Escalating health insurance costs mean more people are vulnerable to high medical costs

The other day I received an email from Print that gave me the opportunity to write openly about any topic that was on my mind to be published on The Print.

I was excited about the opportunity and thought maybe I should highlight a neglected topic that affects most of our lives. Like most of us, I have an aging parent to care for.

In 2011, on the very day that India celebrated the world title, my father breathed his last after suffering his second heart attack. Like most of our parents, he didn’t bother with health insurance either.

I was fresh out of college at the time of his first heart attack, I had saved some money by working part-time, money earmarked for starting my own business. I had plans for what today would be called a startup. I ended up spending that money on my father’s treatment and, with an unmarried sister, I became the only breadwinner in the family. The typical Bollywood cliché of my personal history is certainly not lost on anyone here.

After learning my lesson the hard way, I decided not to make the same mistake with my mom. I finally bought Rs. 3 Lac health insurance coverage for my mother in 2014. My mother was already 62 years old and suffered from high blood pressure, arthritis and thyroid disease. The premium was Rs. 12535/- with co-payment condition. I wondered if I had two aging parents and a family of my own to support, how I would have handled such an expense.

This is how my story with health insurance began. Nowadays we are all advised to get health insurance early to avoid high premiums and to cover pre-existing conditions. No one tells you, however, that your health insurance premiums are not only linked to your health and age, but are suddenly multiplied by what is known as medical inflation.

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Insurance companies track how much treatment costs have increased over the year and get IRDA to approve increases in insurance premiums. Mind you, inflation only affects the premiums, your sum insured remains almost unchanged.

Since 2019, The Medical Inflation bug has also hit my premiums:

Year of PREMIUM PREMIUM AMOUNT % Increase from Previous Year 2014 12535.00 0 2016 12744.00 1.66 % 2017 0.66 % 2018 13164.00 2.611.00 40.00 % 2021 23360.00 27.57 % 2023 35336.00 19.65%

The insurance company has managed to increase the premium by over 20% every two years since 2019 and IRDA has been a willing partner in this endeavor. I was concerned about the insurance being too low, so in 2022 I increased it to 5 Lacs and paid an even higher premium.

Whenever an insurance company decides to increase their premium, IRDA approves it. The process includes submitting relevant data to IRDA, publishing the intent in newspapers to allow the public to record objections and informing policyholders of the said change. It all seems very fair. However, I don’t recall reading about an insurance company’s intention to increase premiums and asking for feedback, I’m sure it’s there somewhere. As a policyholder, I don’t get any notification of an increase in premium either, they will certainly call several times when an extension is due.

The term medical inflation, which has nothing to do with your sum insured but only with the premium, is also interesting. One would assume that the sum insured would also be affected by medical inflation and IRDA should be asking companies to increase the sum insured to match the increased premiums, unfortunately this part of the reality has not caught on to any of the concerned authorities.

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Insurance companies argue that they give a cumulative bonus for no-claims years, but it’s nowhere near the increased premiums and it’s contingent on you not making a claim that year. The follow-up premiums, on the other hand, increase significantly in the event of damage.

Insurance companies face challenges. However, fraudulent claims, increased administrative costs and most importantly the need to show shareholders a 20% CAGR growth they deserve by investing the premiums collected and by the growth that our massively under-performed insurance sector offers.

Carelessly raising the premium is a way of killing the hen that lays the golden egg. People end their health insurance halfway through, especially for the elderly, leaving them vulnerable and constantly underinsured in India. I hope those in power find some time to think about the issue. And for regular people like me, don’t be swayed by initially low bonus offers, please consider the subsequent explosion of bonuses.