Summary of this article
Health insurance alone doesn’t cover all medical costs; a medical corpus fills gaps.
Even cashless claims involve out-of-pocket expenses like consumables and room limits.
Experts suggest Rs 2–5 lakh per adult as a liquid health corpus buffer.
Keep the corpus liquid, low-risk, and reviewed regularly to match rising healthcare costs.
Health insurance is a must. However, there could still be out-of-pocket expenses when cashless insurance does not come through or for expenses that are not covered under health insurance. This is why one needs a medical corpus too. We take a look.
The Safety Net Beyond Cashless Care
Adequate health insurance is important, but it is also good practice to create a separate health corpus for your family. “Most typically, for urban Indian households, the Health Corpus would be needed in the range of 6 to 12 months’ worth of essential household expenses and would generally range between Rs 200,000 and Rs 500,000 (Rs 2 to 5 Lakh) for each adult family member,” says Arun Ramamurthy, co-founder, Staywell.Health.
Your health corpus will cover the differences in deductible amounts between insurance companies and hospitals, room rent charges for all hospitals, consumables that are not covered by your insurance, and situations when your cashless approvals were delayed or could not be approved. Your health corpus should also cover other amounts that may be related to your family’s age, location, medical history, and type of insurance policy (including any limits or co-payments).
Why Families Still Pay, Even When Insured
In India, many people pay out-of-pocket expenses for components of healthcare services that are not paid for through reimbursement from insurance companies. These components can include consumables, registration fees, administrative fees, and limits on room rent that may cause pro rata deduction after hospitalization, exclusions based on waiting periods, or any post-hospitalization expense.
Cashless claim denials may occur due to delays in getting necessary documentation from the insured for their claims or because the hospital is not participating in the network of an insurance company.
The health buffer enables families to cover any gaps caused by the above-mentioned components; however, families should avoid using long-term investment portfolios like retirement and education funds to finance a health buffer. “Families may also reduce the financial burden of a medical crisis by performing regular policy reviews, understanding exclusions of coverage for medical expenses, and utilizing hospitals that are within the preferred network of their insurance company,” says Ramamurthy.
Keep It Liquid, Keep It Funded, Keep It Ready
Liquidity and safeguarding the capital base should be the primary objectives of creating a healthcare corpus rather than maximizing returns. Appropriate instruments would include high-interest savings accounts, 'sweep-in' fixed deposits, or liquid/ultra-short-term debt mutual funds.
“The main aim is to have a healthcare corpus that can be accessed easily without bearing any risk from market fluctuations. The healthcare corpus should be reviewed at least every year and/or after major life events (marriage, childbirth, change of residency, etc.) or as a result of changes in healthcare policies,” says Ramamurthy.
With the recent increases in the cost of healthcare, it is even more important that healthcare corpus undergo periodic additional funding to ensure they keep pace with the increased cost of medical care and adapt to the changing landscape of healthcare coverage.
