The health insurance sector is evolving, with the conversations revolving around managing rising costs and ensuring premium stability for the policyholders. Today, health insurance plays an important role in safeguarding families and improving the access to quality healthcare. At the same time, the expansion that underscores its relevance, also brings in certain structural challenges that require collective attention to further strengthen the long-term confidence in the ecosystem.
Health insurance premiums have seen a sustained rise across segments, reflecting broader medical inflation and higher utilisation and medical advancements in the treatments. Premium revisions, while often driven by legitimate cost pressures, are also indicative of deeper systemic misalignment, one that calls for honest introspection and coordinated action across all stakeholders.
Challenge of Premium Volatility
Health insurance premiums are revised because of higher claims outgo than predicted by insurers. This higher claim outgo is because of more people seeking treatment, more private healthcare facilities available, customers going to a tertiary care hospital for a secondary level medical problem and lack of standardisation of cost with the hospitals. Standardised billing format, hospital tariff in line with the categorisation and overall regulation of standard practices can offer a possible solution.
A critical but under examined driver of this volatility is defensive pricing. Hospitals, uncertain about the extent to which insurers will reimburse their billed amounts, tend to inflate charges proactively. If a facility anticipates reimbursement of only a fraction of what it bills, it may set the original charge far higher to absorb the expected shortfall. While rational from the hospital's perspective, this approach adds a layer of artificial inflation to an already pressured cost environment.
Compounding this is differential pricing based on the patient's sum insured. The same diagnosis and identical procedure can sometimes attract markedly different charges depending on the level of the policyholder's coverage. Patients with higher sum insured values are sometimes billed more for identical treatments, a tendency that functions as a quiet surcharge on insurance coverage itself, contributing directly to medical inflation and, consequently, to premium pressure.
ALSO READ: 100% Restoration Health Cover Isn't Unlimited: Key Clauses To Check
Impact on Pricing, Policyholder Trust
The cumulative effect of these pressures can create a trust deficit across the insurance ecosystem. Policyholders, hospitals and insurers often find themselves navigating disagreements around claims and reimbursements, and this friction can ultimately manifest as premium hikes at renewal.
Information asymmetry further aggravates the concern. Customers often do not fully understand the terms and conditions of their policies while hospitals may not always be aware of specific product clauses and reimbursement structures. This mutual opacity creates fertile ground for disputes, dissatisfaction, and perceptions of mis-selling, perceptions that, whether or not accurate, damage the credibility of the broader insurance system.
Patients themselves are not exempt from this dynamic. When treatment costs are fully covered by insurance, there is a natural tendency for some patients to seek, or encourage, more expensive interventions than may be clinically necessary.
Technology adoption adds yet another dimension. Hospitals investing heavily in advanced infrastructure such as robotic surgery systems being a notable example, face pressure to utilise these technologies to recover capital costs. While technological advancement is essential for improving healthcare outcomes, its deployment must remain aligned with clinical necessity to ensure affordability and value-based care.
Underwriting Loss: Compulsion Behind Premium Revision
There is a genuine compulsion for the insurers to increase the premium so that they can manage the portfolio without much loss and safeguarding the interest of the policyholders. This should be made far more conspicuous to inform clients that premium changes should not be perceived in an arbitrary manner, but rather as a direct consequence of the dynamics and trends of the healthcare industry.
Multi-Stakeholder Alignment for Cost Discipline, Pricing Stability
Hospitals and insurers should work collaboratively to implement standard treatment workflows and transparent billing to minimize the cost variations. Insurers should adopt data rich analysis and pathway-based product design and innovations in technology to improve service efficiency.
Patients should be provided with information to make informed choices regarding healthcare and responsible utilisation of insurance benefits. Increased awareness of personalized wellness programmes for preventive care can go a long way in achieving remission of chronic metabolic conditions like hypertension, diabetes. This can help prevent frequent hospitalisation.
Building Sustainable, Predictable Model
Long-term, viable solutions include standardising treatment workflow and following uniform clinical care pathway. Transparent and uniform billing structure which is system treatment should be mandated. There should be disciplinary action on anomalous practices, while ethical and honest services should be recognised through a prudent technology driven approach. Each of the stakeholders, including hospitals, insurers and patients, has a role to play to ensure the healthcare ecosystem is viable and sustainable.
Our objective is to provide a healthcare ecosystem that is robust, transparent and financially viable so that every citizen has a right to safe health in our country.
The article has been authored by S Prakash, chief executive officer of health insurance ecosystem and strategic partnerships, General Insurance Council.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
ALSO READ: IRDAI Tightens Rules On Executive Pay; Links Incentives To Claims, Customer Metrics
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
