The year 2021 has been a year of trials and tribulations, of growth and learning, of despair and hope, and of stagnation and innovation. To borrow from Dickens’ A Tale of Two Cities, “It was the best of times, it was the worst of times.”
The lessons learnt cannot and will not be relegated just to the year being left behind. The ongoing Covid pandemic has emphasized the importance of institutionalising health care services. Stable, equitable, thriving, and peaceful societies and economies can only be catalysed by the assurance that every single individual will be taken care of. In a country plagued by divides, the digital divide got accentuated during the pandemic.
The current crisis also presents an unparalleled opportunity to prioritise and bring about structural transformation aimed at benefitting all segments of the population. With the 2022 budget nearing, there is an urgent need for the government to consider alterations in insurance, especially the health ecosystem.
Given this background, priority should be driving affordability and accessibility. It’s taken a pandemic to make us realise that health insurance is an essential commodity. It has the power to save or at least enhance the quality of countless lives. Therefore, health insurance needs to be taxed in the 5 per cent GST slab and senior citizens should be exempt from paying GST on health insurance. Having people buy insurance at a lower GST slab will save the government thousands of crores which would have otherwise been spent on providing subsidised or free health care. The government will be revenue positive while ensuring access to quality health care.
Raising Health Insurance Limit
It is interesting to note that the premiums paid on health insurance policies are often viewed as a cost by the customer. Hence, customers often eschew an adequate policy in favour of a ‘cheaper’ policy. This gap needs to be bridged. A planned and well-calibrated raise in tax deduction limit, under Section 80D of the income tax Act, will significantly boost the penetration of health insurance in India. Currently, the government allows an individual to claim a deduction of up to Rs 25,000 for self and family. This is woefully inadequate; this limit was set in 2015 and should be increased to at least Rs 50,000 in 2022, even if we consider annual healthcare inflation to be just 10 per cent.
Small-Ticket Insurance Products
The Indian insurance ecosystem is significantly under-penetrated when compared to developed economies, and there is a pressing need to bring larger parts of the population under the safety net offered by health insurance. Smaller ticket-size insurance products like micro-insurance, sachet products, etc., should be exempted from GST. The economically weaker section is very price-sensitive, and it’s imperative that we do all that we can to reduce the cost burden. This will drive inclusion.
The health insurance industry has been evolving and growing rapidly, thanks ironically to increased lifestyle diseases, and the inability of the modern working population to take care of its health. Add to this higher affluence, disposable income and nuclear set-ups with close to zero support from the extended family, especially in cities, and we had the perfect storm for health insurance. However, Covid has exposed limitations on multiple fronts—inadequate physical infrastructure, lack of doctors and trained healthcare professionals and the inability of the even relatively better-off sections of the population to survive the economic implications of a health crisis. While solving the first two issues by augmenting the physical infrastructure and trained manpower will take time, at least 5-7 years, before we can see results on the ground, the government can immediately begin to mitigate an economic impact of a health crisis for a billion-plus people.
With the pandemic far from over and Budget 2022 just around the corner, policymakers would do well to keep these facts in mind and drive health insurance penetration.
The author is MD and CEO, Future Generali India Insurance.
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