Service tax hike to make medical cover a costly affair

The hike in service tax to 8 per cent will be an additional burden on Mediclaim policyholders -- especially those in the older age bracket.

This comes above the 40-50 per cent jump witnessed in the cost of a medical cover in the last one year.

In January 2002 the four state insurance companies hiked Mediclaim premiums by 20-30 per cent in a move to counter rising losses as a result of high claims.

This was subsequent to Mediclaim being put under the service tax net two years back.

Further, in October last year, the four insurance companies decided to hike premiums again by 6 per cent for introducing cashless hospitalisation treatment through third-party administrators.

With the Union Budget 2003-04 hiking the service tax further by three per cent, hundreds of thousands of Mediclaim policyholders will be hit as premiums rise by an additional 3 per cent.

Shirish Parekh used to pay an annual premium of Rs 3,206 for his Rs 100,000 Mediclaim cover in March 2001 before the introduction of the service tax.

This shot up to an annual outflow of Rs 4,387 when the four insurers raised premiums by 20-30 per cent to offset high claim ratios.

Today, Parekh is paying Rs 4,910 following the hike in October as a result of introducing TPAs.

His annual premium will further shoot up on renewal to Rs 5,057 with the three per cent rise in service tax. This reflects a 58 per cent hike in the premium for those in the age bracket of 65-70 since March 2001.

The hike in premium has been less severe at 32 per cent for the younger age group from zero to 35 years. A 34-year-old woman was paying Rs 1,463 per annum for a Rs 1.5 lakh cover.

This has since shot up to Rs 1,877 at the last renewal and will rise further to Rs 1,933 following the service tax hike.

S K Jain, a senior New India Assurance Company agent, said: “As Mediclaim costs have risen, in the face of recession with more people being laid off work, many policyholders have reduced the amount of health coverage in order to maintain the same level of premium outgo.”

At the same time, many policyholders, though have shelled out more since October last year, are yet to benefit from the cashless hospitalisation promised.

“Whether the costs can be justified, only time can tell as many policyholders are yet to obtain their cards,” said Ashok Mehta, an agent working for Oriental Insurance Company.

Currently, many policyholders feel that their hospitalisation facilities are being confined to a specific region if they wish to take advantage of cashless hospitalisation.

They are also at the mercy of TPAs in terms of the treatment and coverage, said Jain.