IRDA catches up to common sense

Will new reforms truly expand health insurance access for all?

Late last month, the insurance regulator, IRDA, came out with the updated master circular on health insurance. The headline news of the circular was that there would no longer be any age cap on getting health insurance. There's actually more. The gist of the new points is this: insurers are required to provide a range of products, add-ons, and riders to offer wider choices to policyholders and prospects. These offerings must cater to all ages, all types of existing medical conditions, pre-existing diseases, and chronic conditions. They should also encompass all systems of medicine and treatments, including Allopathy, AYUSH, and others. They must address every treatment situation, including domiciliary hospitalisation, outpatient treatment (OPD), daycare, and home care. The range of products should be available in all regions and for all occupational categories, persons with disabilities, and other categories. Additionally, all types of hospitals and healthcare providers should be included to suit the affordability of policyholders and prospects, ensuring that coverage is not denied in emergency situations. It also says that insurers must provide support for new medical technologies and lists a bunch of such technologies.

Being a long-time IRDA sceptic, my first reaction was, "But all these are obvious things! Why weren't they done years ago? Why weren't they a part of insurance regulations from day one?" That's an honest question and one that a lot of health insurance policyholders ask.

I mean, think about it. Older people fall ill and have worse illnesses than younger people. This is true of practically every disease that afflicts humanity. Big killers like cancer and heart disease are essentially diseases of age. Sure, there are some young victims, but they draw attention simply because they stand out. However, till now, India's health insurance coverage by and large ends at the age of 65. That means insurers would like to take your money while you are at a relatively healthier age and then deny you coverage when you reach the age when you actually need the coverage. Anyway, no point being surprised at such things-this is typical of the way insurance regulation in India has always been.

Long ago, I came across something interesting in an article written by the legendary American technology columnist Robert X Cringely. He writes: There was a time when actuaries at insurance companies studied morbidity and mortality statistics in order to set insurance rates...because for the most part, the actuaries weren't able to drill down far enough to reach past broad groups of policyholders to individuals. In that system, insurance company profitability increased linearly with scale, so health insurance companies wanted as many policyholders as possible, making a profit on most of them. Then, in the 1990s, something happened: the cost of computing came down to the point where it was cost-effective to calculate likely health outcomes on an individual basis. This moved the health insurance business from being based on setting rates to denying coverage...the health insurance business model switched from covering as many people as possible to selling insurance only to healthy people.

This practice is now completely normal in all branches of the insurance industry all over the world. It's good that IRDA has removed the age limit and done all those other nice things that I listed above. However, the proof of the pudding is in the eating. Let's wait and see the actual rates and terms at which insurance is offered to older people and what kind of coverage they actually manage to get. I think it will be some years before we see how good the actual, on-the-ground impact of these changes will be, but let me assure you-I'm not holding my breath.

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