Group President, Group Managing Director & Editor In Chief: Dr.Shelly Ahmed

Friday, March 13, 2015

Is Best Health Insurance An 'Expense' Or An 'Investment'?

SPONSORED: There are two schools of thought in India - one who believe in the concept of Health Insurance, are aware of the benefits and are pro-active about it. 

And the others, who feel that they are fit and can never fall ill, discard the need for health insurance; even though they are in agreement of the fact that the costs of hospitalisation and medical treatment have reached sky high in the last few years. So, to combat their queries, I thought of writing about Health Insurance in India, its penetration and importance and whether or not it should be mandatory, by law or by principle.

Let us understand the graph mentioned below. This data published by World Health Organization is the Expenditure on Health Care as a Percentage of the Gross Domestic Product (GDP).

As seen from the above graph, India is at a dismal position in terms of health insurance penetration. Even countries like Japan and Germany, with lower population, are ahead in terms of health insurance awareness. So why does India lag so far behind despite having a large population? How could health insurance penetration increase in a country where majority of the population is in the lower income group or middle income group? Should the government make health insurance mandatory?

“Health insurance should not be made mandatory. It would be a waste of money. If people want, they could buy mediclaim themselves,” says Amit Mehra, an engineer working in a MNC. So is Amit right? Would mandating health insurance be a waste? How many people actually buy health insurance because of being aware?

The reason health insurance is overlooked by majority of the population is because of Lack of Awareness. Health insurance is a contract which does not give immediate benefits but saves for a rainy day. The idea of putting aside funds for a possible future use is unattractive. 

People generally have a myopic vision and feel that they don’t need insurance as they are healthy and don’t foresee illness in their immediate future. Those who are sick don’t seem to afford the high premiums. All these reasons coupled with lack of knowledge (of how to take out a health plan and what points should be noted) make them averse to buy a health plan.

The need for a Health Plan arises only after you have been hospitalised and the hospital bill has already pinched your pocket pretty hard. And, if you have been diagnosed of any major illness, then your policy might or might be issued even with an additional loading!

Medical Inflation vis-à-vis Per Capita Income
The Medical Inflation in India is far ahead of the normal inflation and thus in 5 years’ time (as per the chart provided below) the cost of the same treatment has increased by almost 50% whereas the income potential has risen by less than 25%. Thus people have actually shelled out more money than before in Hospitalisation and Medical Treatment.

Life Expectancy in India
The importance of health plans cannot be negated. With the improvement in medicine, life expectancy has greatly increased.

Newer and more complicated illnesses have been discovered over the years and so have been its diagnosis, treatment and cure which in turn plays a major role in increasing the medical inflation in India. Medical Attention and Treatment is one of the only expenses that cannot be delayed or neglected and hence taking care of the same is of immense importance rather than burning a huge hole in the pocket!

Government Intervention on Health Concerns
India being a developing country, where the Government stresses on mass welfare and social development; health care, diagnosis and treatment has always been an area of concern. Proper Health Care is an area of constant improvement for India where the Government endeavours to ensure insurance opportunities to the lower classes. But these benefits are largely restricted to the lower classes or people working in government owned companies.

Health Care for All: An Area of Serious Concern
What about the society at large? If the poorer sections are taken care of by the government what about the middle income section? Isn’t there a problem in the uniformity of distribution of health cover? This is the reason why penetration is low.

The word “mandatory” or “compulsory” always draws out negative reactions from the society. So, if health insurance would become “mandatory”, it is bound to run into resistance. But shouldn’t you see the bigger picture? For instance, auto insurance is mandatory in India and every vehicle purchased must be insured. So, does it mean your vehicle is more important than you? If Auto Insurance can be made mandatory then why Health Insurance should be left at the individual’s discretion?

Isn’t it important enough to be insured? Is your vehicle more important than your health? Then why shouldn’t health insurance too be made mandatory?

Health Insurance Plans in India
Now, Health Insurance Policies come at a cost. If you wish to purchase a basic plan for the entire family, there is quite a hefty amount that needs to be paid.

Below is the approximate premium amount (in Rs.) without tax for an Individual of 30 years of age and for 2 adults and 1 child for Coverage of Rs 3 lacs without deductible.

How Expensive is a Health Insurance Plan?
The cost of Insurance rises heavily for each year. Thus, the earlier you take for the plan, the better. Let us understand this with an example as well.

Below is the premium comparison of some widely sold policies for Individuals of 30, 40 and 50 years respectively for Health Insurance Coverage of Rs 3 lacs.

Thus, an Individual pays not more than Rs 1.5 lacs entire his entire lifetime forany Health Insurance Plan of Rs 3 lacs, assuming health insurance premiums are constant. Even if Health Insurance Premiums rise by 5% p.a., the total premium paid would never be more than Rs 2 lacs.

Also, in the span of 30 years, if the individual is hospitalised once, twice, thrice or more the hospitalisation costs would compensate the premiums paid 3 times over! So, think for yourself, is Health Insurance a better option at the rate of Rs 300 to Rs 450 per month or a sudden hospitalisation expense of Rs 1 lac or maybe more? What do you think?
Post a Comment