Health insurance is an essential form of financial investment. In the post-pandemic world, having an effective health insurance policy should be on top of your financial planning list. If you are new to the concept of health insurance, it can be tricky to choose a policy that serves you best, given the plethora of choices in the market. Moreover, the rising medical inflation in India can also be a hurdle in selecting an insurance policy for yourself and your loved ones.
Health insurance in India
But first, what is health insurance? The concept of health insurance is relatively straightforward. The policyholder pays an amount as a premium to the insurer. If the policyholder needs medical treatment, the insurer will pay or reimburse the expense of diagnostic tests, hospitalisation, and treatment, as per the policy.
In FY21, health insurance accounted for 29.5% of the non-life insurance premiums in India. Out of the 58 insurance companies in the country, 34 are non-life insurers. Of these, 7 are standalone health insurance companies, as per National Investment Promotion And Facilitation Agency data.
What is medical inflation?
Much like other forms of inflation, medical inflation is the economic scenario in which there is a rise in the prices of goods and services in the medical industry.
Various factors can trigger medical inflation. It can result from general inflation or the development of expensive treatment techniques and drugs. A rise in the number of unhealthy people, an ageing population, an epidemic or a pandemic can all place pressure on the healthcare system, increasing costs.
Medical inflation in India
India has witnessed a significant rise in medical inflation in 2021. As per the MMB Health Trends report by Marsha, the rate of medical inflation in India was the highest in Asia, touching 14%.
Due to the pandemic and its aftermath, there has been tremendous pressure on the healthcare system. There has been a shortage of hospital supplies and healthcare staff compared to the volume of patients. Also, hospitals saw an increase in overhead charges due to the inflow of patients. All these factors have led to a rise in medical inflation.
The rising medical inflation in India directly impacts your health insurance. Due to rising prices, health insurance companies will aim to adjust the premium rates to inflation. As the cost of healthcare services increases, the price of your health insurance premium is also likely to increase. Moreover, medical inflation can also lead to stricter policies, more narrow scope of coverage and specific policy exclusions.
Medical inflation can also lead to a situation where the policy amount is insufficient to cover the cost of treatment or medications. For instance, some policies may not cover items such as oxygen masks and PPE kits. But these same items can cause your treatment prices to shoot up unexpectedly.
What can you do as a policyholder in the face of rising medical inflation? Always pick a health insurance plan that meets your primary requirements. It is essential to curate or choose a policy that addresses your immediate health concerns. You can select insurance schemes that allow you to top-up an existing policy to improve coverage. Also, always make room in the policy for emergency conditions.
Inflation has taken a toll on every industry, and the healthcare sector is no exception. As the age increases, one already pays more in premiums, and watching the rates spike up more due to inflation, might be an unpleasant experience. However, staying aware of all available options and choosing the right policy might save you some bucks.