India currently spends a little over 2% of GDP on healthcare, which is less compared to other countries at a similar stage of development. For a growing country like India, Health Insurance experts believe that the government should commit to spending approximately 3-5% of GDP on healthcare as it would ultimately affect the ability and capacity to become the fastest growing economy.
Health insurance has become a basic necessity today, whether one is self-employed or a salaried person. It is a critical component in mitigating rising health care costs while providing access to quality health care treatments for individuals and families.
Access to health insurance protection for the elderly, who make up approximately 9% of our population, and with a higher life expectancy is also crucial. However, penetration of health insurance is still very low in our country. More than 50% of health expenses are paid out of pocket.
India is a price-sensitive market where people want to get maximum value from whatever they buy. A tax advantage therefore acts as an incentive for people to buy health insurance cover.
“Given the importance of health insurance in protecting families and the elderly against rising hospital costs and easing financial strains, under these circumstances the insurance industry would urge the government to consider reducing the existing 18% GST rate on retail health insurance products.” Anand Roy, MD & CEO, Star Health And Allied Insurance.
Currently, the government levies 18% GST on health insurance premiums. The high GST rate not only makes health insurance expensive but is also a limiting factor as which health insurers find it difficult to build OPD benefits into health insurance products.
This reduction in GST rate would not only improve affordability of health insurance for the general public but also contribute to increasing insurance penetration and accessibility, especially in tier-II, tier-III cities and rural markets, he added.
Echoing what Roy said, Krishnan Ramachandran, MD & CEO, Niva Bupa Health Insurance also feels that to give impetus to IRDAI’s vision of ‘Insurance for all by 2047’, the government should consider lowering the prevailing high GST- health insurance rate.
Read also: In the backdrop of IRDAI’s ‘Insurance for All by 2047’, Insurers expect encouraging changes from Budget 2024
“In the next budget, the government may look at providing incentives and tax exemptions to companies and bring regulations that encourage both corporates and SMEs to opt for health insurance for their employees,” he said.
Many customers today consider buying health insurance because apart from offering financial protection in case of a medical emergency, it also offers additional tax benefits under section 80D. Therefore, it becomes easier for customers to think about buying insurance from a savings point.
According to the veteran insurer, 80D tax exemption limit should be linked to inflation and revised periodically to adjust for inflation.
“As an industry, we would like to see an increase in the current limit of 1 lakh to claim tax deductions under section 80D as it would encourage more people to opt for health insurance. Also, tax exemptions for insurance purchases should be part of. the new tax regime that the government launched,” he said.
Policyholders can currently claim a deduction of up to Rs 25,000 when they buy health insurance for their parents who are below 60 years of age and Rs 50,000 if parents are above 60 years of age. Considering that senior citizens need health insurance the most, the government may consider increasing this limit to allow a deduction of 50,000 for parents below 60 years and 1 lakh for parents above 60 years.
Also Read: BFSI honchos discuss what’s in store for Union Budget 2024
This tax benefit will encourage more people to opt for health insurance for their elderly parents. Additionally, tax exemptions should also be allowed for dependent family members such as brothers and sisters, Ramachandran expressed.