Bridging India’s Protection Gap: Affordability of Health Insurance

In continuation with the previous blogs where I discussed the key reasons behind India's significant protection gap, today let's delve into the third essential factor: Affordability.

The protection gap leaves millions of Indians vulnerable to financial strain in the event of medical emergencies. Affordability is a major factor contributing to this gap. Bridging this protection gap by making health insurance more affordable is essential for the well-being of the population and the overall development of the nation. Let's explore the affordability issues surrounding health insurance in India and potential strategies to make it more accessible.

What are the Barriers to Affordability?

Low Disposable Income: India's vast economic disparities significantly impact the affordability of health insurance. A large segment of the population lives below the poverty line or has limited disposable income, making it difficult to afford health insurance premiums. This financial constraint is a primary reason many families forgo health insurance, perceiving it as an unnecessary expense.?

High Medical Inflation: According to the 2023 Sustainable Development Goals National Indicator Framework Progress Report by the Ministry of Statistics and Programme Implementation (MoSPI), over 90 million Indians allocate more than 10% of their household income to healthcare, with 31 million spending over a quarter. Out-of-Pocket Expenses (OPD) comprise roughly 60% of medical costs, yet existing health insurance plans offer limited or no coverage for outpatient care.

High Premium Costs: Health insurance premiums in India can be prohibitively high, particularly for comprehensive coverage plans. This high cost deters many individuals from purchasing insurance. Furthermore, standard insurance plans often do not cater to the specific financial situations of different population segments, making it difficult for low- and middle-income families to find suitable, affordable options.

Lack of Awareness and Complex Products: There is a lack of awareness about the benefits of health insurance and how it works. This lack of understanding contributes to a perception that health insurance is not a necessary investment. Additionally, the complexity of insurance products can discourage potential buyers who find the terms and conditions overwhelming and difficult to comprehend.?

Fraud, Waste, and Abuse: This is a very serious issue. It is estimated that nearly 15-20% of the insurance claims paid in India are fraudulent. This also impacts the premium pricing by the insurers. It is important to develop a safety net to identify any fraudulent activities and deal with them through measures like common de-empanelment of suspicious hospitals. Reduction the frauds can help bring down the premiums at industry level.

What does this mean?

All these results in higher protection gap, leading to financial vulnerability as individuals face high out-of-pocket expenses during medical emergencies, often resulting in debt and poverty. It negatively impacts health outcomes by causing delays in seeking medical care and reducing access to preventive services, leading to higher rates of chronic diseases. Economically, the lack of insurance decreases productivity as a healthier, insured workforce is essential for sustained economic growth and development.

How to address this?

Addressing the affordability issue requires a multi-faceted approach involving various stakeholders, including the government, private sector, and civil society.

Government Support:?

• Subsidies and Financial Assistance: Providing subsidies or financial assistance to lower-income groups can make health insurance more affordable. Government programs should aim to reduce the premium costs for economically disadvantaged populations.
• Expansion of Public Schemes: Expanding and improving existing public health insurance schemes can cover more people and enhance the quality of services provided.

?Role of Private Sector:?

• Affordable and Customized Plans: Insurance companies should develop affordable, customizable plans that cater to the needs of different income groups. Microinsurance products, which offer basic coverage at minimal costs, can be particularly effective.
• Simplified Insurance Products: Simplifying insurance products and making the purchasing process more user-friendly can encourage more people to buy health insurance.?

Technological Integration:?

• Telemedicine and E-Health Services: Integrating telemedicine and e-health services into health insurance plans can provide affordable and accessible healthcare options, making insurance more attractive and valuable.
• Digital Health Records: Implementing digital health records can streamline healthcare services and improve efficiency, benefiting both providers and patients. The National Health Claim Exchange will be greatly beneficial in this regard. It will help create a health data repository accessible to relevant healthcare stakeholders with customer consent. Additionally, it will significantly reduce fraudulent claims in the industry, potentially leading to more favorable pricing in the long term.?

Conclusion

Bridging India's protection gap by making health insurance more affordable is crucial for ensuring that all citizens have access to quality healthcare without the burden of financial hardship. In the next blog, we will talk about how "experience" plays a key role in bridging the protection gap.

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