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Expectations of the Health Insurance sector from the Union Budget 2022

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Expectations of the Health Insurance sector from the Union Budget 2022

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The sector has called for a GST rate cut on health insurance premiums and granting infrastructure status to healthcare facilities to boost access to quality healthcare

Expectations of the Health Insurance sector from the Union Budget 2022
With the Union Budget 2021 having fortified our nation’s goal of achieving universal health coverage (UHC) by increasing the allocation for the health sector by 137% over 2020, expectations are high from this year’s budget to be presented by the honourable Finance Minister on 1st February 2022. As the Indian economy bounces back to pre-pandemic levels and aims to surpass the $5 trillion GDP mark by 2025, it is important to protect the health of all citizens from the risks associated with any future pandemic.
To mitigate these risks, the role of the health insurance sector becomes even more vital, necessitating a collaborative effort to improve health insurance penetration and the development of healthcare facilities across the country.
As per industry reports, an estimated ~ 56 crore individuals do not have any health insurance cover and represent about 40% of India’s population. Apart from the lack of awareness about the importance of health insurance, the costs associated with even standard insurance products like Arogya Sanjeevani is a deterrent with prices ranging between Rs.15,000 to Rs.18,000 per year for a family of two adults and two children with senior-most member’s age being 45 years. One of the largest contributing factors to these high prices is the current 18% GST rate imposed on health insurance premiums, which is unlike other essential goods and services that command a lower 5% GST rate.
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The insurance sector has previously requested for a GST rate cut on health insurance premiums from 18% to 5% and hopes are high that this will be heeded to in the forthcoming budget. If implemented, this initiative alone can spur double-digit growth in new user signups and bring down the uninsured population drastically by the end of the current decade. The resultant increase in health insurance premiums collected should more than compensate the loss in GST revenues resulting from the rate cut.
From an infrastructure perspective, the COVID-19 pandemic brought back the focus on ensuring quality and affordable healthcare facilities are made available across the expanses of our country. This requires an intense focus on developing diagnostic centres, specialty hospitals and wellness centres even in the rural hinterlands. To achieve this, it is imperative that healthcare facilities be developed at an accelerated pace, on par with the road infrastructure push made by the Government over the past few years. Understandably, this will necessitate an exponential increase in capital being allocated for the construction of these healthcare facilities.
While various initiatives have already been taken by the Government, the role of private players and foreign investment is vital to ramp up the pace if India is to achieve UHC by 2030. Towards this end, the health insurance sector has called for such facilities being granted ‘infrastructure’ status, which will in turn attract funding from large institutions, including insurance companies who are obligated to invest in infrastructure assets as part of regulatory requirements.
The combined effect of these two main suggestions will undoubtedly encourage people to purchase health insurance for themselves and their family with the assurance of being able to access quality healthcare in case of an emergency. Additionally, if the current limit under section 80D of the Income Tax Act is doubled to Rs.50,000 for non-senior citizens and to Rs.1 lakh for senior citizens, people will have an added impetus to upgrade their health insurance coverage thereby promoting better health and wellness. The health insurance sector on its part will have to ensure transmission of any GST rate cut immediately and step-up marketing initiatives with the aim of reaching out to the exposed underbelly of India’s uninsured population.
-The author Rakesh Jain is CEO of Reliance General Insurance Co. Ltd. The views expressed are personal.
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