The health insurance premium may still be out of reach of several individuals especially those who may not be able to afford adequate sum insured.
Budget 2019 India: Union Budget 2019 India may give a fresh look at the health insurance industry paving way for lower cost in terms of premium paid towards medical insurance and giving incentives in terms of higher deductions from total income in order to boost the sector.
The tax benefit under section 80D of the Income Tax Act, 1961, could be revised upwards. Currently, the maximum deduction is allowed up to Rs 25,000 a year and Rs 50,000 for those above age 60. With people buying policies with high sum insured of Rs 20 lakh and above including critical illness plans for self and family members, the limit needs a re-look amidst increasing medical inflation. “The government may also revisit the Income tax deductions available under Section 80D for health Insurance and would look to revise the same upwards. This would incentivise more people to take health insurance,” says Parimal Heda, Chief Investment Officer, Digit Insurance.
The health insurance premium may still be out of reach of several individuals especially those who may not be able to afford adequate sum insured. “Currently the insurance premiums are taxed at a GST rate of 18 per cent which increases the cost to purchase health insurance. Given that the purchase of a health insurance policy is not done for investment purpose, the government could either lower the applicable GST rate for health Insurance premiums or could exempt it for policies with a cover of up to Rs 5 lakh,” says Heda.
The decision on GST will, however, be taken up by the GST Council. It remains to be seen if GST on health cover premium gets a mention in the Budget speech.
The voice in the industry for making health cover cheaper is growing louder. “I would like to see goods and service tax (GST) removed from insurance premiums. On one hand, the government is providing low-cost health and life insurance for Indians, but on the other hand, people who want to buy insurance they are being charged 18% GST. Even regulator has mentioned that 18% GST on premiums is ‘brutal’. If not completely going away with GST, they should at least take it to single digits as it will benefit a large number of people in the country,” says Rakesh Goyal – Director, Probus Insurance Brokers.
Along with health cover, there are certain other insurance products such as accident cover, home cover, term life insurance etc that help in managing financial risks.
“Given that the protection gap reported for India is very big, we expect the government to make essential insurance products like Accident Insurance, Health Insurance, Term Life Insurance, and Home Insurance affordable for Indian citizens. Currently, the service tax on these products is a massive 18 per cent. While the rich can afford insurance and the poor are benefiting from many government insurance programs, the middle class is finding even the essential insurance products unattractive due to the high premiums. Without financial protection, a personal calamity or natural calamity can shift them from middle class to poverty. We feel the middle class should be encouraged to protect themselves and their families by introducing tax deductions and complete waiver of GST on essential insurance products,” informs Mahavir Chopra, Director – Health, Life & Strategic Initiatives, Coverfox.com
Under the ambit of Ayushman Bharat, a Pradhan Mantri Jan Arogya Yojana (PM-JAY) launched in Augusts 2018, the interim Budget 2019 saw an increase in allocation towards the scheme. Ayushmaan Bharat is a National health protection scheme which provides a financial coverage of Rs. 5 lakh per eligible family per year. The scheme covers the secondary and tertiary care hospitalization of the patients. It is also popularly known as Pradhan Mantri Jan Arogya Yojana or Modicare or National Health Protection Scheme.
If not total removal of GST on medical premium is provided for in the Budget 2019-20, at least the government may consider reducing it from 18 per cent including that on hospital and OPD expenses.