Health Care Inflation in India – Have you planned for next 30 yrs?

When you decide upon buying a health insurance policy, one of the pertinent questions that crops in your mind is the coverage amount – how much health insurance to buy? One of our readers Saket made an interesting comment on health care inflation, and how a decent cover today might look so small in distant future and raised the issue of “renewal” of policies by companies.

The Health Insuranec companies, eargerly selling policies to younger age group (mostly), are actually giving them a false sense of security about their twilight years. No doubt, the current policy will be good for next 5 years, but not later than that because of the health care inflation. So this sense of security has a shelf life of max 5 years. After that my fate will lie in the hands of insurer-whether it finds my policy upgrade worthy or not. Considering a most conservative healthcare inflation rate of 15% , a humble 3L coverage requirement as on date for a 38 yr old would translate into a whopping Rs 130 Lakhs ‘Final Amount’ at the age of 65 , the calculation is fairly simple - 3,00,000*(1+.15)**27 =130 lacs

Coming to the question, we can now clearly see that decision of taking health insurance in current moment depends on two points. which are
a) Health insurance is a super looooonnng term investment, which you would need most in your old age, beyond say 60 years of age.
b) It’s common knowledge that Hospital costs are increasingly rising, gradually becoming unaffordable, to the common man.
How much is enough to financially support your family’s healthcare needs, ensuring you have a peaceful retirement life. Let us take this up, step-by-step.

Costs of common surgeries & Hospital Costs In India

A recent analysis done by Medimanage Research team show that the cost of some major surgeries in hospitals across India. Going by these numbers, assuming only one surgery is required during a year, per member; a sum insured of Rs. 3-4 Lakhs should be good enough for the year 2012. Major supply deficit with respect to healthcare infrastructure – hospital beds, doctors and nurses, increase in cost of medical equipment’s, land has resulted in an increasing trend of healthcare inflation. Here are the 2012 costs for surgeries, compared with costs in 2007.

Sr. No	Treatment	2012 Cost	2007 Cost	Increase
1	Cataract	24,000	16,000	50%
2	Angiography	22,000	14,000	57%
3	Coronary Artery By pass Graft (CAGB)	2,35,000	1,65,000	42%
4	Appendectomy	42,000	28,000	50%
5	Heamorrhoidectomy (Piles)	35,000	21,000	60%
6	Cholecystectomy (Gall Bladder removal)	52,000	32,000	63%
7	TURP (Prostate Surgery)	62,000	37,000	68%
8	Angioplasty (PTCA) with 2 stents	2,45,000	1,55,000	58%

 Source : Medimanage.com Research Team

The costs of common surgeries have increased by 50-60% in 5 years! This means healthcare costs have increased by 9-10% year-on-year, since the last 5 years. We spoke to Sudhir Sarnobat, CEO at Medimanage.com. Here’s what he had to say

“The average annual healthcare inflation would be at 5%, if you look at 30 years duration. The hospitals do not increase their tariffs every year. Generally, they increase it by around 15-20% every 2-3 years. This would effectively come to 5% CAGR.” “India is currently having Supply Deficit when it comes to Hospital Beds. But we are seeing a good amount of capacity increase in beds in last 7-10 years which should continue to grow. On the other hand, our population is stabilizing. In 15 years, the equations should change & ease pressure on prices.
India is a developing economy and from credible reports, will continue to be on growth path for next 10 years. After that once the wealth distribution is even, we would see stabilization of inflation (world over that’s been the phenomenon, look at US Medical Inflation for last 5-7 years, it is 4%)” Sudhir added.

Some reports on Hospital infrastructure talk of a major crisis in the making in the Healthcare Industry, due to overflowing demand, coupled with very slow growth in the poor hospital bed to patient and doctor to patient ratio in India, primarily due to deprived participation from the Govt. A Tower Watson Report pegs healthcare inflation in India at 13% for the year 2012.
In my opinion, while costs are bound to rise due to the slow growth in the ratios, on a 30 year horizon they have to plateau somewhere. Looking at this, I suggest, let’s take the inflation year-on-year for the next 10 years at 12%, and then average 5% for the remaining 20 years.

Future Healthcare Costs

Factoring healthcare inflation on Rs. 4 Lakhs of costs expected today, in 10 years, @ 12% inflation, the sum insured requirement would increase to Rs. 12 Lakhs, per member. In 20 years @ 5% inflation, to Rs. 20 Lakhs, and in 30 years to 33 Lakhs. For calculation of floater coverage, take 50% ad hoc for every adult member and 10% for every child, and here’s the kind of cover you will need, for some of the family combinations.

Type of Plan	Sum Insured	Tenure	Costs
Health Insurance	Rs 5 lacs	30 yrs	Premium Rs 6,000
Top up Plan	5 Deductible/15 SI	30 yrs	Premium Rs 5,000
Critical Illness Plan	Rs. 5 Lakhs/20 Illness	30 yrs	Premium Rs 3,000
Healthcare Contingency	Rs 25 lacs	30 yrs	Investment Rs. 15000

Source : Medimanage.com Research Team

So a family of 2 – Self and Spouse will need a cover of Rs. 50 Lakhs year-on-year every year, from the age of 60. This is a huge sum, and looks unaffordable to most of us. So, what does one do? A middle class guy would either have to “afford”, “plan” or “pray” be able to afford such astronomical expenses. Let’s see how we can plan to pay such healthcare expenses.

Solution to the problem

Look at the Present Value of Rs. 50 Lakhs at 10% inflation on 30 years, it calculates to just Rs. 3 Lakhs. So though the problem looks big, it definitely can be resolved by the power of financial planning. Here are the steps we recommend you to create a fool proof plan for your healthcare expenses.
a) Commit yourself to healthy living: Yes, it’s very awkward for a Health Insurance services company, asking you to commit to health, but then we at Medimanage.com, believe that Healthy living is the best form of Health Insurance. Healthy living would of course mean Regular Exercise, Healthy nutrition and No ill-habits. Such lifestyle will simply help avoid huge hospitals bills. If you would like to give this a go, read our 1000+ pages preventive health magazine “Jiyo Healthy” Also, read an excellent article on Health SIP by Nandish.
(b) Given point (a) is a way of life for you, you now need to create a Long term and Short term financial plan, for the unavoidable healthcare expenses, like hereditary ailments (Diabetes, Thyroid), age related (like knee replacement), or infectious diseases (like Malaria), or even diseases like Cancer (which still have many unknown causes. Perfectly healthy people have got cancer, in spite of no ill habits).
Note, if you cannot commit to point (a), your needs for long term and short term funds increases multi-fold, to cover healthcare expenses.

How do you create such fund?

Here’s what I recommend should be your step-by-step health insurance investment plan.

• Buy Health Insurance, preferably one which covers you for lifetime, and provides a no claim bonus, for the sum insured of Rs. 5 Lakhs individual or Rs. 7-8 Lakhs Floater. If you are buying plans, with Restore options, then the sum insured could be lower at around Rs. 5 Lakhs.

• Take a good top-up plan, which takes your cover to a floater of Rs. 10-15 Lakhs for the entire family.

• Invest in a Rs. 5-10 Lakhs critical Illness plan, which covers maximum no. of ailments, especially for the earning members of the family. This will help you get lump sum payment for critical ailments, and compensate for any loss of earnings. You can also explore the option of a more comprehensive benefit plan with your health insurance advisor, with products like Tata AIG Wellsurance, Aegon Religare iHealth, which provide lump sum benefits for large no. of surgeries, in addition to the Critical Illness benefit.

• Plan a Healthcare Contingency fund, for Rs. 15 Lakhs for individual, and Rs. 25 Lakhs for a family of 4, maturing at age 60. A contribution of Rs. 15000 per annum at 10% return will accumulate Rs. 25 Lakhs in 30 years.

So what’s the total investment for your healthcare financial plan?

Here is the approximate outgo you would incur.

Type of Plan	Sum Insured	Tenure	Costs
Health Insurance	Rs 5 lacs	30 yrs	Premium Rs 6,000
Top up Plan	5 Deductible/15 SI	30 yrs	Premium Rs 5,000
Critical Illness Plan	Rs. 5 Lakhs/20 Illness	30 yrs	Premium Rs 3,000
Healthcare Contingency	Rs 25 lacs	30 yrs	Investment Rs. 15000

 Source : Medimanage.com Research Team

The plan above is indicative and would have to be customized depending on some of the following factors

• No. of members you want to cover
• Their age
• Their health condition
• Family history of critical ailments like
• The city where claims are expected
• The type of hospitals, rooms you prefer.
• Your lifestyle.

What do you think about health care inflation and your thoughts on renewal decision by the companies. Do you think creating your own health care corpus is a better idea rather than depending on health insurance policies?

Source : Manish Chauhan – www.jagoinvestor.com

“Someday” Is code for “Never”

I got an interesting question in my mail box – “Can you please coach me on How can I overcome my casual approach towards my finances and live a good financial life?” 

The thing is that deep down we already know how to live a good financial life; the issue is that we are somewhere unwilling to take the required actions. Personal finance is not a rocket science; it simply has some hand full of things that you need to do. It is not about “How to” live a good financial life; it is a matter of choosing wisely and to make commitments to the actions that are required.

Someday I am going to sit with my advisor and sort out my finances, 

Someday I will go for financial planning, 

Someday I will do something with the idle cash that I have

Someday I will alter my investment style

Someday I will buy a term plan

Someday I will increase my investments

Someday I am going to buy my own house

Someday I am going to complete all my pending actions

Someday I will read all the nice articles that are starred in my inbox

Someday I am going to read entire article archive of Manish

And Someday I am going to organize my finances?

Give me two days and I will show you what I can do with my finances. This Someday syndrome always keeps you away from wealth creation in life. I re-collect a line from a famous movie Day and Knight 

“Someday. That’s a dangerous word. It’s really just a code for never” .

The code to your financial success is in your hands. Today you can choose to bring a dramatic change in the way you live your financial life. What you choose today determines the quality of your financial future. The “Someday investor” is all about hoping, wishing, desiring and wanting things to happen in his/her financial life. The truth is this really does not serve you in your financial life.

Once an old Cherokee is teaching his grandson about life -

A fight is going on inside me, he said to the boy. It is a terrible fight and it is between two wolves. One is evil – he is anger, envy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego. The other is good – he is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion, and faith.

This same fight is going on inside you – and inside every other person, too. The grandson thought about it for a minute and then asked his grandfather, which wolf will win? The old Cherokee simply replied, the one you feed.

What are you feeding your financial life? – “specific actions or someday actions”. Specific is being committed, someday is being casual. When you make a choice to be in action you gain leverage over other investors. The more specific you are in defining your actions the better your financial life gets. Keep feeding your commitments. Keep choosing. Keep taking actions. This blog is your sacred space, it is for you to add different dimensions to your financial life, if some conversations trigger new thoughts or actions than allow that action to happen and don’t forget to share your actions with us. Leave your questions in comments section and we will try to incorporate them in future articles.

Lastly 2011 is about to close its doors, why don’t we take this opportunity to lock our “someday” behind the doors of 2011 and step forward with commitment in our hearts. Wish you all a very prosperous 2012.

This post was written by Nandish and this post was taken from our finacial coaching blog where we keep on writing these kind of coaching conversations from time to time

Source : www.jagoinvestor.com

WIFE GETS 50% SHARE IN HUSBAND'S PROPERTY AFTER DIVORSE - INDIA LAW

Do you love your wife? You better do !

There were few changes made few weeks back in the marriage laws in India, which everybody should be aware about. A bill called “Marriage Law’s (Amendment) Bill 2010″ was passed in Rajya Sabha which has made some major changes in the women rights on how the properties would be divided after divorce.

The biggest change says – “As per new Divorce law, Wife share in property would be 50% in all her husband’s residential properties, no matter what and in other properties, her share will be decided as per the court decision.”

Wife share in property owned by husband would be 50%

Earlier, before this change – a women was entitled for a share in husband’s properties, but there was no quantum defined as per law, it would be any percentage depending on the case, but now with this amendment done, a women will enjoy equal sharing without any condition in all the residential properties owned by husband. But in this case, women will have to specifically apply for her share, she should be aware about this law about “50% share” .

A major change in this amendment is that this rule is applicable to all the properties of the husband acquired before and after the marriage, whereas as the earlier law made sure that the wife gets share only in those properties which are acquired by husband only after marriage. Now men stand to loose on this front, in-case things so sour with wife.

Husband & Wife joint holder’s in a residential property

You should be clear by now, what will happen in the case where a property is registered in the joint names of husband and wife. A lot of couple register a house in joint names, a lot of times both pay’s from their respective salaries, and in some cases only one party pays (generally husband). Imagine divorce happens – Who will get how much ? Women will keep her 50% part and she will also get half of her husband share in the house, so 75% wife and 25% husband.

Rights of women after divorce on other properties in India?

Apart from the mandatory 50% share in husband’s residential properties, the wife will also be entitled to get a share in other kind of properties, but the quantum is not set, as per the Bill, it will depend on “living standard of the wife”

Waiver of six months cooling period possible

As per the old Indian law which governed the division of assets for women after divorce, it was mandatory for husband and wife to spend at-least 6 months together before applying for divorce, but with this new amendment bill, there are provisions of waiving off the 6 months cool off period or lessen it, but only if both husband and wife wants it. Which means if one of the spouse wants to get divorce on an “urgent basis” , but other does not, it will not be possible. This is one of the major change in the bill and will help those couples who do not want to serve that “6 months” cool off period of living together.

Is this a anti-male law ?

A lot of groups have termed this change as anti-marriage and ant-male law and critically oppose it, they have termed it as a bill totally against males and illogical. The major issues with the amendment are as follows

·         The bill talks about only the division of Husband Properties, but not wife’s properties. So in-case women is at fault, still she will get 50% share in husband property, but her share of property will not be divided.

·         A major disappointment for men in this bill is that, even the “person at fault” can apply for getting the share of property, and the other party will have to respond to it. Generally as per old law’s when mutual consent was not there, the victim applies for the property share and the person who is the “bad person” has to respond to it. Now with his law change, wife can seek a divorce and ask for share in property.

·         If wife and husband are living apart from many years, a wife can oppose the divorce on the grounds of financial hardship, but men cannot! . This is called Irretrievable breakdown of marriage

·         There are concern’s raised like this law will encourage more divorce’s are women can get hold of property easily for sure.

Now there are some serious concerns due to these changes. If a husband has one residential properties, old parents who are financial dependent on him and there is divorce between husband and wife, the wife could take 50% share, in which case the men will be left with 50% property, this seems very unjustified. What is the women already owned 2 more properties on her name? She has nothing to worry! .

One serious drawback of this law is that some men, who are undergoing a bad phase of marriage, may convert their residential properties into immovable assets, or just transfer it on other names to save themselves from parting away with 50% share in worst case.

Conclusion

While there are cases where women are deprived of their share in wealth at the time of divorce in India and there was requirement of strong laws which focuses on rights of women in case of divorce in India, this amendment seems to have gone beyond what it wanted and has loopholes which can be exploited by women. With due respect to each gender, it would be great if there would have been some balanced law, and some thought should have gone for worst cases.

To summarize things, here are the take away’s from the changes made in marriage law’s.

·         In case of divorce, Woman will have 50% share in the residential property of a man

·          The wife will have to take the initiative of seeking her share in such cases.

·          Women and children will also have rights in the other assets of man, which will be decided by court

·          It does not matter if the property was acquired by before or after the marriage

What do you think about this amendment ? Do you also feel its too anti-male but only designed keeping women in mind ? Do you feel its correct to keep 50% share for wife in husband’s property in case of divorce as per law in India ? Note that the bill still needs to be passed in Lok Sabha

Source : Manish Chauhan - Jagoinvestor

SHOULD YOU BOOK SOME PROFIT FROM MARKET NOW

Prashant Mahesh suggests profit booking in some outperforming sectors and stocks as the market has climbed 13% in under three months

The stock market never stops surprising investors. Just when many were busy writing obituary of the equity cult, market barometer BSE Sensex moved up 2,000 points in just three months — from 15,749 in early June to 17,783, a gain of 12.91%. 

Needless to say, most investors are surprised by the sharp upward move, as both news flows and economic data have not shown any sign of improvement during this period. If anything, it got worse. Brent crude has risen to $115 a barrel from $90. The government has not been able to raise prices of administered petroleum products like diesel, LPG and kerosene and is losing . 14 on every litre of diesel sold. The fiscal situation has deteriorated, with S&P threatening to downgrade India’s rating. Policy paralysis continues with no announcement on reforms or FDI in retail and aviation. Rainfall too has been poor so far this year, with a drought-like situation in some states. 

Even on the global front, the debate continues over the exit of Greece from the Eurozone and the consequent financial implications it could have. Yet, despite these negatives, the market surged ahead. 

“Investors have expected the ECB to start buying troubled bonds and there is hope of a QE3 (quantitative easing) soon. This, along with liquidity, is driving the markets up,” says Sadanand Shetty, VP and fund manager at Taurus Mutual Fund. The most obvious question an investor would be asking: is it time to take profits? 

“Certain sectors like FMCG and pharma have seen a sharp rise in stock prices over the last one year. You can book profits selectively in these sectors and enter at lower levels,” says Madhumita Ghosh, head of research at Unicon Financial Intermediaries. 

BOOK PROFIT SELECTIVELY IN PHARMA & FMCG 

Since the rally is liquidity driven with foreign institutional investors (FIIs) pumping in more than . 13,000 crore since July 2012, experts feel the broader market will be range bound. “For the next six months the markets are likely to be range bound and the Nifty will trade between 4,750 and 5,500,” says Sandeep Raichura, business head at Castanea Wealth Management. Since the Nifty is at 5,400, it may make sense to book profits in stocks which have run up. Certain stocks in the FMCG and pharma spaces have seen a sharp runup in their prices. For example, Hindustan Unilever has moved up from . 320 to . 518, a rise of 62% over the last one year, and now quotes at a PE of 34. Similarly, Godrej Consumer Products has moved up from . 416 to . 652, a rise of 57%, and is quoting at a PE of 46. 

In the pharma space, Wockhardt has moved up from . 389 to . 1,266 a jump of 225%, while Strides Arcolab has moved up from . 288 to . 854, a jump of 195%. “It makes sense to take partial profits in cases where the stock prices have run up fast,” advises Madhumita Ghosh. 

DEPLOY CASH INTO STOCK BASKETS 

Now there are a couple of ways in which investors can utilise the cash generated from booking profits. Conservative investors could hold on to their cash and wait for declines and invest again. “Investors, who wish to remain fully invested, could invest in a basket of stocks to generate some extra returns. You could invest up to 10-15% of your equity portfolio in such baskets,” says Rajesh Cheruvu, chief investment officer, RBS Private Banking India. 

For example, in the current environment he recommends a policy reforms basket of five stocks — HPCL, IDFC, IRB Infra, Spicejet and Pantaloon Retail. Any change in policy be it in FDI in aviation or retail, hike in diesel prices or increase in infrastructure activities will benefit this basket and generate extra return for the portfolio. 

Similarly, longer-term investors can play the delisting theme basket, which will pan out over the next 12 months. “In the delisting theme, buy into those stocks which have a higher return on equity than their parents,” says Cheruvu. 

Some stocks that you can buy here are Oracle Financial Services, BOC India and Thomas Cook. Similarly, to take advantage of the currency depreciation, investors are advised to buy the Hang Seng ETF listed on the NSE. “The Hang Seng ETF is available at a steep discount to its historical average and at valuations cheaper thantheIndian Nifty, making it a good investment,” says Cheruvu.

Source : The Economic Times – 27/8/2012