Higher Incomes, Rising Medical Costs, Create A Health Insurance Crisis In India 

*This is a sponsored feature by ICICI Lombard General Insurance Company Ltd.

Shravan Iyer, his wife and two children were happy, healthy and active. He had no reason to believe any of them would need medical treatment any time soon, and even if they did, he was confident his employer’s Rs 5 lakh family floater health cover would be enough.

Unfortunately, fate had other plans. One day at work, 42-year-old Shravan began experiencing shortness of breath, nausea and chest pains. An ambulance rushed him to the hospital, where doctors diagnosed him with a severe heart blockage that would require bypass surgery. The total cost: a whopping Rs 10 lakh, including hospitalization, surgery, medication and post-operative care.

Shravan’s wife Sujata had to sell her gold jewelry and liquidate one mutual fund they’d been using to save for their daughter’s wedding. It turns out their employer-sponsored health insurance just wasn’t enough for this emergency.

Shravan isn’t alone in being totally unprepared. Many Indians have seen their standard of living gradually rise over the last two decades. The increase in per capita incomes of middle-class households has meant greater choice of how and where to spend on health care and medical treatment. But this hasn’t translated to more Indians being covered under some sort of health insurance plan - less than 20 percent of urban and rural Indians have health insurance coverage.

When you consider that this newfound prosperity has been accompanied by greater life expectancy and so-called lifestyle diseases such as diabetes, cardiac ailments and certain types of cancer, the lack of insurance coverage among Indians is worrisome.

Around 130 million people will be afflicted with such illnesses in the coming years. Most are unprepared for serious diseases or emergencies, either because they have no health insurance or not enough of it. According to data from personal finance portal BigDecisions.com, only 5 percent of Indians have sufficient insurance based on their age, family status and location.

Here are some facts that magnify India’s health insurance crisis.

Healthcare Costs Are Skyrocketing

According to World Bank data, per capita health expenditure in India was $75 (Rs 4,793) in 2014. But the actual cost of treating life-threatening diseases, chronic illnesses and emergencies is much higher.

Procedures such as heart bypass surgery can cost more than $5,000 (Rs 3.2 lakh) in urban India. What’s more, healthcare inflation has hit double digits, and the trend looks unlikely to reverse.

The cost of treating common ailments such as communicable diseases and diseases of the circulatory system in urban centres have climbed, as seen below:

These figures will only escalate with time, but so far, the number of Indians who have protected themselves against health-related financial difficulties hasn’t kept pace.

Only 1.5 percent to 2 percent of total healthcare expenditure in India is currently covered by insurance providers, meaning households are left footing massive bills using savings or other means.

Few Indians Are Prioritizing Health Insurance

Only 18 percent of urban Indians and 14.1 percent of those in rural areas have any kind of health insurance coverage. Of that, many are overly reliant on corporate insurance plans, which come with their own set of conditions and, more importantly, have a low sum insured.

Group policies are usually in the single-digit lakhs, which isn’t much for a family of four. Even if you don’t have dependents, you should consider what would happen if you did. Your parents may not have any insurance at all. An independent policy can cover everyone under a family floater.

Data show that, of 50 countries classified as low- and middle-income, India has the sixth highest number of out of pocket spenders. The spillover effect is clear: more money pulled from household savings for healthcare means less to spent on food, education and long-term goals such as retirement. These consequences snowball into one looming scenario - a financial crisis for middle-class Indian households.

Sources:

IBEF | World Bank | IndiaSpend | BigDecisions