Rising medical inflation may lead to higher health insurance premiums for policyholders, especially, senior citizens and people with pre-existing medical conditions.
Says Adil Haroon, vertical head, of GoalTeller, a financial planning app: “As the cost of medical treatment and healthcare services increases, so does the burden on insurance companies. Thus, insurance companies need to pay a higher compensation and eventually, they pass on this cost to the customers in the form of higher premiums. This impact might be more severe for senior citizens and people with pre-existing medical conditions.”
“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 analyzing your medical insurance needs, following a healthy life, and choosing appropriate deductibles and co-payments can help you manage your health insurance plans,” adds Haroon.
Medical inflation in India rose at an alarming rate of 14 per cent in 2021, which was more than that of China, according to a recent report by Plum, an insurtech company, titled "Health Report of Corporate India 2023."
Medical inflation as a term denotes the increase in the expenses related to health and healthcare services. These costs include the cost of medicines, diagnostic tests, doctor's fees, and hospitalization charges. It is a key driver of Insurance costs, and hence, premiums increase when the medical inflation rate rises.
According to a recent study by Plum, nearly 59 per cent of individuals skip their annual checkups, and 90 per cent neglect regular consultations to monitor their health which raises concerns about the long-term consequences for individual well-being and overall health outcomes.
According to experts, inflation works against your hard-earned money. When it comes to medical inflation it is high compared to say food or fuel inflation. It impacts present & future medical insurance costs – both.
What 14 Per Cent Medical Inflation Means: According to Policybazaar data, considering medical inflation in the range of 10 to 15 per cent, the costs for treatment of diseases such as cancer treatment, heart transplant, liver cirrhosis, and kidney transplant in the year 2021 are here as follows- Rs 34.6 lakh, Rs 23.6 lakh, Rs 16.9 lakh, and Rs 12.4 lakh respectively. In 2022, the costs for cancer treatment, heart transplant, liver cirrhosis, and kidney transplant are Rs 39.4 lakh, Rs 26.4 lakh, 18.9 lakh, and Rs 14.1 lakh respectively. In 2023, the costs for cancer treatment, heart transplant, liver cirrhosis, and kidney transplant are Rs 44.6 lakh, Rs 29.9 lakh, Rs 21.3 lakh, and Rs 15.9 lakh respectively. In 2024, the costs for cancer treatment, heart transplant, liver cirrhosis, and kidney transplant are Rs 50.8 lakh, Rs 34 lakh, Rs 24.3 lakh, and Rs 18.2 lakh respectively.
Increase In Health Insurance Premium In Last Three Years: According to a recent study by HDFC Ergo, thanks to Covid, there was a whopping increase of 25 per cent in premiums during 2021-2022. According to experts, post-COVID, health insurance premiums have increased anywhere between 10 to 25 per cent after the pandemic, mainly due to higher payouts. According to a survey by LocalCircles, in the last 12 months, 52 per cent of policyholders experienced an increase of over 25 per cent in their health insurance premiums. Also, according to LocalCircles, for people who are above 65 years, the premium amount has doubled over the last two years.
How To Cover Yourself: Says Madhupam Krishna, Certified Financial Planner (CFP), and Sebi RIA, chief planner, WealthWisher Financial Planner and Advisors, a financial planning and wealth management firm: “The rise in medical inflation drives up the cost of treatment and companies offering health plans find it hard to maintain their services or own profits. So they increase premiums. A subscriber often is searching for the desired cover at the lowest cost which is premium. Inflation indirectly increases the features of the health plans. For eg copayments & deductibles are increased by the insurance companies.”
“Even if you are on an employer’s provided plans, the insurance company may lower benefits or increase the self-financed limit. This brings down the quality of the treatment opted for. Another aspect of inflation is – the need for rising cover. Today you may think Rs 20 lakh is enough for your family but just in three to five years you may think the adequate cover required would be Rs 40 lakh. The reason for your upgrade is the same - inflation. For this, you have to buy additional cover and the household budget increases,” adds Krishna.
According to experts, medical inflation is a truth and we have to swallow it like a bitter pill. Some of this can be managed by comparing various plans, shifting some risks to critical insurance policies, opting for copayments by investing in healthcare corpus, living a healthy life, and exploring government assistance programs.
“Medical inflation is a crucial factor to consider when selecting health insurance coverage because it influences premiums, benefits, out-of-pocket costs, provider networks, policy terms, and the overall affordability of the plan. Yes, the premiums might seem to be at an all-time high, but investing a little can save you from digging deep into your savings if a medical emergency hits you. Also, it is critical that while we make our financial plans, we ensure that we take medical inflation at a reasonable number which should be safely assumed at around 10 per cent or thereabouts,” adds Haroon.
