The Hindu Business Line : Out-of-pocket spending on health care high: Report

While most customers agree with the concept and necessity of health insurance, they are sceptical about tedious claims processing procedures, limited options of hospitals/doctors and limited product offerings by insurance companies.

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Mumbai, Dec. 9 The Indian healthcare industry is poised to grow at a compounded annual growth rate (CAGR) of 25 to 30 per cent to reach a market size of around Rs 28,000 crore by financial year (FY) 2015, according to global consulting firm KPMG. The sector has grown at a CAGR of 37 per cent over the last seven years.

As per the Insurance Regulatory & Development Authority’s data, the market size of the health insurance sector stood at Rs 5,152 crore in FY 2008 (with only a small section — around 2 per cent — of the total population being covered so far), up from Rs 761 crore in FY 2002.

According to the Confederation of Indian Industry (CII)-KPMG Report on “Health Insurance Inc.: The Road Ahead”, achieving a 25-30 per cent CAGR growth is dependent on the ability of the key stakeholders — government, regulator, healthcare providers, insurance companies, non-government organisations/self-help groups, third party administrators, distribution channel partners, health centres and the media — to strengthen the health insurance industry.

“While the industry (health insurance) is witnessing some decrease in the group health insurance business due to the current financial crisis, the retail market is expected to grow in the near future… While health insurance forms a low proportion of the total business for life insurance companies in India (0.2 per cent of the individual regular premium for FY 2008), it forms a significant proportion of the business for non-life insurance companies (around 18 per cent of the Gross Written Premium for FY 2008),” says the report. The health insurance sector, which is one of the most promising sectors in the Indian non-life industry today, needs to be strengthened around the “Pillars of Change” — consumer awareness, standardisation and accreditation of healthcare providers, healthcare infrastructure, and data and information exchange — and the “Enablers of Growth” — product and pricing innovation, technology and channel innovation.

Healthcare expenditure

Total healthcare expenditure in India has hovered around 5 per cent of Gross Domestic Product (GDP), with public funding contributing less than 1 per cent of GDP. Limited public funding on healthcare in the country has necessitated out-of-pocket spending to be the dominant component, funding 76 per cent of the total healthcare expenditure.

KPMG has estimated that around 15 per cent of the population was covered under some pre-paid scheme in India in 2007, with less than 2 per cent share of private health insurance.

“In countries like India and a number of other developing countries, which still rely mostly on out-of-pocket payments, universal access to healthcare is elusive. A significant proportion of the population is forced to make direct payments, often with a heavy burden of debt, to access healthcare from the market because the public provision is grossly inadequate or non-existent,” the firm said.

Pooling of risk

“High reliance on out-of-pocket spending alone can pose serious health policy challenges related to financial risk protection in future years. India needs to focus on the potential ways to pool this risk through insurance and reduce out-of-pocket expenditure, for which there is a need to step up public and private sources of healthcare funding,” says the report.

Pointing to the challenges faced by the Indian consumers, the CII-KPMG Report says that while most customers agree with the concept and necessity of health insurance, they are sceptical about tedious claims processing procedures, limited options of hospitals/doctors and limited product offerings by insurance companies. More importantly, consumers have limited understanding of the features of health insurance products which the industry needs to address and change the perception about health insurance in India.

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