Government must focus on accessibility and affordability of insurance plans

2021 has been a year of trials and tribulations, of growth and learning, of hopelessness and hope, and of stagnation and innovation. And the lessons learned cannot and will not be relegated to the year that remains. The current COVID-19 pandemic has underscored the importance of institutionalizing health services. Stable, equitable, prosperous and peaceful societies and economies can only be catalyzed by ensuring that every individual is taken care of. It is the Siamese twin to education, both must be universal. And universal it must to be in a country beset by divisions – rural and urban, rich and poor, employed and unemployed. And all this is amplified with the digital divide, cruelly created and accentuated during the pandemic.

This crisis we are currently facing presents an unprecedented opportunity to prioritize and bring about a structural transformation aimed at benefiting all layers of the population. As the 2022 budget quickly approaches, there is an urgent need for the government to consider changes in insurance, especially in the healthcare ecosystem.

The pandemic made us realize that health insurance is an essential commodity. Having people buying insurance for less than the GST will save the government thousands of crore that would otherwise have been spent on providing subsidized or free health care. The government will have positive revenues while ensuring access to quality health care. Seniors should be exempt from GST on Medicare.

Increase in the health insurance limit

Interestingly, the premiums paid on their health insurance policy are often viewed as a cost by the customer. Therefore, customers often shy away from an adequate policy in favor of a “cheaper” policy. This gap must be closed. A planned and well-calibrated increase in the tax deduction limit, under Section 80D of the Income Tax Act, will significantly boost the penetration of health insurance in India. Currently, the government allows an individual to claim a deduction of up to at Rs. 25,000 for oneself and one’s family. This is expected to be increased to at least Rs. 50,000 in 2022, even amounting to only 10 percent annual health care inflation.

Small Note Insurance Products

Smaller insurance products like microinsurance, bagged products, etc., should be exempt from GST. The economically weaker section is very price sensitive, and it is imperative that we do everything possible to reduce the cost burden.

The health insurance industry has evolved and is growing rapidly, ironically thanks to the increase in lifestyle-related illnesses and the inability of the modern workforce to take care of their health. Add to this greater wealth and Disposable and nuclear income set up with almost no extended family support, especially in the cities, we had the perfect seams to lead the storm for health insurance. However, Covid has exposed limits on several fronts – inadequate physical infrastructure, the lack of trained doctors and healthcare professionals, and the inability of the still relatively affluent segments of the population to survive the economic implications of a health crisis.

While the first two; Increasing physical infrastructure and skilled labor will take time, at least 5-7 years before we can see results on the ground, the government can immediately begin to mitigate the economic impact of a health crisis for more than a billion people. With the pandemic far from over and with the 2022 budget fast approaching, policymakers would do well to keep this fact in mind and promote the penetration of health insurance.

The author is Managing Director and CEO, Future Generali India Insurance

Disclaimer: These are the personal opinions of the author.

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