What are Top Up Plans and how can they help cover medical expenses at lower costs

Health is not valued till sickness comes.

• Thomas Fuller

In India, health insurance penetration is just 5-6%. Most people depend on the employer provided group health insurance for their hospitalization and other expenses. One of the mainreasons for not purchasing independent personal health cover is because of the high premiums and a feeling that the employer provided cover is sufficient.

The average group health cover provided by the employer is usually between Rs.3,00,000 – 5,00,000. Even if a person opts to buy a medical cover, the average cover opted is around the same figure and mostly as a family floater. But if we consider the current healthcare costs and its inflation, the cover might not be sufficient even for one-time major surgery/hospitalization of a single member of the family. Yes, that’s right!

As the medical and hospitalization costs are also increasing, the cost of the premiums for health cover are also increasing proportionately. Not everyone is able to afford additional cover if they wish to, because of this. Also, it is not very practical to buy additional health policies every time we feel the need to increase our health cover. One solution for this is the top-up policies provided by most health insurance companies. They are 2 types of top-up policies– Top Up and Super Top Up Health Insurance Plans.

 How do  top-up policies work?

The top-up policies work on a cost-sharing basis where medical expenses up to the deductible limit have to be borne by the policyholder. The top-up policies will pay for the medical costs only if the expenses cross the deductible limit (above the normal health insurance available) and only the amount which is above the deductible limit is paid.

The deductible amount of the expenses can either be borne by the insured on his own, or by a personal health policy or by the group health cover provided by the employer.

 Group Health Cover provided by Employer and top-up policies:

Employees who have group health cover are eligible to take both Top Up policies as well as Super Top Up policies. The terms and conditions of top-up policies for a person with group health cover or personal health cover or with no health cover remains the same.

 Top Up Plans:

Top Up Plans are unique health insurance plans which offer coverage beyond the “threshold limit” or the maximum limit of the existing health policies for every case of hospitalization. This is called the “deductible” of the policy.

 This is the minimum amount over which the policy / insurance company pays the insured and covers the claim.

One of the disadvantages of Top Up Plans is that the claims are paid on the basis of “per claim/per hospitalization” i.e. the claims under Top Up Plans are admissible only if the expenses are above the deductible for every case of hospitalization in an year.

Such plans are usually cheaper than regular health insurance as the initial costs of hospitalization are borne by either the policyholder or by any other health insurance provider. The Top up and Super Top up plans only come into effect after the basic policy claim has been utilized.

 The premiums for Top up and Super Top up plans vary depending on the deductible limit of the policy. Higher the deductible, lesser the premium.

Below are few scenarios that could arise with Top Up Plans:

Existing medical cover of Rs.3 lakhs and a Top Up cover of Rs.10 lakhs with a deductible of Rs.3 lakhs:

Case 1: There is a single claim/single hospitalization expense of Rs.2.5 lakhs in a given year

The existing medical cover will pay Rs.2.5 lakhs and nothing will be paid by the Top Up cover.

Case 2: There is a single claim/single hospitalization expense of Rs.8 lakhs in a given year

The existing medical cover will pay Rs.3 lakhs. The Top Up cover will pay Rs.5 lakhs.

Case 3: There is a single claim/single hospitalization expense ofRs.5.5 lakhs

The existing medical cover will pay Rs.3 lakhs. The remaining amount of Rs.2.5 lakhs is not paid by the Top Up cover as the deductible limit of Rs.3 lakhs is applicable for every hospitalization.

 Top Up Plans provide cover for multiple times in a year but each time the claim amount should be more than the deductible. In this case, the claim to the Top Up plan is Rs.2.5 lakhs which is less than deductible of Rs.3 lakhs

Case 4: There are two claims in a year. Claim 1 is of Rs.3 lakhs and Claim 2 is of Rs.2.5 lakhs.

For Claim 1, the existing medical cover will pay Rs.3 lakhs after which the limit of the policy will get exhausted. For Claim 2, the Top Up cover will not pay the remaining amount of Rs.2.5 lakhs as the deductible of Rs.3 lakhs is applicable for every case of hospitalization.

Case 5:There are 2 claims in a year. Claim 1 is of Rs.3 lakhs and Claim 2 is of Rs.5 lakhs.

For Claim 1, the existing medical cover will pay Rs.3 lakhs after which the limit of the policy will get exhausted for that year.

For Claim 2, the Top Up cover will pay an amount of Rs.2 lakhs onlysince the deductible is Rs.3 lakhs and the balance 3 lacs will have to be borne by the insured himself.

Existing cover is Rs.3 lakhs and the Top UpPlan cover is of Rs.10 lakhs with Rs.4 lakhs deductible.

If there are 2 claims in a year where Claim 1 is of Rs.3 lakhs and Claim 2 is of Rs.8 lakhs.

In this case, for Claim 1, the existing medical cover will pay Rs.3 lakhs after which the limit of the policy will get exhausted for that year.

For Claim 2, the Top Up cover will pay an amount of only Rs.4 lakhs and not Rs.5 lakhs as the deductible is Rs.4 lakhs. The balance amount of Rs.1 lakh should be borne by the insured.

 Top Up plans are beneficial as long as the single claim amount is above the threshold limit or deductible.

Top up plans are applicable for any number of claims in a year. The amount paid from a top up plan should exceed the minimum deductible for every claim made.

 To address this limitation, Super Top Up plans are available which provide cover for multiple claimsin a year by calculating the aggregate deductible.

Some of the popular Top Up plans are below:

• Apollo Munich Optima Plus Top up Plan
• ICICI Lombard Top up Plan – Health Care Plus Insurance Plan
• New India Assurance’s – Top Up Mediclaim Policy

The premium chart for the Top Up Plans listed above shown below.

The premiums given are for a family of four with the eldest member being 40 years and 2 children within 10 years of age.

It is important to note that the Top Up Plans are available as individual plans as well as family floater plans. However the terms and conditions of the Top Up Plans offered vary with the insurance companies. Some insurers offer only individual Top-Up Plans and some offer both individual and family floater Top Up Plans. The premiums for an individual Top Up plan varies on the age of the individual and deductible and that of family floaters depend on the age of the eldest memberof the family, size of the family and the deductible. Also the age group that will be covered also varies from insurer to insurer.

Super Top Up Plans are also health insurance plans which offer coverage beyond the “threshold limit” or the maximum limit of the existing health policies which is called the “deductible” of the policy.

Unlike Top Up Plans, Super Top Up Plans consider the total of all hospitalization/medical expenses in a given year. Super Top Up plans consider the aggregate claim of multiple hospitalizations for a particular year. The deductible is calculated by putting together all cases of hospitalization per year.

Due to this, the premium of Super Top Up Plans are higher than that of Top Up Plans.

The medical expenses paid by the Super Top Up Plans vary depending on the number of hospitalization in a single year and the total cost incurred for all hospitalizations.

Below are few scenarios that could arise with Super Top Up Plans:

Assume a person has an existing medical cover of Rs.3 lakhs and a Super top up cover of Rs.10 lakhs with a deductible of Rs.3 lakhs.

Existing medical cover of Rs.3 lakhs and a SuperTop Up cover of Rs.10 lakhs with a deductible of Rs.3 lakhs:

Case 1: There is a single claim/single hospitalization expense of Rs.2.5 lakhs in a year

The existing medical cover will pay Rs.2.5 lakhs and nothing will be paid by Super Top Up cover.

Case 2: There is a single claim/single hospitalization expense of Rs.8 lakhs in a year

The existing medical cover will pay Rs.3 lakhs. The Super Top Up cover will cover the cost for the full amount of Rs.5 lakhs which is beyond the deductible of 3 lacs

Case 3: There is a single claim/single hospitalization expense of Rs.5.5 lakhs in a year

The existing medical cover will pay Rs.3 lakhs after which the limit of the policy will get exhausted. The Super Top Up cover will pay the remaining amount of Rs.2.5 lakhs even though it is less than the deductible of Rs.3 lakhs.

Case 4:There are 2 claims in a year. Claim 1 is of Rs.3 lakhs and Claim 2 is of Rs.5 lakhs.

For Claim 1, the existing medical cover will pay Rs.3 lakhs after which the limit of the policy will get exhausted. For Claim 2, the Super Top Up cover will pay the remaining amount of Rs.5 lakhs.

Case 5: There are 2 claims in a year. Claim 1 is of Rs.5 lakhs and Claim 2 is of Rs.6 lakhs.

For Claim 1, the existing medical cover will pay Rs.3 lakhs after which the limit of the policy will get exhausted. The remaining 2 lakhs will be paid by the Super Top Up cover. For Claim 2, the Super Top Up cover will pay the entire amount of Rs.6 lakhs as there is no coverage from existing policy.

 Existing cover is Rs.3 lakhs and the Super top up cover is of Rs.10 lakhs with Rs.4 lakhs deductible.

If there are 2 claims in a year where Claim 1 is of Rs.3 lakhs and Claim 2 is of Rs.8 lakhs.

 In this case, for Claim 1, the existing medical cover will pay Rs.3 lakhs after which the limit of the policy will get exhausted. For Claim 2, the Super Top Up cover will pay an amount of Rs.7 lakhs as the deductible is Rs.4 lakhs. The difference amount of Rs.1 lakh should be borne by the insured.

Examples of popular Super Top Up Plans are as below:

• Apollo Munich Optima Super Top Up
• United India Super Top up plan
• Max Bupa Health Companion Health Insurance Plan

The premium chart for the Top Up Plans listed above are given below. The premiums given are for a family of 4 with the eldest member being 40 years and 2 children within 10 years of age.

From the above illustrations, it can be observed that Super Top Up Plans have a definite advantage over Top Plans. This can be used by individuals who would like to enhance their existing health cover- either a personal health cover or a group health cover provided by the employer at a lesser rate. However before buying any such plans, the insured should always go through the policy terms and conditions with emphasis on coverage for pre-existing diseases, pre & post hospitalization expenses, day care treatments covered etc.

Also, the amount of deductible that is offered by Top up and Super Top up Plans need to be studied carefully, to avoid missing payment on a claim, only because a deductible limit set is higher.

In case the top-up policies are bought by those who rely completely on group health cover provided by employer, it is important to note that they are exposed to higher risk of not having base health cover due to various factors:

1. Low Deductible- The cover provided by the employer might vary from employer to employer. With change in employment, the base cover given under group health scheme might be less than the deductible of the top-up policies and therefore a new top up plan would need to be considered with the appropriate deductible
2. Company Dependent– On job loss, there will be no base health cover and the deductible amount has to be borne by the insured himself in case of hospitalization.
3. Terms of the group health policies – Group health covers have more exclusions and restrictions.

Important Points to Note on Top Up and Super Top Up Plans:

1. No Claim Bonus – The Top up and Super Top Up Plans will pay the claim amounts over and above the existing plans maximum coverage + No claims bonus amount.
2. Both individual and family floater policies can be topped up with these plans.
3. These plans can be bought from insurance companies which are different from the existing policy provider.
4. The Top Up and Super Top Up Plans pay the claims on reimbursement basis i.e. the insured has to submit the proof though hospital and medical bills that the deductible has been paid either by him or through an existing insurance policy.
5. Premiums paid on Top Up Plans and Super top up plans are eligible for tax deduction under Section 80D.

Comparison Table:

Let us compare a Top Up Plan and a Super Top Plans with features given as below:

Top Up Plan:Existing medical cover of Rs.3 lakhs and a Top Up cover of Rs.10 lakhs with a deductible of Rs.3 lakhs

Super Top Up Plan: Existing medical cover of Rs.3 lakhs and a Super Top Up cover of Rs.10 lakhs with a deductible of Rs.3 lakhs

Written by Akhila Muralidhar.

Edited by Dilshad Billimoria

Dilzer Consultants Pvt Ltd.

20 Feb 2016