Employers must take health cover for staff or lose tax gains: Montek

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Companies not complying should be denied tax deductibility on wage payment.

Mr Montek Singh Ahluwalia
Mr Montek Singh Ahluwalia

Insurance push

CII asked to study how other emerging market countries are doing in the organised sector for health insurance

Govt to comprehensively review the Central Government Health Scheme and Employee State Insurance scheme

Our Bureau

New Delhi, Sept. 9

The Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, today mooted denial of tax deductibility on wage payment if the employer in the organised sector does not take steps to enrol the employee in a group health insurance scheme.

Speaking at a CII Health Insurance Summit, Mr Ahluwalia said employers in the organised sector should be encouraged to make it compulsory for their employees to join a group health insurance scheme, in which the employer and the employee make contributions.

As an incentive for this, the insurance premium that is paid can be exempt from tax, he said. Currently, when a company submits its return for taxation purposes, it takes a deduction for the wage paid to every employee.

He said India will never be able to expand insurance for which people pay unless an element of incentive-cum-compulsion is introduced. “If you leave it to people, only rich people will buy insurance, even middle class people will not buy insurance,” he said.

Insisting that his proposal is feasible, Mr Ahluwalia said the Government should give it a very serious consideration.

“That (compulsion) is a pretty drastic thing to do, but it is very easy to do. If the person concerned doesn't want a job in that company, then he can look elsewhere. I guarantee you there will be no huge protests. Unless we do something like this, we will just sit around,” he added. However, he said it will not be possible to force self-employed people to take health insurance.

He said CII should conduct a study on how other emerging market countries are doing the same in the organised sector for health insurance.

Industry estimates suggest that despite the country's private health insurance industry's business volumes recording an annual growth of over 35 per cent, around 85 per cent of the population is still uninsured.

Mr Ahluwalia said if a sick person has to be looked after by the public health system, it is better to help that person get insurance than to encourage a system where they do not do that and then the person ends up paying the total bill later on.

The spending on health in India is around 5-6 per cent of GDP, he said, adding that in this the contribution of the Centre and State governments is just one per cent, while the remaining is private expenditure. But in other countries, the contribution of the Government in health is higher than the private spending, he added. Therefore, in the 11 {+t} {+h} Plan, the target was to increase the expenditure on health by the Centre and State Governments to 2-3 per cent, he said. In the 12 {+t} {+h} Plan, the aim is to comprehensively review the Central Government Health Scheme and Employee State Insurance scheme and improve them, he said.

“If we have to expand our expenditure on health service to over three per cent of GDP, the point is whether to spend all of that in creating public health infrastructure or spend some of it to support health insurance programmes. It is a major choice and we want your feedback,” he added.

Related Stories:
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Panel to overhaul group health insurance sector
Only 1.2% Indian households have health cover: Study
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Corporates pruning health insurance cover for staff

(This article was published in the Business Line print edition dated September 10, 2010)
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