Indian economy measured in terms of Gross Domestic Product (GDP) registered a growth rate of 6.5 per cent in 2011-12, which is the lowest annual growth rate of last decade. Further, this growth rate is expected to be 5.6 percent by the year end where as cost inflation index is moving up in double digit.
Constitutionally every citizen is entitled to good primary health care and tertiary health care like food clothing and shelter. In the 12th Plan five year plan government has planned to spend about two per cent of GDP on health sector which is 100 per cent increase over previous five year plan. Budget 2012-13 allocated Rs. 307120 crs to the Health Sector for Primary Health Care and Territory Health Service.
As far as Health Insurance Segment in India is concerned there are government schemes like Rashtriya Swasthya Bima (RSBY) Central and state government scheme and Health Insurance carriers in Private and Public sector that manages health Insurance for people in the country. In countries like USA/CANADA health care coverage is provided by the state and is seen as every citizen’s right although India does not have such compulsion. In USA Obama Administration head introduced laws making it mandatory for everyone to have health insurance, and there are penalties for those who fail to have some kind of insurance.
Health Insurance continues to be one of the most rapidly growing sectors in the Indian insurance industry, of the total premium underwritten of `52876 crs for the FY 11-12 22 percent i.e. Rs 11777 crs consisted of health Insurance premium. Macro Indicators on Health Insurance Data 2009-2010 shows there are 68.84 lacs policies issued covering 5.48 crs of members out of population size of 120 crs with the penetration as low as 4.9 percent. Out of which 63 percent consists of group policies, where as only 33 percent consists of individual or family floater. This clearly shows need for more government initiatives to boost Health Insurance sector.
The factors that have contributed to the improved Health Insurance portfolio of insurers is more options in coverage, employers including Health insurance for employees as an attraction, increase in medical care costs driving people towards insurance, introducing cashless hospitalization, quicker turnaround times for claims settlement and competition created by standalone health Insurers.
In the current Budget 2013-14 it is expected that government should take following steps to further boost the health insurance segment:
- Rastriya Swasthaya Bima Schemes- currently about twenty eight States participates in RSBY schemes, more states are expected to join the scheme so as to have better penetration and government to monitor that its benefits reach the beneficiary.
- People to have better disposable income for spending on health insurance premium ,section 80-D of Income tax Act currently allows tax exemption up to Rs.15000/- for Individual below 65 years of age and Rs.20000/- for senior citizens. This limits needs to be increased to Rs.40000/- for others and Rs.50000/- for senior citizens. Basic reason for such increase in limits are required is due to rising medical cost and increasing insurance premium due to adverse claim ratios.
- There is a requirement to allow additional limit for deduction for individual for his out patient treatment up to Rs.10000/-u/s 80D ,for senior citizens spending on day to day chronic ailment medication is high hence additional limit of Rs.20000/- should be allowed as deduction from taxable income.
- Employees contribution to group health insurance, provided by employer, if he is made to contribute premium should be allowed under section 80-D as deduction.
- Statistics shows that there are 569000 group health Insurance policies taken, most of which could be employee based group policy. To promote more companies to take care of their employee health, this should become part of their Business Responsibility Report and should be reported in their Annual Audited Accounts especially for all listed company.
- Companies having less than 100 employees should be given special tax concession so as to promote health insurance coverage by SME segment.
- Standalone Health Insurance Company should be considered for tax holidays for a period of 10 years of their operation; currently health insurers are operating at 97 percent loss ratio hence suggesting tax holiday may not still attract fresh investment in the sector.
- Health Insurance should be segregated from General Insurance or Nonlife Insurance Segment and only licensed Health Insurance Company should be allowed to underwrite the health Insurance. This will allow the Insurers to think innovatively to increase penetration.
- Independent regulator to be set up for regulating Third party Administrator and hospitals. This will help in developing and making the whole system transparent and more responsible and would make possible to address frauds in the whole system.
The writer is a Head General Insurance & principle officer at Emkay Insurance Brokers