Have you noticed an increase in healthcare expenses over recent years?
The rise in healthcare costs is caused by several factors, with Medical Inflation being one of them. The growing healthcare expenses linked to medical inflation can be concerning, whether it's the price of medicines, treatments, tests, or consultation charges. While having a health insurance plan can offer relief in managing expenses, it may still have various impacts on you.
In this piece, we'll explore the reasons behind medical inflation, how it influences health insurance and tips to tackle the issue.
Suggested: Why does group health insurance premium increases annually?
What is Medical Inflation?
Inflation in medical terms refers to the rising cost of healthcare goods and services over time. It reflects the increasing expenses associated with medical treatments, medications, hospital stays, and other healthcare-related expenses. This phenomenon contributes to the overall increase in healthcare expenditures, impacting individuals, healthcare providers, and insurance companies.
What are the causes of Medical Inflation in India?
- Advancements in Technology
Medical technology advancements, particularly in cancer and heart disease treatments, aim to improve precision and effectiveness. However, the cost of developing such technology, including research, procurement, and training for imported machinery, costs a lot of time and money. The prolonged development duration and reliance on foreign technology contribute to the rise in overall healthcare prices.
- Rise in Medical Tourism
India is known for providing high-quality healthcare services at reasonable prices. This has attracted global travellers to seek various medical treatments from India. International patients often seek services such as organ transplants, knee or hip replacements, or cancer treatments. This increased demand contributes to the overall cost of healthcare facilities.
- High Demand for Healthcare Services
The advancements in medical sciences have increased their demand, leading healthcare providers to charge higher fees for treatments and procedures. The willingness of people to pay more for quality treatments further contributes to the upward trend in healthcare prices.
- Effects of the COVID-19 Pandemic
The COVID-19 pandemic marked a pivotal moment in India's healthcare sector. The sudden surge in demand for medical equipment, such as ventilators and oxygen cylinders, led to an increase in healthcare prices. Additionally, there was a 10-20% rise in health insurance rates due to a rise in claims during the pandemic.
- Increased Raw Material Cost
The increased cost of healthcare in India is also due to a high surge in prices for raw materials used in medicines and medical equipment. Additionally, higher import taxes, freight costs, warehouse fees, and emergency aid expenses also contribute to the overall increase in healthcare costs.
- Change in Treatment Cost Per Person
Change in the treatment cost per person refers to the change in the cost of basic components of the treatment or medical procedure. This change is influenced by factors such as expenses for hospital consumables, personnel, consultations, and other costs associated with utilities, rent, or property.
What are the current medical inflation rates in India?
According to reports, the medical inflation rate in India reached 14% in 2021, the highest among Asian countries. The significant medical inflation in India for 2022 resulted in a 16.5% increase in retail premiums and a 31% surge in group health insurance premiums.
According to reports, despite the high medical inflation rate, the demand for medical insurance in India surged by 25% in 2022.
How is this impacting Health Insurance Premiums?
- High medical costs burden insurers
With the escalating costs of medical treatment and healthcare services, insurance companies face an increased financial burden. Consequently, these companies are compelled to pay higher compensation, and ultimately, they pass on these elevated costs to customers in the form of higher premiums.
- Transition to older age groups results in a premium hike
Health insurance premiums usually remain consistent within a specific age group. However, a premium change occurs when transitioning from one age group to another. Moving to an older age group may result in a significant rise in the premium, sometimes as much as 50%.
- Severe impact on senior citizens and people with pre-existing diseases
Senior citizens and people with pre-existing diseases are more prone to requiring expensive medical treatments compared to younger individuals. Due to the higher compensation needed for senior citizens, insurance companies consequently raise the premiums for their policies.
How to manage rising Group Health Insurance premiums caused due to medical inflation?
- Introducing copay to parents and or or parents-in laws
A health insurance co-pay is a set percentage of the claim amount paid by the policyholder (employee), with the insurer covering the remaining portion according to policy terms. Opting for co-pay for either parents or all individuals in the GMC policy can effectively lower the premium.
- Introducing disease wise capping
Certain diseases in an insurance policy have capped coverage, meaning the insurance company approves only a set percentage or specific amount for claims related to these diseases during the policy period. The policyholder (employee) is responsible for paying the remaining amount during hospitalization, thus reducing the premium.
Read: Room-rent capping
- Consider reducing the sum insured
To reduce insurance premiums, consider decreasing the sum insured. Ensure a balance between adequacy and affordability while aiming to lower the insurance premium.
How to manage rising retail insurance premiums caused due to medical inflation?
- Purchase Health Insurance at the youngest age possible
Purchasing health insurance early ensures lower and more affordable premiums. These plans provide coverage for hospital bills and associated expenses, protecting you from escalating healthcare costs. The sooner you invest in health insurance, the better it is for both your well-being and finances.
- Opt for No-Claim Bonus Health Insurance
Certain insurance companies often reward policyholders with no-claim bonus benefits for each year without claims. These benefits may include an increase in policy coverage or a premium discount. With every claim-free year, these benefits increase giving you a good way to improve your policy coverage and deal with rising medical inflation.
Final thoughts
The progress in medical technology has enhanced the efficiency of the healthcare sector, meeting the rising demand for top-notch healthcare services. There are improved chances of treating conditions like cancer and heart disease. But these advancements come with a price.
Learning how to manage the increased premium rates caused by medical inflation can enable you to access top-notch healthcare without straining your finances.
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