Opinion
Why health insurance premiums beating motor insurance is both good and bad news
Summary
- This rise in health insurance premiums doesn't necessarily guarantee broader coverage. With healthcare costs skyrocketing, insurance rates have followed suit
India, home to over 326 million vehicles and a population surpassing 1.4 billion as of June 2023, surprisingly used to spend more on motor insurance than health coverage. Before the pandemic, 37% of general insurance premiums came from motor insurance, whereas health insurance contributed 27%. However, post-pandemic, as of September 2023, these numbers have flipped: health insurance now accounts for 38%, and motor insurance is at 28%.
Like the curate's egg, this is both good and bad. While the increased uptake of health insurance is welcome and highlights an increased consciousness among Indians towards health security, it also underlines the dwindling quality of public healthcare and surging private healthcare costs.
Let’s take access to healthcare first. On paper, Indians have access to free, or nearly free, with nominal co-payments, healthcare provided by the government. This is largely through primary and community health centres, with secondary care through district and sub-district government hospitals, with a limited number of tertiary, super-speciality government hospitals in major metros.
In reality, though, the system is chronically underfunded and availability is abysmal.
The nation has a mere 0.5 government hospital beds per thousand residents. Including private hospitals, this number only slightly improves to 1.4 beds. The pandemic starkly revealed that many public hospitals are ill-equipped, often lacking basic facilities.
India’s spending on healthcare at 2.1% of GDP (FY23) is lower than many sub-Saharan economies. In terms of per capita, constant rupees, it has remained nearly stagnant at around ₹4,300-4,400 over more than half a decade.
However, according to the Economic Survey 2023, out-of-pocket expenses on healthcare by individuals has fallen sharply from 64.2% of all healthcare expenses in 2012-13 to 48.2% in 2018-19, even as the government’s share of total healthcare spending has risen sharply from 28.6% to 40.6% of the total during the same period.
However, data, particularly government data, are somewhat unreliable in India. For instance, the numbers for fall in out-of-pocket health costs don't align with WHO data.
As per the UN organization, “nearly 70% of all outpatient visits, about 58% of all inpatient episodes, and approximately 90% of medicines dispensed, and diagnostic facilities in India are currently (2022 figures) provided by either for-profit or not-for-profit providers in the private sector."
According to the 7th National Health Accounts Estimates (2019-20) prepared by the health ministry, the share of out-of-pocket expenditure in total health expenditure has declined from 62.6% in 2014-15 to 47.1% in 2019-20 – which gels with the Survey estimates – but it also says that the government’s share of health expenditure as a percentage of GDP increased from 1.13% (2014-15) to 1.35% (2019-20), which does not match the Survey numbers.
Statistical quibbles apart, the rising share of healthcare premiums may not necessarily reflect wider health coverage. This is because healthcare costs have been spiralling and insurance costs have followed suit. And then there is the challenge of covering the uncovered.
According to a NITI Ayog Report (Health Insurance for India’s Missing Middle, 2021), The Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and state governments' extension schemes together provide hospitalization cover to the bottom 50% of the population – around 700 million people. Around a fifth of the population is covered through social health insurance, and private voluntary health insurance. The remaining is devoid of health insurance.
The onus is now on the government and regulatory bodies to enhance health insurance reach without triggering further healthcare inflation or unethical practices.
