Tax benefits can boost penetration of health insurance
By Ashish Mehrotra
The current healthcare scenario of the nation leaves much to desire. Firstly, it is quite alarming that out-of-pocket expenditure in India is an incredulous 62%. If we compare with other nations, India’s out-of-pocket is way higher and quite distressing.
While it is unfair to compare our numbers with that of developed nations where out-of-pocket expense is 10-12%, it is also nowhere near the peer BRICS nations of Russia (40%), China (30%), Brazil (25%) and even South Africa (6.5%).
Moreover, inflation rates for medical treatment in India is frightening and as the global trends show, it will keep rising. Today medical inflation stands between 12%-15%.
Low health insurance penetration
In 2016-2017, health coverage in India was at 56%. However, the government’s commitment towards increasing the penetration saw significant boost through the launch of Ayushman Bharat.
More than 9,000 private hospitals and all public sector hospitals have been brought under the ambit of the scheme. An encouraging 38,000 patients enrolled in the first two weeks of the launch of the scheme. The coming of Ayushman Bharat also indicates that people not eligible for the government scheme will invariably turn to private insurers for coverage. Good news for the insurance sector.
While the government’s intentions and commitment have remained visibly pronounced, these will barely suffice. In the upcoming budget, the country will look towards more prominent manifestations from the government. While a significant increase in the allocation of budget towards the healthcare sector is the need of the hour, the insurance sector will look out for more distinctive measures. In a country of 1.3 billion, incentivising health insurance purchase will be key to increasing coverage, and hence, penetration. This incentive can be given out in various ways. First, implementing the policy of no GST for health insurance premiums paid, which is currently at 18%. Second, offering higher tax benefits under Section 80D to all health insurance holders.
To further strengthen coverage of health insurance, people can be motivated to opt for longer period of insurance. Tax exemption, available each year based on number of years covered, can be an effective way of encouraging buyers. Tax benefits can be tremendously inspiring in boosting penetration of health insurance. In addition, it can also nurture a culture of preventive healthcare in the country. For the specialised health insurance companies, extending the period of carry forward of business loss and depreciation to at least 12 years will also be a welcome move.
In fact, 2019 will be the year of reckoning for the healthcare industry. The government had earlier shown strong resolve to elevate the healthcare environment. It is now to be seen how much and how far.
The writer is MD & CEO, Max Bupa Health Insurance