Missing Middle is that large part of our population—about 56 crore individuals—who are not protected by any type of health cover. This insurance gap has to be plugged to protect the Missing Middle from financial shocks and healthcare debt.
As we grapple with the ongoing third wave of the Coronavirus pandemic, it is sufficient to say that most Indians are prioritising matters of health like never before. In fact, even before the pandemic set in, India had outlined the expansion of health insurance/assurance coverage as a vital step to achieve Universal Health Coverage (UHC).
As part of its efforts to achieve UHC, initiatives like the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) provide comprehensive hospitalisation cover to the bottom 40 per cent of the country’s population, while another 18 per cent is insured through other government and group health schemes. Retail health insurance penetrates only a meagre 3.2 per cent of the 138 crore population, leaving a huge part of it—38.8 per cent, which is about 56 crore individuals—unprotected from any sort of health insurance cover, making them prone to financial shocks and healthcare debt. Termed as the ‘Missing Middle’ in NITI Aayog’s October 2021 report on the health insurance space in the country, it is important that all efforts be made to secure this population base and protect them from the catastrophic effect of high out-of-pocket expenditure (OOPE) arising from hospital expenses in times like the current Covid crisis.
It is imperative to note that India’s current healthcare spend is only 3.6 per cent of its GDP, which is much lower than that in other developing countries. Due to this, India has one of the highest out-of-pocket expenditures—close to 62 per cent— making it very difficult and costly for a common man to access quality healthcare.
The aforementioned NITI Aayog report estimates that most segments of this demography can afford to pay Rs 4,000-6,000 per year to protect their family from hospitalisation expenses; a figure arrived at based on extensive industry consultations and market research. However, most health insurance products, including Arogya Sanjeevani, the standardised health insurance product by the Insurance Regulatory and Development Authority of India (Irdai), entail an annual premium ranging from Rs15,000 to Rs18,000 for a family comprising of two adults (45 years being the age of the senior most member) and two children for a sum insured of Rs5 lakh.
Understandably, this price gap between what they can afford and the actual premium range needs to be brought down on an urgent basis and the inclination of this ‘Missing Middle’ segment of the Indian population to secure themselves and their family’s health needs to be increased. Towards this end, the entire health insurance industry has been clamouring for a reduction in the GST rate on health insurance premiums, which stands at 18 per cent currently.
While there are unified calls to bring the applicable GST rate on such premiums to 5 per cent, it must be noted that all essential commodities are currently out of the purview of the GST regime. This makes the call for the GST reduction all the more important, especially considering the lack of any social security cover for Indian citizens. This picture becomes even more gloomy when we consider the plight of senior citizens who remain one of the most under-insured population classes in the country. Even the Arogya Sanjeevani product can be purchased only up to the age of 65 years. Therefore, there is a humanitarian need to completely forgo GST collection on health insurance premiums for this class.
While the central government has reiterated that there are no recommendations from the GST Council to reduce the GST rate on the premiums collected, it is a matter that needs addressing in Budget 2022. In addition to improving the affordability of standard health insurance products, a reduction in GST rates will boost the health insurance sector due to the improved insurance penetration and increased propensity of Indian citizens to avail timely healthcare. This will go a long way in achieving India’s goal of UHC and pave the way for a healthier population that is vital to our country’s long-term prosperity.
The author is CEO, Reliance General Insurance Co. Ltd