The healthcare sector in India is largely underpenetrated with government expenditure constituting approximately 1.4 per cent of India's GDP. Private sector expenditure constitutes 70 per cent of the total healthcare expenditure out of which 62 per cent is out of pocket while only 8 per cent is covered through pre-financed instruments, as per World Bank Data (2014). Moreover, less than 30 per cent of India's population has healthcare cover indicating considerable potential for the health insurance industry.
The health insurance industry, as of today, caters largely to institutional treatment, leading to considerable opportunities in targeting outpatient treatment in areas such as consultation fees, diagnostics and medicine expenses. The outpatient treatment, with medical inflation at ~15 per cent has created a strong need of developing a health savings account product combined with a robust health insurance plan in order to bring in spend efficiencies and protection for the Indian population.
In order to understand the key imperatives for offering a comprehensive health plan in the Indian market and suitability of Health Savings Accounts, FICCI and KPMG in India conducted a joint study. A report titled 'Health savings account in India' released by Mr. T S Vijayan, Chairman, IRDAI at FICCI's 10th Annual Health Insurance Conference provides key insights and recommendations from this study.
Sharing his views on the occasion, Mr. Antony Jacob, Co-Chair, FICCI Health Insurance Committee and Chief Executive Officer & Whole Time Director, Apollo Munich Health Insurance said, "Healthcare costs today are going up by the day due to lifestyle diseases in particular and the only way the gap between rising healthcare costs and affordability can be bridged is if the insurance sector develops a sustainable and viable mechanism. Today with out of pocket expenses accounting for nearly twice as much as institutional expenses there exists a real need for an all-inclusive solution towards healthcare in the Indian market".
Speaking on the report, Mr. Shashwat Sharma, Partner and Head, Insurance, KPMG in India said, "A key imperative for enabling social security for the population is ensuring they have access to quality healthcare. Currently, 73 per cent of the population does not have access to pre-financed instruments for healthcare leading to 90 per cent of private sector expenditure being done through Out of Pocket spends. The concept of a Health Savings Account could therefore prove to be a viable option for creating a corpus for meeting future healthcare needs. This will ensure that more and more people have funds for accessing healthcare services, thereby going a long way in realising India's goal of providing healthcare to all".
Key highlights of the analysis:
The Indian healthcare industry is driven by out of pocket expenditure at 62 per cent of the entire expenditure
Health cover is provided to only 27 per cent of the population while remaining 73 per cent is uninsured.
The analysis demonstrates that there exists a significant gap in coverage offered by current products and the need for a comprehensive ecosystem of financed healthcare. The joint report by FICCI and KPMG in India has analysed these gaps to develop recommendations on a comprehensive health insurance product as well as role of various stakeholders such as regulators, government and the insurance industry. The recommended models include a centralised health savings scheme managed by a government nominated body or privately managed by insurers with centralised fund management. The report delves into key regulatory interventions for ease of execution of either model. The report concludes by suggesting introduction of a Health Savings Account (HSA) scheme linked to a high deductible health insurance cover, thereby allowing for end-to-end coverage of healthcare needs, which could be the catalyst to bring a major part of the population under the ambit of health insurance.
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