Health may be wealth but the fear of ill health has proved to be strong medicine for the medical insurance industry. The total health insurance premium collected in India grew by a whopping 25 percent in just a year, possibly due to the huge rush by people to protect themselves and their families from catastrophic out-of-pocket medical expenses arising from the COVID-19 pandemic and increase in the premium cost.
A paper titled Health Insurance in 2042: Challenges and Opportunities prepared by the National Insurance Academy under the Union finance ministry has revealed that while Rs 58,572 crore was collected in 2020-21 as health insurance premium by insurance companies, this figured jumped to Rs 73,330 crore in the next financial year.
The first quarter of fiscal 2021 was marked by the devastating second wave of the COVID-19 pandemic which saw the maximum number of hospitalisations and deaths across the country.
The paper released at a PHD Chamber of Commerce and Industry (PHDCCI) event on Tuesday, May 10, said the health insurance market in India had been growing steadily at around a compound annual growth rate of 24 percent but grew at nearly 34 percent in the pandemic period.
The missing middle
The report underlined, like a Niti Aayog report of October last year, that while 70 percent of the population is either covered by or eligible for a health insurance plan (either government or private insurance coverage), nearly 30 percent of the population is still out of this bracket.
The report also said that this group, largely working in the unorganised sector, and their families may be in no position to buy expensive private health insurance plans.
Incidentally, the National Health Authority—which operates the government’s flagship Ayushman Bharat- Pradhan Mantri Jan Aarogya Yojana (PMJAY) that offers Rs 5 lakh hospitalisation coverage to nearly 40 percent of the poorest—has proposed to extend its scheme for this “missing middle”.
These beneficiaries, at a very low premium paid by them, may be able to avail the benefit offered by the PMJAY.
Largest cost on healthcare borne by individuals
The paper also highlighted that while the government’s expenditure on public healthcare has increased from Rs 2.73 lakh crore in 2019-20 (pre-COVID-19) to Rs 4.72 lakh crore in 2021-22, an increase of nearly 73 percent, its spending including the states constitutes just around 25 percent of the total healthcare cost in the country.
Insurance, on the other hand, contributes only around 12 percent, but the remaining 63 percent of the total cost is incurred by the individuals by way of out-of-pocket expenses.
Need to raise the OPD benefits under insurance
The paper said the outpatient department (OPD) benefits available under health insurance are capped at Rs 5,000, which needed to be enhanced to a reasonable amount factoring in the utilisation cost of the household’s average OPD expense rate, medical inflation and increasing healthcare cost.
“Such products would be in high demand by both middle- as well as lower-income households. Hence, the premium would be more or less equal to the total claims cost or sum insured for OPD care. It may not be affordable for low-income customer segments which effectively makes it ideal for a prepaid subscription model with the government subsidy,” it said.
The paper also said that the advantage of providing OPD benefits alongside in-patient care would increase the efficiency and value of the healthcare provided through bundling of fragmented and simplified services (physician fee, cost of diagnostics, medicine and drug cost) and help in improving the health of the entire society at an affordable cost and with timely care to a large number of low- and middle-income customers.
Many changes required
PHDCCI president Pradeep Multani, while noting the health insurance sector is expected to grow at 10.1 percent between 2021 and 2027, also stressed the need to develop customised products as one product may not be suitable to take care of the needs of all the people concerned.
Dr Sameer Gupta, co-chair, hospital & diagnostics committee, PHDCCI, stressed how important it is for the insurance providers to be open to change.“Lots of primary healthcare services are going to be virtual down the line as COVID has accelerated this even faster,” he said. “It is therefore very important for the insurance providers to understand and adapt to the change.”