The upcoming Union Budget 2025 carries immense significance for India’s healthcare landscape, particularly for the health insurance sector. As healthcare evolves in response to shifting demographics, technological advancements, and post-pandemic challenges, expectations from the government have reached a crescendo.
Health insurance, including the burgeoning Outpatient Department (OPD) insurance segment, is poised to play a transformative role in making healthcare more accessible, affordable, and efficient.
Here are some key expectations from the budget that could pave the way for significant progress:
Expanding Tax Benefits to Boost Insurance Penetration
One of the most anticipated moves is the enhancement of tax deductions under Section 80D of the Income Tax Act. The current limit of ₹25,000 for individuals and ₹50,000 for senior citizens falls short of addressing the rising healthcare and insurance premiums costs. An increase in these limits would provide taxpayers immediate relief while encouraging greater health insurance policy adoption.
Additionally, separate tax benefits for OPD insurance could be introduced. With a significant portion of healthcare expenses in India attributed to outpatient services, creating distinct incentives for OPD coverage could address a critical gap in healthcare financing.
Reducing GST on Health Insurance Premiums
Health insurance premiums attract an 18% Goods and Services Tax (GST), making policies less affordable for a large population segment. Reducing GST for health insurance, particularly for senior citizens and families, would make these products more accessible. This move would align with the government’s vision of achieving universal health coverage and ensuring financial protection against medical emergencies.
Encouraging Innovation and Digitisation
The health insurance sector is rapidly embracing technology, with innovations such as AI-driven claim settlements, teleconsultations, and digital health records becoming more mainstream. Budget 2025 could allocate funds or offer incentives for insurance providers to invest in these technologies. This would not only improve efficiency and customer experience but also help in fraud detection and management, ensuring the sector's long-term sustainability.
Focus on OPD Insurance
OPD expenses, including doctor consultations, diagnostic tests, and minor procedures, often form a significant chunk of out-of-pocket healthcare costs. Despite this, OPD insurance remains underutilised and underdeveloped in India. The government could encourage the adoption of OPD insurance by offering tax breaks for policies that include OPD coverage or by incentivising insurers to develop comprehensive OPD products. Such measures would address the financial burden on individuals and families, particularly for frequent, smaller healthcare expenses that do not typically involve hospitalisation.
Strengthening Public-Private Partnerships (PPPs)
To ensure the success of health insurance initiatives, the government could foster stronger collaboration between public and private stakeholders. PPPs can play a pivotal role in improving healthcare infrastructure, expanding insurance penetration in rural areas, and creating awareness about the benefits of health insurance. The budget could allocate resources or provide frameworks to facilitate these partnerships effectively.
Addressing Affordability and Accessibility
Affordability remains a significant barrier to health insurance adoption in India, especially in rural and semi-urban areas. The government could introduce subsidies or premium support programs for economically weaker sections. Additionally, initiatives to promote awareness and education about health insurance benefits would go a long way in increasing penetration.
Promoting Preventive Healthcare
Preventive healthcare is gaining prominence as a cost-effective way to address long-term health challenges. Health insurance policies that incentivise preventive measures, such as regular health check-ups, fitness programs, and vaccinations, should be encouraged. The budget could provide guidelines or incentives for insurers to design such products, fostering a culture of proactive health management.
Addressing Elderly Care
With India’s ageing population growing, there is an urgent need for insurance products tailored to the elderly. The budget could focus on creating a conducive environment for insurers to offer affordable senior citizen health plans with comprehensive coverage, including OPD and home care services. This would address a critical gap in the current offerings and cater to a demographic with significant healthcare needs.
Conclusion
The Union Budget 2025 presents a unique opportunity to address the structural and systemic challenges in India’s health insurance sector. By focusing on expanding tax benefits, reducing GST, promoting OPD insurance, fostering innovation, and addressing affordability and accessibility, the government can create a robust ecosystem supporting a diverse population's healthcare needs. Such measures would alleviate the financial burden on individuals and contribute to a healthier, more resilient nation.
The author is founder and CEO of Livlong 365