India continues to have one of the highest out-of-pocket consumer health expenditure, driven by double-digit medical inflation and continued increase in lifestyle related diseases.
Economic prosperity and fast-paced urbanisation contributes to this as well. Also, a large portion of out-of-pocket consumer expenditure is tied to outpatient care, including consultation, diagnostics and pharmacy.
The National Commission report on macroeconomics suggests that only 5% of Indians are covered by health insurance policies. Health insurance is still viewed as secondary to other investments by most consumers because of a lack of awareness and lower tax exemption compared to other investment options.
The increase in the tax deduction limit on health insurance premium to R25,000 from R15,000 and R30,000 from R20,000 for senior citizens under Section 80 D, announced by the finance minister, is a welcome step to help increase penetration in and awareness of health insurance products.
This move is likely to provide much-needed momentum to the health insurance industry by incentivising the end-consumers and encouraging them to set aside more money for insuring themselves and their families for their health and well-being needs.
The move continues to bridge tax incentive gaps between health insurance and other long term investment based products, insurance and pension.
India is one of the few countries in the world that provide tax incentives towards health insurance. The increase in tax deduction limit on health insurance premium will support product innovation towards longer-term health saving products, and product and service solutions that focus on preventive care and health management.
Such innovation is also likely to attract individuals opting for health insurance at an early age and saving towards the future years when the need for care can increase.
In addition, other initiatives announced by the government to strengthen India’s social security system by introducing low-cost personal accident insurance schemes and augmenting medical facilities in villages, will not only provide much needed protection to Below the Poverty
Line (BPL) segment, but also support creating awareness in this segment related to protection, health and well-being as the segment continues to emerge out of poverty and participate in India’s inclusive growth.
A key to a sustainable health delivery and financing system in India will be to educate ‘all’ consumers about need for protection; and health, and well-being in general, with the introduction of programmes from basic hygiene to targeted health management, and educating them on prevalent conditions like diabetes, hypertension, as well as future disease burdens like asthma and cancer.
Every citizen should have access to a quality healthcare system; however, due to affordability constraints and lack of protection planning access to quality healthcare in India, it is not easily accessible to all consumers.
In this regard, the 2015-16 Budget presents a positive way forward towards healthcare for all Indians.
By Sandeep Sandeep Patel
The writer is MD & CEO, Cigna TTK Health Insurance