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Medical reimbursement isn't enough

Yogini Joglekar / Mumbai 23 Nov 12 | 12:41 AM

Many of our tax benefits are completely out of sync with ground realities. The medical reimbursement, an annual amount of Rs 15,000 (Rs 1,250 monthly) – is one of these.

Companies reimburse this amount to employees on a monthly or annual basis irrespective of the bill submitted. However, one can get these reimbursements 'tax-free', if supported with medical bills. Given the paltry amount, few find any utility for it.

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Ashish Arora, founder and managing director, HR Anexi, says that since much of the working population – 60-70 per cent – is below the age of 35, the chances of them using this amount are little. But when the reimbursement has to be used for dependents as well, it falls woefully short.

Obviously, as Sangeeta Lala, senior vice-president & co founder, TeamLease Services, puts it: “Even if a single family member requires continuous medication, this allowance is practically too less. This component hasn't been looked into for more than a decade now and definitely needs a relook."

Since this component was revised in 2001, the cost of health services has increased manifold. According to a research report by Towers Watson, in 2012 India witnessed a 13 per cent increase in its health care costs as against 12 per cent last year. Data from Medimanage.com, a health insurance portal, shows that in just five years (2007-2012), the cost of a simple operation like cataract has increased by 50 per cent – from Rs 16,000 to Rs 24,000. Of course, companies provide group health insurance. But given the spiralling costs, many companies have already taken the co-payment route where the employee has to incur a certain part of the bills, if any senior citizen dependents are hospitalised. Some have even extended the co-payment system to immediate dependents like wife and children.

Despite medical insurance, there are constant expenses that families incur on various small and sometimes bigger diseases such as diabetes or blood pressure in the family where the person may not be hospitalised but there are constant expenses on medicines and other tests.

Also, bills of medicines and tests cannot be claimed against an insurance policy unless you have been hospitalised for 24 hours. So, reimbursement is your only option. But the small amount defeats the entire purpose.

Even the company health insurance may not be enough. The average medical insurance provided by employers is in the range of Rs 2-3 lakh, which is quite low if you have a family of four to six persons. In addition, junior employees are given less cover compared to their seniors, says Krishnamoorthy Rao, managing director and chief executive officer at Future Generali Health insurance. No wonder, all eyes are on the Direct Taxes Code.

According to Homi Mistry, partner, Deloitte Haskins & Sells, the medical allowance limit is very low and needs to be revised considering the increasing medical inflation and other health care costs. “The DTC has recommended that this limit be increased to Rs 50,000 annually. However, if DTC is not implemented next year, the government should definitely look into it in the forthcoming budget," he said.

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