Unravelling the Mystery: Medical Inflation in India and Its Impact on Your Premiums

HEALTH INSURANCE


Unravelling the Mystery: Medical Inflation in India and Its Impact on Your Premiums

Let’s imagine, Kolkata based Rahul Gupta has been seeking treatment from AIIMS Delhi to treat his kidney disease for last two months. Sadly, Rahul has exhausted his health insurance cover over hospitalisation, which ultimately left him with nothing but having to dig into his lifetime savings.

This is not the only example of people becoming prey to the ever-rising inflation. There is no denying that people have been feeling the soar taste of inflation with every single thing- food, vegetables, petrol, and other important products-becoming heavy on the pocket.

In 2023, the country witnessed the highest inflation at 14%. The health sector is no different!

Sadly, medical inflation is a key driver of insurance costs, and hence, premiums increase when the medical inflation rate rises. Health insurance companies are always on the lookout for ways to manage medical inflation better so that they can offer competitive premiums to their customers and mitigate lapses.

Well, before analysing today’s topic, let’s understand what medical inflation is?

Medical Inflation 2023

Simply put, medical inflation is the scenario where the average costs of healthcare service/ services increase over a period of time. When it comes to healthcare inflation, there are a few factors that drive it, such as:

1. Change in Cost per Person

The availability and access to healthcare have increased over the years. People are now better aware of health and healthcare treatments. Medical advancements also lead to more hopeful patients who are ready to try new and innovative treatments.

2. Change in Cost per Service

A few years back, a knee replacement surgery cost about ₹1.8 lakhs, while today, it is nothing less than ₹3 lakhs. This is a classic example of a change in the cost per service, which is also because of an increase in the doctors’ fees, salary of hospital staff, charges of consumables, and overheads of the hospital.

Causes of Medical Inflation in India

Here are some of the common reasons for an increase in the medical inflation rate:

Advancements in the Field of Medical Sciences

There has been an unabated increase in the number of diseases, with new ones cropping up every now and then. Black fungus, Nipah, and Zika were unheard of till a while back. With necessity being the mother of invention, more and more treatments and medications are being discovered. Majority of them being costly, eventually have raised the inflation rate as well.

Growing Demand for Better Quality Healthcare Services

Undoubtedly, the advancements in the field of medical sciences have increased its demand as well. Despite the high-cost services in multi- specialty hospitals, people do not mind spending for the quality treatment received there.

Technology is an Important Factor

The emphasis on state-of-the-art technology in healthcare services plays a key role in the increase in healthcare costs. Hospitals boast their equipment and advanced diagnostic technologies to attract more and more patients, which contributes to the rise in inflation in the medical sector.

The Effects of the Pandemic

COVID-19 surely brought a turning point for the healthcare industry. The rising cases of illness made the insurance company being sceptical about offering insurance coverage. Considering the increasing number of claims, insurance providers have started offering health insurance at an increased rate of 10-20%.

>> Also Read: Health Insurance in India: Know what are the Challenges to its Awareness?

Medical Inflation in India and its Impact

Better medicines, new technology, and easier treatments are some of the lifesaving innovations that make healthcare services more efficacious. Technically, people never had a better chance of coming out of illnesses such as cancer, cardiac ailments, etc. Though this is very good news, and the benefits are tremendous, it comes with a price. A constant increase in healthcare services has further led to rising prices of health insurance premiums.

Inflation makes everything expensive, and increased health insurance prices can indeed be a bitter pill to swallow. While the government tries to keep a check on the prices of essential medicines, there are a number of other reasons that go into deciding the health insurance premium. However, it is quite feasible to deal with the shooting prices if you consider a few things when it comes to health insurance. Understanding the coverage, buying after analysing your medical insurance needs, following a healthy life, and choosing appropriate deductibles and co-payments can help you in managing your health insurance plans.

But wait, here’s the catch!

The IRDAI mandates that the prices of products that are filed with the apex body cannot typically be revised for a term of three years. After this, the insurer can review the rates and file for a revision with the IRDAI. After this 3-year lock-in, there might be a high one-time rise in the premium rates. The increase in premium varies from company to company, also, generally, private companies tend to revise the premiums a little more than public sector companies.

The health insurance premium, in most cases, remains quite constant in a particular age group. Generally, the premium rise is from the old to the new age band. The increase in the health insurance premium for a policyholder moving from one band to the other can sometimes be as high as 50%, in comparison to the previous policy tenure.

Before You Take Off

The rising medical inflation is causing a buzz all over the world,  and  India is not left behind.  In a high medical inflation market such as India, a rigorous methodology is the need of the hour to track the inflation, in order to standardise the re-pricing of premiums. The best way to deal with the increase in healthcare services is to invest in a comprehensive health insurance policy.

Yes, the premiums might seem to be at an all-time high, but investing a little now can save you from digging deep into your savings if a medical emergency hits you. At Care Health Insurance, we strive to offer health insurance options that suit not just your healthcare needs but also your budget.

Disclaimers: The above information is for reference purposes only: Policy Assurance and Claims at the underwriter's discretion.

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