Health Insurance Riders: Are They Necessary?

Riders work well when they are designed to reduce or eliminate additional expenses

A health care insurance rider can help take the sting out of large medical bills, allowing policyholders to pay next to nothing or nothing for their treatments. This is because hospitalisation plans typically don’t cover a full medical bill. The insured has to pay a portion of the bill, such as a deductible (the threshold at which the insurance company will start to reimburse the insured for treatments) and a co-payment (the percentage

of the rest of the bill that the insured pays).

For example, if the bill is $10,000, the deductible amount is $3,000, and the co-insurance percentage is 10 per cent, the insured will have to pay the first $3,000, plus 10 per cent of the remaining $7,000 before insurance kicks in. In other words, he pays $3,700 and the insurance company pays $6,300. Hospital bills for major ailments and critical illnesses can run into the hundreds of thousands, so even with insurance, patients can end up forking out daunting five-figure sums. But having an insurance rider that covers the deductible and co-payment – either partly or totally – he may then pay little or no out-of-pocket expenses.

Having a rider is particularly pertinent amid concerns of mounting health care costs, but some argue it inadvertently drives up health care costs, leading to a vicious circle of overconsumption of treatments and rising premiums. Riders may encourage the so-called “buffet syndrome” in which the insured goes overboard on medical treatments. Since patients do not feel the pinch of co-sharing the bill, they are more likely to opt for unnecessary or non-essential treatments, or over-consume medical services. And health care professionals may be tempted to over-treat or overcharge patients.

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