How Broad Approaches To Health Protection, Hospitalization Coverage Are Changing The Insurance Industry?

Health Insurance is one topic which has garnered a lot of attention in recent times and is becoming a key area of discussion, not only in middle-class living rooms but also in the wider political economy of the country. Two instances will suffice to strengthen the argument. One of the first acts of the newly constituted Union Government was to broaden the coverage ambit of Ayushman Bharat to senior citizens of the country. Also, the widespread discussion around the need for the review on GST on health insurance.

Out of Pocket Expenses continue to be a burden

Even as health insurance is taking centre stage in the consciousness of Indian society, it is a topic which is still not fully understood and appreciated. A few stats to illustrate the point that we are trying to make:

As per the Economic Survey Report FY 24, out-of-pocket health expenses in India is at 50%. This is a big drop from 64% in 2014 but is still higher than the world average of 35%. The drop has been achieved due to extensive health insurance schemes launched by both the Union and State governments, targeting the lower strata of society.

However, the General Insurance penetration in India, of which health and motor insurance are the biggest components, is still at 1%. This is roughly where it was in 2001 showing little to no progress in the last 20 years. Health emergencies continue to be one of the biggest reasons for financial distress in Indian middle-class households.

Need for focus on post-hospitalization coverage

Why has health insurance, in spite of being relevant and top-of-the-mind recall, not been able to penetrate deeper? This is a very complex question and it would be too simplistic to list out the answer in a short article but one of the biggest reasons for health insurance penetration not being as high as it should be amongst the middle class is that it is excessively focussed on indemnity insurance i.e. payment against the expense incurred during or immediately before and after the hospitalisation. And only for expenses for which there is a bill.

For example, if a person is hospitalized for 15 days and takes another month to get back to work, insurance will cover the hospital bills. But what about the loss of income? What about diagnostics and medicine which the person might have to consume for months or even years to come?

Hospitalisation, when it does happen, is a catastrophic expense. As a result of which, Health Insurance policies in India, which focus heavily on hospitalization only, do not find resonance with the vast majority of the middle class. They look at health insurance as something which is not really relevant to them.

Expanding scope of health insurance

How can we make health insurance more appealing and expand coverage without straining government finances, while also building a self-funded system that protects India's middle class, the backbone of the economy.

In that light, one of the most significant changes has been the transition from hospitalisation to holistic health ecosystems. The health insurers and insurance industry have begun to tie up many products and services which are part of health ecosystems and bring the economies of scale into play. This has resulted in discounted medicines, diagnostics, pre and post hospitalization services either being bought in as benefits in the core insurance benefits plan or as part of the ecosystem being made available to the customers.

Transition from payment to prevention

The focus is also shifting from payment to prevention. Companies are actively encouraging their customers to adopt an active lifestyle and undertake preventive tests. The government initiatives in the form of Digitisation of Health records and information like ABHA cards, promotion of teleconsulting as well as Jan Aarogya and Aushadhi Kendras are giving a further fillip for the emergence of a holistic health ecosystem in the country.