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The Impact of Job Loss on Health Coverage

The COVID-19 pandemic has wreaked massive havoc in our lives and the lives of those around us. It has changed how we perceive the world and taught us that nothing can be taken for granted. Livelihoods and lifestyles have been impacted worldwide, and none of us has a plan of action on how to handle the situation. Simply because nothing of this scale has occurred in recent memory. 

One of the significant impacts of COVID-19 has been massive job losses across all sectors. According to statistics, one in four people in India lost their jobs during the COVID-19 crisis. The extent of job loss has significantly impacted the daily wage/unskilled laborers. Sector-wise, the hospitality sector has been one of the worst-hit by the COVID-19 pandemic (It has also been quick to recover). Other sectors majorly affected are aviation, retail, realty, financials and automobiles. 

The reasons for each of these are self-explanatory. Purchasing power has shrunk and people do not wish to invest in anything long-term. They also do not want to spend on items that they do not immediately and urgently require. While job losses have resulted in many shifts and changes in the way people are living, a significant difference it has made is the changes in insurance coverage. 

The insurance sector has had a varied impact on COVID-19.

This includes both life and health insurance and general insurance (property and casualty insurance). India is traditionally an underinsured nation. According to a report on the Impact of COVID-19 on the Insurance Industry by PwC, private health insurers cover only 18% of the urban population and just about 14% in the rural areas. These statistics have improved post the Ayushman Bharat scheme. 

The Ayushman Bharat scheme aims to insure the poor and vulnerable sections. It is indeed a tall vision because of a variety of reasons. Firstly, most of the Indian community is too caught up in survival mode for today to think about insuring themselves or their health/property for tomorrow. Future planning and precautionary measures are a luxury that only a precious few in the country today enjoy. Secondly, for those who can afford insurance and do have the resources, there is a lack of awareness/accessibility. People do not know how having insurance can benefit them in the long run. Given this situation in general, people losing their jobs has made them even more susceptible to a lack of health coverage. 

One of the reasons for the reduction in health insurance coverage post losing a job is that most corporate employees have employer-sponsored health insurance. This is a group of medical insurance. As more and more people lose their jobs, they are also losing out on corporate benefits such as corporate health insurance. Employees, especially the youth, do not purchase additional health cover if they are provided health insurance from their workplace.

It seems like a natural step to take since individual health insurance along with pre-existing employer-sponsored health insurance is an additional expense. However, a point that is easily forgotten is that employer health insurance is only valid until you are employed. It ceases to exist if, god forbid, you lose your job. And in these uncertain times with COVID-19 floating around, losing your health insurance coverage at any point in time can burn a huge potential hole in your pocket! 

Do not underestimate the costs of getting treated for COVID-19.

Private hospitals are charging patients a bomb for coronavirus treatments and isolation. The costs can go up to Rs.1 lakh for a private room in Tier 3 cities, Rs.2-3 lakhs in Tier 2 cities and up to Rs.5 lakhs in Tier 1 or metro cities. In super-specialty hospitals with facilities like ICUs, ICCUs and ventilators, the cost can touch Rs.9 Lakh in Tier 2 cities and Rs.12.5 Lakh in metros. Moreover, the number of asymptomatic carriers are also on the rise, which increases your risk of contracting the infection.

Considering all these and the precarious job market, merely relying on employee medical insurance for these exorbitant treatment costs is hardly a prudent idea. Another point to be noted is that employee-sponsored health insurance has a limit on the sum-insured, so it is not a feasible option to bank on. 

So, what are the factors you should consider before you purchase health insurance in the face of a looming job loss crisis? 

What is your budget and what is the kind of cover you are looking for?

If you have recently lost your job or want to insure your health in case you are faced with the prospect of a job loss sometime in the future, you should first chalk out your budget. Your budget will include the premium amount you can afford to pay even if you do not have a job. That is, how much you can shell out from your savings for the health insurance policy. This should be calculated, keeping in mind that you will have to keep enough funds to tide you and your family through the crisis smoothly.

Once you figure out a reasonable budget, the next step is to think about the kind of health coverage you need.

  • Do you have any pre-existing diseases?
  • Would you like critical illness coverage?
  • Do you want coverage for you as an individual or your whole family?

With clarity on these questions, look for health insurance providers that offer health insurance policies fitting your budget and requirements. With adequate planning, you will be able to take care of your priorities and health despite unforeseen eventualities. 

Health Insurance with a Job Loss Cover 

An insurance policy add-on that is gaining increasing popularity in today’s COVID-19 times is the job-loss insurance. In contrast, job loss insurance is not available as a standalone insurance policy. That is, it is always an add-on along with existing policies covering more considerable risks like health insurance, personal accident insurance etc.

Job loss covers pay for the three largest EMIs that are due and usually caps it at 50% of your income. So, if you have an existing health insurance policy, your job loss insurance cover will pay the premium amount for you and your policy will not lapse due to lack of funds. Some policies also offer a monthly income payment for periods of 3, 6 or 12 month’s post-loss of a job due to legitimate reasons(as mentioned in the policy). The catch here is, job loss covers have several restrictions through their terms and conditions, and this makes it difficult for the insured person to make the best out of the policy.

Therefore, it is better to rely on your financial planning and save up enough money as a contingency to sustain your family as well as existing EMIs and other expenses for 4-6 months, in case you do lose your job. 

Impact of Job Loss on Health Coverage

Does unemployment insurance also include health insurance coverage?

No, unemployment insurance or job-loss insurance does not include health insurance coverage in itself. However, it does pay for your existing liabilities, including EMIs for health insurance for a stipulated period post the start of unemployment. While purchasing unemployment insurance, you should read up on the different kinds of policies available in the market. After settling on a policy, when you have to file a claim, the online application process is simple and easy. You have to file the unemployment claim on the insurance provider’s website to avail your unemployment benefits. There are certain kinds of retrenchments that are not eligible for claim benefits. These include losing your job due to poor performance, loss of employment if you are self-employed etc. It is wise to maintain an existing health insurance policy in the event of a job loss because you will be short of funds for treatment in case you fall critically ill.

If I lose my job due to contracting COVID-19, will I be eligible for unemployment benefits?

Unemployment benefits usually do not include losing your job due to sickness. However, under instructions from the IRDAI, health insurance providers are obliged to accept claims of COVID-19 under existing health insurance policies. So, you might not be eligible for unemployment benefits, but if you have a health insurance policy, then your policy will cover the treatment costs you incur due to COVID-19. You can manage the rest of the funds with prudent financial planning for the next few months like spending stingily and cutting down on lavish expenses.

If I have employer-sponsored health insurance, how long will it be valid if I lose my job?

In usual cases, employer-sponsored health insurance ceases to be valid once employment at the organization is terminated. But, if you provide notice to the insurance provider about losing your job, then you can continue with the same health insurance policy. You will, of course, have to pay all the future premiums yourself. The advantage of this is, you don’t have to go through the hassle of looking for a suitable health insurance policy on your own when you are already stressed with a job loss. It allows a smooth transition between ownership of the health insurance policy.

All in all, the levels of job losses have been on the rise, and there isn’t much we can do about it. What we can do is, insure ourselves in the best way possible against potential risks of job loss, financial crunch and related health scares by purchasing and maintaining insurance policies and planning our finances wisely enough so that they last when the good times don’t.

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