Budget 2017: Incentivise health insurance purchase with better tax benefits

Ashish MehrotraNearly 70 percent of all expenses made for medical treatment in India are out of pocket, meaning thereby that people pay mostly from their savings or take loans, for any unanticipated medical emergencies! This financial burden impacts people across categories, but has a significantly higher negative bearing on people in the lower income category. Millions are pushed to the brink of poverty and destitution just because of huge medical expenses. This isn’t a healthy situation. Therefore, it is imperative for people to understand that health insurance can be a life saver especially in the light of burgeoning medial cost and increased incidence of lifestyle diseases cutting across age, gender and even class.To make health insurance ubiquitous, there needs to be a concerted effort from all stakeholders -government, regulators, industry players and healthcare providers. The government and regulator have already taken a large number of measures to create a conducive environment for the growth and penetration of health insurance. However, some more steps in the right direction can lead to a more robust health insurance ecosystem which works not only as a life saver but also provides a financial protective umbrella around family and dependents.To begin with, the new budget must bring in healthcare service providers under a regulatory framework and treatment cost must be standardized. People’s preference for private healthcare providers has also given rise to undesirable practices which has pushed up the individual and total healthcare cost. Over diagnosis, avoidable admittance, premature surgery and over billing have become common together with lack of transparency and fairness in dealings. The problem has been aggravated as there is no regulatory body to keep an eye on the sector and to ensure that the sector plays by the given set of rules and where treatment costs are standardized. Along with putting a check on malpractices which raises healthcare costs and impacts healthcare security of the nation, we need to incentivize both customers and insurance providers in this budget.Specific measures includes: Longer duration for carry-forward losses:  Currently, business loss and depreciation can be carried forward for 8 years only whereas specialized health insurance companies require minimum 10 years to break-even and another 3-4 years to clock profits. Due to this mismatch, insurance providers tend to lose credit of initial years losses. Hence, for specialized health insurance companies, period of carry forward of business loss and depreciation should be extended to at least 12 years.Tax exemption for multi-year premium policies: As of now, tax exemption is available only in the year of payment. To encourage people to insure themselves for longer period, tax exemption should be available each year based on number of years covered. Alternatively, tax exemption can be multiplied by number of years of coverage. For example, in case of 3 year premium paid, limit should be Rs. 75,000 for self, spouse and kid (i.e. 25,000 per years x3 yrs) and Rs. 90,000 for senior citizen parents (i.e. 30,000 per years x3 years).Broader service portfolio: Health insurance companies being specialized players should be allowed to offer Wellness service features beyond doctor consultation, diagnostics and pharmacies, as allowed by Health Regulation 2016.Long term saving linked health insurance product:  Government should permit offering of long term saving linked health insurance product, which is the need of the hour. The pre-defined component of premium would go under investment category (like unit linked life insurance product). It would grow over time and can be utilized for purposes like funding post-retirement premium post 60 years and other expenses which are generally not covered by insurance contracts.Incentivizing healthcare security through tax relief: Tax burden is a clear area of pain which has been weighing hard on larger section of the society. Unfortunately, health insurance is still looked upon as a secondary option to other investments by most consumers. While lack of awareness is the primary cause for this, lower tax exemption also plays a crucial role as health insurance is still seen as a stress purchase in India. A welcome move would be if the government can provide relief by removing the 15% service tax on health insurance premium and further increase the deduction limit under section 80D for individuals and families from Rs 25, 000 to Rs.50, 000. Tax benefits will help boost penetration of health insurance as well as help nurture a culture of preventive healthcare in India.These are simple but very desirable measures in the interest of common people which the coming budget must make provisions for. If undertaken, this will galvanize and transform the healthcare architecture of our country.  We look forward to a growth-oriented budget, with a focus on increase in financial inclusion and healthcare security, along with further tax rebates on health insurance will provide a stimulus to the industry’s growth.The author is MD & CEO of Max Bupa Health Insurance