Budget 2018: Every Budget is important, but this year’s edition holds special significance. Next year when the finance minister rises to make the speech, India would well and truly be in the election mode. This is the Budget where the reforms since 2014 can be appraised and policymaking gears appropriately shifted.
Low health insurance penetration
Budget 2018: From the consumer’s perspective, insurance must form the foundation of the financial planning pyramid as it acts as the shock absorber while people undertake their journeys in the pursuit of wealth creation or career advancement or personal goals. Unfortunately, the penetration of retail health insurance in India remains measly—under 4%. That’s a reason why governments have to incentivise its purchase by linking it to tax sops, or like the case of motor insurance, make it mandatory. But given the low penetration levels, the industry and the government must move in lockstep to ensure that every citizen has access to high quality secondary and tertiary healthcare.
GST on insurance
Budget 2018: Insurance products including health insurance fall in the 18% goods and services tax (GST) slab. In the pre-GST tax regime, insurance purchases were taxed at 15%. While India’s median age is 27, it has an elderly population approaching 110 million. It is important to incentivise private investments to ensure healthcare for the elderly. Keeping in mind the healthcare needs of senior citizens whose disposable incomes are significantly lower, and illness vulnerability much higher, the government must consider bringing their health insurance under the 5% GST bucket.
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Health insurance investments come under Section 80D where citizens are allowed to claim a deduction up to `25,000 annually year for medical insurance premium installments. The premium paid must be for themselves, spouse and dependent children. An exemption of up to `30,000 can be claimed if the premium is paid for parents who happen to be above the age of 60. Today Irdai allows health insurers to sell policies that cover two or three years of medical expenditure with the payment of a single lump sum premium. Such plans prove useful for consumers who may have the financial resources today, but fear cash flow instability in the medium term. While the insurance cover stretches for three years, the lump sum investment is considered for tax exemption only for the financial year the investment is made. The finance minister should consider a provision to carry over the tax benefits over the course of time the health insurance cover is purchased for.
Access to reliable, affordable and good quality healthcare remains a challenge for both rural and urban poor in India. While increased investments in public healthcare infrastructure will most certainly happen in the upcoming Budget, private public partnership models to roll out a universal health coverage can help achieve the twin objectives of expanding the umbrella and providing a shot in the arm to the organised healthcare sector in the country.
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India has stated its ambition to achieve universal health coverage by 2030. A successful PPP model for diagnosis and treatment, and health insurance will be a major step in the direction of achieving the universal health coverage goal.
The writer is CEO and wholetime director, Apollo Munich Health Insurance