Health Insurance premium in India has been increasing every year by almost 20-25%. The increase in premium have been impacted many policyholder putting a financial burden. If an individual’s financial plan did not account for the possible rise in health insurance premium, there is a chance of derailment of the entire financial goals of the individual due to the increase.

The contributing factors for rise in health insurance premium are many such as Medical Inflations, Higher Medical cost, Policyholder’s age, Claim history, etc. Understanding these factors can help policyholder plan better and even take steps to mitigate the impact of rising premiums. In this article, we will explore the key reasons behind increasing health insurance costs and provide practical strategies to minimize their impact.

1. Rising Healthcare Costs

There has been continuous rise in healthcare cost. The expenses related to hospital bed charges, surgery charges, doctor fee, medicines have been increased considerably in last 5 years. Modern medical treatment, better hospital infrastructure, higher cost of medicines, higher doctor fees have been major factor for increase in health insurance premium.

2. Medical Inflation

Medical inflation has been increasing at 15% every year in India. There is no regulatory mechanism to control over hospitals and their charges. Higher medical inflation directly translates into higher health insurance premiums as insurers need to cover these growing expenses.

3. Age of the Policyholder

Age is a crucial factor affecting health insurance premiums. As a policyholder grows older, the risk of developing chronic illnesses and requiring medical care increases. Insurance companies compensate for this increased risk by raising premiums. For instance:

• A young individual (in their 20s) will have lower premiums.
• A middle-aged person (40s and 50s) may see a steady rise in premiums.
• Senior citizens (60+) often face significantly higher health insurance premiums due to age-related illnesses.

4. Claim History and Risk Profile

Policyholders with chronic illness are considered high risk as claims are frequent. Many people with pre-existing diseases or critical illness have higher claim ratio. Insurance companies have to look into claim history and risk profile of policyholders which may increase premium during policy renewal to balance out risk.

5. Lifestyle Factors

Changing lifestyle habits have been foremost factor for increase in lifestyle diseases such hypertension, blood pressure, diabetes, mental stress, etc. Unhealthy habits such smoking and alcohol consumption may increase premium for individual policyholder. Individual with high BMI or obesity will have loading on their premium. Individuals leading an unhealthy lifestyle are more prone to illnesses and chronic conditions, leading insurers to increase their premiums.

6. Changes in Coverage, Benefits and Underwriting Policies

Modern treatment cost is expensive which may increase your health insurance premium in your policy. Each insurance company has its own risk assessment methods. Based on their claim experience and financial performance, insurers may decide to increase premiums across the board or for specific segments of policyholders. IRDA may include new diseases, addition of mental health coverage, congenital diseases which can lead higher premium for existing policyholder. Insurance company will communicate any changes in premium or policy with its policyholder as mandate by IRDA.

7. Increased Awareness and Insurance Penetration

As more people become aware of the importance of health insurance, the demand for policies increases. While greater penetration helps spread risk, it also leads to higher payouts by insurance companies, especially in economies where healthcare infrastructure is still developing. This demand-driven scenario can contribute to increasing premiums.

8. COVID-19 and Its Lasting Impact

The COVID-19 pandemic changed the healthcare landscape and significantly affected insurance premiums which have led to higher hospitalization costs and increased claims due to COVID-related treatments. This has raised demand for comprehensive health coverage. Even though the pandemic has subsided, its effects on healthcare pricing and insurance costs continue to influence premium rates.

9. Regulatory Changes

IRDA regulatory body periodically introduces changes to protect policyholders and ensure better coverage. However, these changes can also result in higher premiums, such as:

• Lesser waiting period for pre-existing conditions.
• Inclusion of internal congenital diseases.
• Inclusion of Modern treatment.

While these changes enhance consumer protection, they often lead to increased policy costs.

10. Location

Cost of hospitalization is higher in cities like New Delhi, Mumbai, Bangalore, Ahmedabad as these location have advance medical facilities. The difference between big cities and small towns will have different premium in health insurance.

How to Reduce the Impact of Rising Health Insurance Premiums

While premium hikes are inevitable, you can take proactive steps to minimize the financial burden:

1. Compare and Choose Wisely

Always compare policies with different insurance companies buying policy or renewing existing policy. Choose insurance companies with higher health claim settlement ratio and stable premium

2. Opt for a Higher Deductible

You can lower health insurance premium with deductible in your health policy or have capping limit on health coverage benefits. This would be beneficial for those have chronic illness and require frequent medical care.

3. Maintain a Healthy Lifestyle

Health lifestyles habits and avoid smoking, excessive alcohol consumption will help to prevent major diseases, Exercising regular, healthy diet, and regular health check-up will help to get discount from insurance company for lead good lifestyle.

4. Utilize Wellness Benefits

Many insurance company offers discount to enroll in their wellness program and inspire policyholder to have regular exercise régime Insurance offers health check-up in their policy from first year also.

5. Consider a Family Floater Plan

Family floater premium is lower than individual policy. Insurance company gives discount for family floater policy ranging from 5-10%.

6. Opt for TOP-UP Plan

Upgrading existing health policy can be costly but opt for top-up plans. These plans are normally cheaper than base policy which can be used as supplementary way to increase your coverage without increase your health insurance premium.

7. Look for No-Claim Bonus (NCB) Benefits

No claim bonus can be 50-100% depending upon health insurance plans which insurance company may reward with higher coverage and lower premium. Insurance gives these benefits for continuous claim free period.

8. Take Advantage of Tax Benefits

Any individual buying health insurance policy for themselves or family member; premiums are tax-deductible under Section 80D up to Rs.25000 and dependent parent policy premium up to Rs.50000. This can assist in lowering your taxable income, hence decreasing the amount of tax that you are likely to pay to cater to the premiums.

Conclusion

As health insurance premium increase every year which eye opener for many policyholder. This highlight growing expenses are difficult to manage and making adequate financial budget to cover future cost is now a necessity. While this trend may continue, understanding the reasons behind these increases can help policyholders take strategic steps to reduce their impact. By making informed choices, maintaining a healthy lifestyle, and leveraging available discounts and benefits, individuals can effectively manage their health insurance expenses while ensuring adequate coverage for their medical needs.