Government Should Seriously Consider Reducing GST On Health Insurance Premiums

When it comes to your finances, inflation is the biggest concern. It eats into your money like a parasite and silently so. What Rs 10 can buy you now will not buy you the same thing 10 years later. In fact, at an inflation of seven per cent, 10 years down the line you would need Rs 19.67 to purchase the same amount of goods that you can purchase with Rs 10 now.

We talk about headline inflation numbers and also how the prices of essential items go up, sometimes suddenly. The rise in prices of onions not only makes news, but can also topple governments.

However, when it comes to inflation in health insurance costs, the news is mostly of journalistic interest. We see some number crunching and that is pretty much there is to it. However, inflation in health insurance is a big deal, a really big deal.

In a recent survey, which made it to the headlines, it has been revealed that for 52% of policyholders, health insurance premiums went up by 25% in the last 12 months. Meanwhile the Insurance Regulatory and Development Authority of India (IRDAI) has made some changes to health insurance policy rules like decreasing the waiting period and asking health insurance companies to provide insurance to people of all age groups, which could mean that health insurance premiums for senior citizens can go up by 10-15%.

The question is, how do senior citizens afford such high premiums for health insurance?

There are two ways that senior citizens can reduce health insurance premiums and make it more affordable. One is co-pay, where the insured has to pay a certain amount of the expenses from his own pocket. So, if there is a co-pay of 10 per cent on your insurance policy and your hospital bill is Rs 1 lakh, you pay Rs 10,000 and the insurance company covers the rest.

The other is deductible. Here too, you need to pay a certain amount of money from your own pocket. So, if you have a deductible of Rs five lakh and your hospital bill is Rs four lakh, you pay it from your own pocket. However, if your hospital bill is Rs seven lakh, you pay Rs five lakh and the remaining Rs two lakh is paid by the insurance company. In each case you need to have some funds with you when you make a claim. In both the cases, since the expenses of the insurance company goes down, your premiums reduce substantially. The higher co-pay or deductible you opt for, the lower are your premiums.

So, in essence it means that apart from a retirement corpus, senior citizens do need a sizable corpus to meet medical emergencies, even if they have health insurance. While health insurance companies have to price their products based on the cost and the frequency of claims, there is not much they can do to reduce the cost of insurance premiums.

One thing the Government can and should do is to bring down the goods and services tax (GST) on health insurance premiums from 18 per cent to five per cent as most health insurers are demanding. This is something the Government must do at the earliest. Otherwise, the health insurance premiums, especially for senior citizens will get unaffordable for many.