coverage.

3. Network hospitals: Check if the plan offers access to quality hospitals and clinics in your area. Convenience and familiarity with your preferred healthcare providers are important factors.

4. Claim settlement ratio: This ratio indicates how quickly and efficiently the insurance company settles claims. A higher ratio suggests faster claim processing, which is crucial during medical emergencies.

5. Renewability: Ensure the plan allows for renewal throughout your life, even if you develop pre-existing conditions later. This provides long-term security and avoids the risk of losing coverage when you need it most.

6. Maternity cover: Policies that cover maternity benefits should be considered as this later adds up to out-of-pocket expenditures if not covered under the policy.

7. Room rent restrictions and disease-specific restrictions: When you land in a hospital, you might not have control over which room you are allotted and therefore, technically, the policy should not have limitations on room rent capping and disease capping, which may result in a short-term premium decrease, but ultimately, when the person gets admitted, there will be higher out-of-pocket expenses.

Bonus Tip: Consider adding optional riders to your plan! These are like add-ons that provide extra coverage for specific needs, such as critical illness. While they come with a small additional cost, they can offer valuable peace of mind in case of unforeseen circumstances.

Common mistakes to avoid
"Common mistakes young adults make when signing up for health insurance include underestimating the coverage they need, ignoring the terms and conditions, and choosing the cheapest option without considering the benefits," states Mishra.

Naqvi lists down in detail, some common mistakes you must avoid making:
1. Ignoring the fine print: Understand key terms like deductibles (the amount you pay upfront before insurance kicks in), copays (fixed fees for certain services), and coverage exclusions (what the plan doesn't cover). Read the fine print carefully and ask questions in case of any confusion.

2. Thinking you don't need health insurance: Thinking you're invincible and won't need insurance is a gamble. Accidents and illnesses can happen to anyone, and the financial burden can be significant. Protect yourself from unexpected costs.

3. Ignoring the coverage of mental health: Don't overlook the importance of mental health coverage. Look for plans that cover outpatient therapy sessions with licensed professionals. Mental well-being is just as crucial as physical health.

4. Pre-existing condition pitfall: Hiding pre-existing conditions can backfire. Be honest with your insurer to avoid claim denials later.

5. Price over value: Don't be solely swayed by the cheapest plan. Consider the overall value proposition. A slightly more expensive plan might offer a wider network of hospitals or better coverage, ultimately saving you money in the long run.