Are you covered enough to fight Medical Inflation?

If there was one significant lesson that the pandemic brought to the forefront; then it is the fact that often group insurance health plans alone may not be sufficient to cater to your medical needs. The group insurance scheme for employees is often too basic with standardized coverage and not customised. Here is a look at the health insurance scenario in India and why group insurance policy alone may not be sufficient to fend off growing medical costs. 

Health insurance segment in India:

  • According to the recent report by NITI Ayog, at least 30% of the population, i.e. about 40 crore individuals, do not have any form of health insurance. 
  • As per the Health trends report released by Mercer Marsh Benefits (MMB), the medical inflation in India during the pandemic is at 14%; which is one of the highest globally. 
  • Amidst the pandemic Covid-19, related claims accounted for 34%.
  • As per IRDAI (Insurance Regulatory and Development Authority of India), the out of pocket expense accounts for ~62% of the total healthcare costs in India.

This is indicative of the chasm in the healthcare industry that the country continues to stare at. It is apparent from the pointers above that even those individuals who can afford comprehensive insurance are probably not availing the same: 

  • Either due to the lack of awareness that group insurance policy may not suffice 
  • Or probably because they do not understand the severity of medical inflation in India.

Health insurance coverage in India:

The below graph with data from Statista indicates the number of individuals who have health insurance across India. The data depicts the penetration of health insurance between the period 2016-and 2021 (in millions). 

The average growth rate over the past 5 years for group insurance is ~17.4%. This is a marginal fall in the number of people covered under the group insurance schemes in the last year. The average growth rate in private health insurance is 13.5% for the same period. There has been an increase in the private insurance health plans over the past year of ~2%. There is an increasing trend in gaining private insurance which offers personalized coverage. However, a large part of the population continues to depend on group insurance cover. It may not be surprising to know that the largest part of the populace continues to depend on Government sponsored schemes.  

Reasons for medical inflation in India:

Medical inflation may be understood as the increase in the average cost of healthcare services in India. The growing demand for superior healthcare services pushes many individuals’ costs out of reach. The reasons for an increase in hospital costs are:

  • Increase in hospital consumable costs
  • Hospital staff and consultation fees increase
  • Increase in utilities, technology, rent and property costs
  • New age diagnostic technology
  • Improved line of treatment
  • Rising awareness among consumers and change in perspective towards healthcare benefits 

The reasons for increased demand for healthcare services which remains the primary reason for medical inflation is triggered by:

  • An increased population of senior citizens in some places.
  • Lower health insurance among the aged population.
  • Increase instances of critical illnesses and lifestyle diseases.
  • Higher insurance premiums due to increased environmental hazards, stress levels, medical advancements and new-age diagnosis and robotic surgery, shortage of supply of life-saving drugs, etc.
  • Lower medical expert to patient ratio – a clear trend of a reduced number of experts> According to the new WHO norm, a country should ideally have 4.4 doctors per 1000 population. However, in India, the ratio is abysmally low and is less than 1 doctor per 1000 population!

A growing gap between group insurance policy coverage and actual medical costs:

From the data above, it is apparent that the inflation rate of medical expenses is quite high, making it nearly impossible for corporations to provide health insurance that will ensure that the employees are comprehensively covered. The pandemic further narrowed down the budget of many companies concerning their allocation towards health care benefits for employees. Also, since an average employee spends two to five years in any organisation, it is very important to think of the long term continuity perspective of health insurance. 

The growing gap has not only been due to the inability of corporates to up the budget allocation towards group insurance schemes for employees; but also due to the growing instances of lifestyle and critical illnesses. This has increased the risk factors for the insurance company. This, in turn, has increased the overall premium costs. The same sum insured now costs higher as compared to the cost a few years ago. As per the MMB, health trends report, the cost of employer-sponsored group insurance policy costs is likely to go up by 15% in 2022. 

The vulnerability of individuals to diseases and illnesses has also increased drastically. This has led to increased instances of exhaustion of the sum insured amidst the policy term. There is also growing awareness among people to screen regularly. This has enabled early detection of diseases and a better line of treatment. 

All these factors have contributed to the growing gap in group insurance policy coverage and actual medical costs. 

The ideal way to tackle the increasing gap between actual medical costs and coverage under a group insurance policy; is by availing of personal health insurance in parallel. Personal health insurance could be personalised to ensure that it covers the specific needs of yourself and your family. To know check https://blog.oneassure.in/

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