Budget 2024: How healthcare allocations could impact your insurance choices

Budget allocations for the healthcare sector have always played a major role in shaping the landscape of the Indian insurance sector, especially the health insurance segment. As we approach the new budget session, many questions arise about how the government’s policies will impact the sector and its stakeholders.

The last Budget brought several changes in this sector, for example, increasing the deduction limit for health insurance under Section 80D to Rs 50,000, which encouraged individuals, especially the elderly, to avail insurance products.

Also Read: Budget 2024: Healthcare Sector Seeks GST Relief, R&D Incentives, Local Manufacturing

Last year’s budget allocated ₹86,175 crores for the Ministry of Health and Family Welfare, a 16% increase over the previous year. The objective of this allocation was to strengthen public healthcare services, reduce out-of-pocket costs and reduce pressure on insurance providers. Of course, the sector is looking for more growth-oriented measures in the upcoming budget that could increase insurance penetration and improve financial security.

Both insurance companies and potential policy buyers are expecting favorable changes in incentives that could further ease the financial burden of having health insurance and increase the chances of getting lower insurance premiums.

Expected budget allocation for the health sector

The government is expected to continue to prioritize healthcare spending post-pandemic, with many predicting that this allocation will increase by 2.5% of GDP, with a focus on improving primary healthcare infrastructure, upgrading public hospitals and expanding digital healthcare infrastructure.

Similarly, preventive healthcare has gained a lot of attention in recent years, with the industry expecting the government to allocate funds for preventive healthcare, including vaccinations and public health campaigns. Such an approach could lead to a healthier population and reduced insurance claims, which would benefit insurers and policyholders.

In addition, strengthening government-backed insurance schemes could also prove beneficial. Government-backed health insurance schemes like Ayushman Bharat provide funds to the underprivileged. As funds flow into such schemes increases, their reach could be expanded and more people could benefit from their provisions.

However, there are several other measures that could further help improve policyholders’ experiences with insurance products and coverage. For example, more targeted tax deductions for health insurance premiums and medical expenses could provide policyholders with immediate relief.

Expanding tax breaks and reforms to cover a wider range of medical expenses, such as telemedicine and mental health services, could be a great health initiative. Encouraging the integration of digital health by allocating funds for digital health infrastructure, such as telemedicine platforms and electronic health records systems, could improve access to health care and leverage digital transformation.

There is also a need to reassess the GST rate, which is currently 18% for both health and term insurance. A balanced tax structure could ensure that the price benefits directly reach the end consumer, encouraging broader investment in life insurance. In addition, tax deductions for health insurance and medical expenses can provide better financial stability, making it easier for individuals to invest in health plans, regardless of their high costs.

Last but not least, budgetary measures for companies that maintain the confidentiality of health insurance, promote its benefits and ensure transparent claims settlement can also contribute to positive changes in the insurance market.

The upcoming budget could bring about changes in the health sector by influencing the insurance industry. The government can create an accessible health insurance ecosystem by focusing on healthcare expenditure, taking preventive measures and improving tax benefits. If the government implements these measures in the upcoming budget session, it could impact the insurance options of customers by making them more affordable and accessible to health insurance.

-The author is GM, General Insurance at Insurance Samadhan. The views expressed are personal.