Health insurance pinch: Indians seek GST, pricing relief amid rising premiums

Calls grow for regulatory help on hospital charges and GST rates; health insurance premium grows close to ₹1-lakh crore in FY24 [View in browser]( [See all newsletters]( 09 May 2024 Health insurance pinch: Indians seek GST, pricing relief amid rising premiums [The rising cost of health insurance premiums exceeds the average retail inflation rate by almost a three-four multiple. ] With health insurance premiums having gone through the roof, more buyers of health insurance across the country are anxious over rising premiums blowing a hole in their wallets. Industry insiders and even many consumers that businessline spoke to want the government to expedite setting up of a health regulator or reduce the GST rate from current 18 per cent to a much lower rate to curb the staggering cost of health insurance premiums. According to Srinath Sridharan, an insurance buyer, the rising cost of health insurance premiums exceeds the average retail inflation rate by almost a three-four multiple. “The sector’s foundation seemingly rests on a distrust of its customers, burdening policyholders with the onus of proof and claims efforts. This is evidenced by the persistently low claims ratio and payouts”. Exorbitant charges Moreover, consumers often encounter exorbitant charges and what can only be described as ‘fleecing’ pricing practices in Indian hospitals, Sridharan said. [The rising cost of health insurance premiums exceeds the average retail inflation rate by almost a three-four multiple. ] “Perhaps it’s time to consider regulatory measures to restore affordability and bolster consumer confidence in healthcare services”, he said. Health insurance has been the fastest growing insurance segment in the country clocking premium of close to ₹ 1 lakh crore in 2023-24, reflecting a robust compounded annual growth rate of 20 percent, latest data with General Insurance Council showed. Also health insurance now accounts for 38 percent of the insurance market with more than 50 crore Indians have some form of health insurance coverage. Tapan Singhel, Chairman of the General Insurance Council and Chairman of the CII National Committee on Insurance and Pensions, said: “We have been saying on various forums for a while now that GST on health insurance should be brought down from the current 18 percent to a minimum slab of 5 per cent”. Health insurance is not a luxury commodity, and taxing it heavily makes it difficult for people to get financially protected, he added. “We should see insurance as a necessity that everyone should afford. Reducing GST will address the issue of affordability to a certain extent,” Singhel, who is also MD & CEO, Bajaj Allianz General Insurance, said. S.K.Sethi, Co-Chairman, BFSI Committee, PHD Chamber of Commerce and Industry (PHDCCI), said: “Even though inflation in the country is in the range of 7 per cent but it is a fact that medical healthcare inflation has been 18-20 per cent year over year.” Sethi also said that government may in the upcoming June Budget consider reducing GST for senior citizens to 12 per cent (instead of 18 per cent). “Any such decision will be welcome and would fulfill the demand of senior citizens,” he said. With average annual medical inflation of 18-20 per cent, price rise in premium has to cover 54-60 per cent over three years, said health insurance industry insiders. Higher medical cost While insurance premiums are locked three years (IRDAI allows revision once in three years), medical bills are moving up every year, some players pointed out. The attempts in certain quarters to bring in health sector regulator is not making any headway due to several reasons. Also, the Supreme Court directions to Centre to hold consultations with state governments and arrive at a consensus on determining treatment rates at hospitals across the country is still work in progress. Standardisation —although a complex exercise— is seen to be the need of the hour as it would bring in much-needed transparency in the healthcare sector, which currently does not have a regulator. It is expected to also reduce frauds and any kind of extrapolation of undue costs. Also, transparency in rates is expected to result in lower healthcare inflation and thereby lower insurance premiums. “GST is not being let go, price regulation of hospitals is not happening, premium adjustment to medical inflation can happen only once in three years. So what relief can insurance companies bring to the table”, wondered an industry player. “GST is not being let go, price regulation of hospitals is not happening, premium adjustment to medical inflation can happen only once in three years. So what relief can insurance companies bring to the table”, wondered an industry player. 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