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A substantial part of those covered by health insurance are those who belong to the marginalised section eligible for the government’s Aayushman Bharat programme under which as many as 50 crore people are eligible for health cover upto ₹5 lakh per annum per family. Second in the pecking order is group insurance cover taken by employers.
Why are people reluctant to take health insurance even though the onset of Covid pandemic in 2020 did drive people into the arms of insurers to some extent. The primary reason is there is a feeling that a huge element of cross-subsidy at work in health insurance. In other words, those who do not get the claim either due to lack of illness or due to exclusion by the policy document are actually paying for the settlement made to those who have claimed.
This skew is not reflected in the seemingly impressive claim-settlement ratio of more than 80% by our health insurers or the incurred claim ratio of our insurers. That is — claims paid vis-a- vis the premium collected — is again impressive at around an average of 80%. Insistence on hospitalisation is the root cause of this skew.
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The Vadodara Consumer Court on March 15, 2023 did well to strike down the de rigueur requirement of minimum 24-hour hospitalisation in order to entertain a health insurance claim. But then consumer court’s verdicts do not bind the insurers and are at best complainant specific.
The government or the Insurance Regulatory and Development Authority (IRDA) must take the lead and strike down such blind insistence on hospitalisation, though there are a few claimed-to-be exceptions, which is not necessary for lifestyle diseases like hypertension, diabetes etc. Day care treatment must be treated at par with hospitalisation for entertaining health insurance claims.
And why should dental care figure on top of the exclusions of insurers unless it is cosmetic dental surgery? Geriatric care often is about dental treatment, cataract and knee-cap replacement. And they are fobbed off with disdain by the insurers. A typical policy reserves a measly ₹20,000 per cataract operation for an eye subject to a cap of ₹30,000 for both the eyes.
Secondly, most of the health insurance policies have annual fixation i.e., they lapse at the anniversary of the policy. Unlike in car insurance, there is generally no no-claim bonus to reduce the subsequent premiums though a few enlightened insurers do offer a higher cover every 4th or 5th year at a marginally higher premium.
Indeed, the disconcerting bottom line that health insurance premium goes down the drain is the cause of disillusionment with health insurance policies in India.
No one is going to go on paying annual premium in the larger interest of others who have had the mortification of being admitted to hospitals. Cross-subsidy at the government level is fine but not at the individual level. So, unless insurers allow at least a partial carry over of the unclaimed insurance cover, there is bound to be resistant to the idea of health insurance.
To such disillusioned people, self-insurance presents itself as a viable alternative. Suppose, the health insurance cover is ₹5 lakh and stays static, one is apt to wonder why at all he/she has been foolishly paying an annual premium of ₹25,000 for the last five years. She is bound to think in terms of investing the amount in a recurring or fixed deposit and build a war chest for medical emergency. As it is, for his/her ₹1,25,000 has gone down the drain.
Given the raw deal given to non-hospitalisation medical bills, the pitch for top- up policies made by insurers add salt to one’s injury. Top-up policies are available at lesser premiums provided one has a basic policy of ₹3 to ₹5 lakh. Cynics say when my basic policy is going bad, why should I top it up?
—The author,S. Murlidharan is a CA by qualification and writes on economic issues, fiscal and commercial laws. The views expressed in the article are his own.
Read the previous ones here
(Edited by : C H Unnikrishnan)
First Published: Nov 23, 2023 9:52 AM IST
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