Soaring inflation pushes up health insurance premiums; makes standardised care costlier

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Since the COVID-19 pandemic, India is witnessing a surge in healthcare cost inflation, making assured and standardised healthcare unviable for several sections of the society and pushing up health insurance premiums. Last year the country witnessed a health care cost inflation of 14% even while general inflation stood in single digits. Healthcare market experts note that this level of escalation is unsustainable, and market correction should be kicking in soon.

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Speaking to The Hindu, Sumit Bohra, president of the Insurance Brokers Association of India (IBAI) notes that currently in India, rising healthcare costs and growing health insurance premiums are feeding each other.

“This is a vicious cycle and at present we are witnessing claim amounts of 90%. One-third of the insurance sector has been captured by the health insurance segment which is growing at a rate of 19-21% annually and is expected to grow further,’’ he said.

Listing out the reasons for healthcare costs becoming dearer Mr. Bohra noted that the concentration of specialised doctors in the private sector, overcrowding in government hospitals (leading to long delays etc.), the price flexibility that insurance cover offers (people spend more when they have a health insurance cover), growing demand and availability for health care interventions are all contributing factors.

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Seconding this trend ACKO General Insurance in its recent report notes that hospitalisation in India soared 12.8% in 2023-2024 compared to the previous financial year according to an analysis of health insurance claims with the average claim size in India for 2023-24 being ₹70,558, up from ₹62,548 in the previous financial year.

Rise in costs of medical procedures

Additionally, the report notes that the costs of common medical procedures have risen. An angioplasty now comes at an expense of ₹2-3 lakh compared to ₹1-1.5 lakh in 2018. Similarly, kidney transplant costs have doubled from ₹5-8 lakh in 2018 to ₹10-15 lakh in 2024. According to the company, this could further double in the next couple of years.

Health insurance, also known as medical insurance plans/policy, is a financial tool that covers the cost of medical treatment with a wide variety now available in the Indian market. Despite these option, for the common Indian, health insurance premiums are steep.

Physician and health activist Arun Gupta said that both he and his wife Rita Gupta (senior citizens) have written to the Insurance Regulatory and Development Authority of India (IRDAI) about the excessive premium increase of 450% in three years. Dr. Gupta said that accessing assured, quality health care is now not a matter of right but a matter of having the ’right’ insurance cover. 

“The sector needs regulations in terms of capping of premiums, regulating expenditure costs to patients when they are hospitalised, bringing in standardisation of hospital costs etc.’’ he said.

Population is vulnerable to catastrophic spending

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Meanwhile, speaking about how escalating costs can be curbed, Mr. Bohra said that customers should look at availing of health insurance cover only for chronic diseases and surgeries. “This system will help in stabilising that market,’’ he said adding that with the many players in the market, customers are now also being offered schemes like fixed premiums and benefits cover.

The Central government’s policy think tank NITI Aayog, in its report on health insurance, notes that India’s population is vulnerable to catastrophic spending which is not limited to the poor.

“Pre-payment through health insurance emerges as an important tool for risk-pooling and safeguarding against catastrophic [and often impoverishing] expenditure from health shocks. At least 30% of the population, or 40 crore individuals – called the missing middle in this report – are devoid of any financial protection for health,’’ it said.

Absence of robust public health infrastructure

Abhay Shukla, co-convenor Jan Swasthya Abhiyan (JSA), a non-government organisation working in healthcare rights, said that the organisation has decided to intervene in the various petitions challenging the regulation of hospital charges. 

“Currently in India in the absence of robust public health infrastructure, people have no option but to depend on private health care facilities to meet their health care needs. In the absence of effective regulation, millions of people are exposed to exploitation by private hospitals. Both the Central and the State governments are not taking measures to effectively implement central or state level legislation such as the Clinical Establishment Act 2010 (CEA),’’ he said, adding that the Central Clinical Establishment Rules make it mandatory for clinical establishments to adhere to the rates fixed by the central government in consultation with the respective state governments.