Budget allocations for the health sector have always played an important role in shaping the landscape of India’s insurance industry, particularly the health insurance segment. As we approach the new budget session, many questions arise about how government policies would impact the sector and its stakeholders.
In the last budget, there were a few changes in the sector such as an increase in the health insurance deduction limit under section 80D up to Rs. 50,000, that incentivised individuals, especially senior citizens to avail of insurance products.
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Last year’s budget saw an allocation of Rs. 86,175 crores to the Ministry of Health and Family Welfare, representing an increase of 16% from the previous year. This allocation aimed to boost public health services, reduce out-of-pocket costs, and reduce the pressure on insurance providers. Naturally, the sector is seeking more growth-centric measures in the upcoming budget that could boost insurance penetration and enhance financial security.
Both insurance companies and potential policy buyers are expecting favourable changes in incentives that could further ease the financial burden of getting health insurance and increase the chances of securing lower insurance premiums.
Expected Allocation of Budget on Health Sector
After the pandemic, the government is expected to continue to prioritise healthcare spending, with many expecting the allocation to increase by 2.5% of GDP with a focus on improving basic healthcare infrastructure, upgrading public hospitals, and expanding digital health infrastructure.
Similarly, preventive health has received a lot of attention in recent years, and the industry expects the government to allocate funds for preventive healthcare, including vaccinations, and public health campaigns. This approach can lead to a healthier population and reduce the frequency of insurance claims, benefiting insurance providers and policyholders.
Additionally, strengthening government-backed insurance schemes could also prove beneficial. Government-backed health insurance schemes like Ayushman Bharat have been providing funds to the unprivileged. With an increase in funding flow towards such schemes, their reach could be enhanced and more individuals can benefit from its provisions.
However, there are a few other measures that could further help enhance policyholder’s experience with insurance products and coverage. For instance, more focused tax deductions on health insurance premiums and medical expenses can provide immediate relief to policyholders.
Extending tax benefits and reforms to cover a broader range of medical expenses like telemedicine and mental health services could be a great health initiative. Encouraging digital health integration by allocating funds toward the digital health infrastructure such as telemedicine platforms and electronic health record systems could improve health access and leverage digital transformation.
There’s also a need for a re-evaluation of the GST rate, currently set at 18% for both health and term insurance. A balanced tax structure could ensure that pricing benefits directly reach end consumers, encouraging broader investment in life insurance. Additionally, tax deductions for health insurance and medical expenses can provide better financial stability making it easier for individuals to invest in health plans regardless of their high cost.
Last but not least, budget allocations for businesses that keep health insurance confidential, promote its benefits, and assure transparent claim settlements, could also foster positive changes in the insurance landscape.
The upcoming budget could prompt changes in the health sector, by influencing the insurance industry. The government can create an accessible health insurance ecosystem by focusing on healthcare spending, taking preventive measures, and improving tax benefits. If the government implements these measures in the upcoming budget session it can influence the insurance options of the customers by increasing their affordability and accessibility to health coverage.
-The author is GM, General Insurance at Insurance Samadhan. Views expressed are personal.