Middle-class risks breaking banks for rising health costs

A personal finance advice platform, has released its comprehensive 2015 health research report. The study conducted by BigDecisions reveals 95 percent of middle-class Indians do not have enough health insurance to cover some of the most common procedures and ailments in the country. Surprisingly, consumers above 45 who are at higher risk of health problems and closer to retirement, are least prepared for emergencies as they are under-insured by an average of 69 percent.

The study is based on data obtained from 10,000 consumers across eight major cities, aged 25 to 45 and in the income bracket ranging from Rs 6 to 36 lakh annually. It's the first-of-its kind report to combine macro and public data with real statistics, and aims to jump start a long overdue conversation between consumers, insurance companies, employers, healthcare providers and regulators."An increased appreciation of rapidly rising healthcare treatment costs does not seem to have translated into Indian consumers being better prepared. This is either because we, as consumers believe that we're a genetically healthy bunch or are unaware of just how expensive medical procedures have become," says Manish Shah, co-founder and CEO of BigDecisions.

Key takeaways of the report:

Healthcare in India is witnessing double-digit inflation

1. It's getting more expensive to treat some of the most commonly occurring diseases in India.

2. Amid an inflationary environment in India for at least a decade, prices four years ago were not exactly low. The fact that they have again risen, by double digits in some cities, is noteworthy.

Meanwhile, treatment costs keep rising

1. It's clear that there is room for Indian prices to increase further. We believe that current inflationary trends are likely to continue for the foreseeable future.

2. While it is no surprise that typical treatment costs in the US are sometimes more than 10 times what they are in India, that they are more than twice as expensive in countries closer to home such as Malaysia and Thailand, means Indians could soon be paying more.

While the percentage of your claims paid or reimbursed is actually dropping as treatment costs rise

1. While treatment costs have been going up steadily, people's health insurance covers seem more and more insufficient at current levels. A significant reason for this is that many Indians who have full-time jobs appear to believe that the insurance coverage provided by their employer is enough and doesn't need to be supplemented.

2. Consumers are paying large sums out of pocket as a result of being under-insured at times when they need insurance protection the most – i.e. when facing large treatment bills.

Even though insurance premiums are relatively stagnant

1. Over the last four years, premiums of most insurers have increased only once - in 2014 - over the previous year, reflecting a CAGR of 2.79 percent (for sum insured of Rs 2 lakh and Rs 3 lakh) and 3.29 percent (for sum insured Rs 5 lakh and Rs 10 lakh).

2. Premiums have not increased at the same rate across the board – some are, in fact, relatively stable due to increased competition in the insurance sector and supply and demand factors.

Some 95 percent of Indians are under-insured, with those above 45 in the highest risk group

1. Data show some 95 percent of our users are not adequately insured, with 62 percent of 10,000 BigDecisions users having less than 50 percent of required health cover.

2. Consumers above 45 years of age (with higher needs, typically higher incomes and fewer years to retirement) are a high-risk group – they are the least prepared for health emergencies as they are under-insured by an average of 69 percent.

"We analysed 7 lakh insurance claims over four years to understand incurred treatments costs, inflationary trends, claims and reimbursements for various groups of ailments within large Indian cities across different hospital types," says Gaurav Roy, co-founder and COO of BigDecisions.

"Our methodology, coupled with the volume of data, helps eliminate any aberrations because of specific healthcare providers and ailment incidents or costs within certain age groups," says Roy.

"We further analysed data entered by 10,000 decision makers on our website to understand their current health insurance cover versus their requirements, and found coverage to be abysmal. These findings are derived from an involved decision-making process where many of these users eventually go on to make health insurance purchases with our partners for amounts to make good their shortfall," he adds.

The goal of this report is to encourage Indians to make smart and informed decisions on obtaining relevant and adequate health insurance before it's too late, says Manish Shah.

"With rising incomes and standards of living, most middle-income and affluent Indians expect ever improving healthcare facilities. We believe having such expectations, while being this poorly prepared financially to fund our future healthcare needs, is nothing short of catastrophic," he adds.