Despite regulatory interventions intended to improve health insurance coverage in India, consumers are still facing significant challenges that indicate policies do not adequately prioritise their benefits. The Insurance Regulatory and Development Authority of India has introduced several reforms, but has failed to check frequent premium hikes that exceed healthcare inflation rates and rigid claim rejection processes that continue to frustrate policyholders. The exclusion of comprehensive OPD benefits and the underutilisation of employer-sponsored health plans highlight the industry’s neglect of consumer needs. Despite the growing demand for more inclusive and affordable insurance products, these systemic issues persist, leaving many consumers dissatisfied and resorting to legal actions to seek redress.
Health insurance policyholders are increasingly demanding higher coverage from their providers, especially for out-patient department (OPD) benefits. Awareness among patients has grown in the post-pandemic years, leading to a surge in consultations with doctors and diagnostic tests. Consequently, consumers are urging insurers to expand their policy coverage. This demand highlights a long-standing gap in health insurance, as policyholders have needed these benefits for years.
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According to the latest data from Policybazaar, more customers are now selecting OPD benefits when choosing health insurance. The share has grown from 5% in FY21 to 20% in FY24. Although there was a pre-existing need, industry experts attribute the significant increase to the COVID-19 pandemic. Before the pandemic, OPD benefits were often an afterthought, bundled with employee health plans and underutilised. However, the rising cost of consultations and diagnostics, along with increased access to telemedicine, has pushed demand. Now, one in every two policyholders actively utilises OPD services included in their plans.
Previously, OPD benefits were included in employer-sponsored health plans, with a utilisation rate of around 25%. As the demand landscape has drastically changed post-pandemic, insurers are responding by offering standalone OPD products. The popularity of these tailored plans is evident, with a 70% utilisation rate for OPD benefits.
State of health insurance in India
The insurance sector in India is extremely chaotic, and there is growing discontent among consumers, many of whom are resorting to legal actions. Claim rejection cases are skyrocketing, prompting policyholders to take insurance companies to consumer courts. The Department of Consumer Affairs has advised insurance companies to implement measures to protect consumers’ interests.
In addition to broadening eligibility and incorporating more options for policyholders, health insurance must also be made affordable. Recently, the Insurance Regulatory and Development Authority of India (IRDAI), the apex regulator of insurance products, recognised the need to cover a wide demographic of citizens. Despite IRDAI regulations mandating health insurance price revisions only every three years, policyholders face frequent premium hikes. These increases are significant, exceeding the inflation rate for healthcare expenses (ranging between 4.3% and 6.3% in the past year) and irrespective of the consumer’s age and claims record. There is a wide discrepancy between regulations and industry practices.
Another area that warrants attention is health insurance for senior citizens. Those above 65 are currently barred from issuing new policies for themselves. India is undergoing a demographic shift, with the elderly population projected to increase from about 10% of the population (149 million in 2022) to 30% (347 million) by 2050, according to the India Ageing Report 2023. This elderly population will surpass the current population of the US. While most developed countries allow anyone to buy health insurance, it becomes significantly more expensive with age, as insurance companies base their prices on risk, and older people are more likely to need medical care.
Several developed countries have senior demographics ranging from 16% to 28%, raising concerns about access to healthcare, affordable medicine, and appropriate caregiving infrastructure. India needs to learn from these nations, which have government-funded public health systems.
In India, the economic elite have access to “family floater” plans that cover individuals and their parents at a lower cost than individual senior-citizen health insurance. However, the government must strive to make such plans affordable for all sections of society. A healthy population is key to prosperity, especially as the upcoming decade is dubbed India’s ‘make or break’ moment to reap its demographic dividend. The focus should now be on broadening health insurance eligibility and massively upgrading affordable healthcare.