Health Insurance Challenges in India

Health insurance ideally serves as a safety net, yet it has increasingly become a financial burden over the past three years. The situation reflects a systemic issue within the regulatory framework, primarily overseen by the Insurance Regulatory and Development Authority (IRDAI).

Current Issues

• Premium Hikes
  • Significant increases in premiums, disproportionate to medical inflation or logical adjustments.
  • Insurers justify hikes with vague reasons such as ‘loss ratios’ or ‘medical inflation’.
  • Little clarity on what constitutes a ‘significant change’ in risk factors or claims experience.
• Regulatory Challenges
  • IRDAI's role perceived as passive, failing to enforce accountability.
  • Regulatory framework allows grievances but lacks enforcement.
• Impact on Vulnerable Groups
  • Senior citizens on fixed incomes face a threat to accessible healthcare.
  • Rising premiums may lead vulnerable groups to opt out, threatening financial inclusion.

Insurance Market Trends

• Growth in non-life insurers collecting over ₹1 trillion in premiums in FY24, a 20.2% increase from the previous year.
• Increasing trend in claim rejections, with a 19% rise in rejected health claims. 
• A survey indicated that 43% of policyholders faced issues with claims, including rejections and partial approvals.

Financial Implications

• Health insurance is the largest out-of-pocket expenditure for families, exacerbated by premium hikes.
• Lack of a robust public health system increases vulnerability, with hospitals charging more to non-insured individuals.

Proposed Reforms

• Mandate Transparency
  • Insurers should provide detailed, publicly audited breakdowns of factors influencing premium hikes.
• Cap Premium Increases
  • Introduce regulatory caps on premium hikes, especially for group policies and senior citizens.
• Strengthen Adjudication Powers
  • Empower IRDAI to adjudicate grievances, with authority to impose penalties for exploitative practices.
• Enhance Consumer Representation
  • Include consumer voices in regulatory decisions through advisory panels.

Conclusion

Health insurance is a promise of security and trust. Ensuring equilibrium between growth and fairness in India’s health insurance market is crucial for its affordability and survival. The Government must prioritize addressing the unregulated health system in future budgets to support the expansion of health insurance as a viable path forward.