A case for deferred Health Insurance

Don't defer the necessity of planning for your healthcare to your old age. As a country that just added 115 million new voters between the previous and the just concluded Lok Sabha elections, we can rejoice in the comfort that India is a young country.

 

However, this isn’t a source of comfort to those who are at the threshold of middle age, when we examine the facts:

 

Healthcare costs have gone up faster than inflation

Private (out-of-pocket) healthcare spends form an inordinately large chunk of total healthcare expenses (what insurance pays and what the government subsidises or provides, covers a small amount)

As people get older, their spend on healthcare starts consuming a much larger share of wallet. This rises dramatically after retirement

 So, by the time you retire, you may be hit by a triple whammy of:

 

Healthcare costs which may have spiralled to astronomical proportions

Lack of access to free/subsidised healthcare compounded by lack of insurance

Increased healthcare spend requirements because you aren’t as young any more

This of course will, in all likelihood, burn a large hole in your retirement corpus. You certainly need to plan for this. Typical responses to tackling this problem are:

 

Save for old age healthcare expenses in your earning years: This may look like planning too far ahead and difficult to achieve but something which must be done for the following reasons:

Remember, you won’t be employed and lose the coverage you currently have under your employer’s best health insurance in India. Also, buying insurance will be either too expensive or impossible, since most insurers will either cover you with too much exclusion or charge a fantastic premium.

Invest in your own health to minimize problems in your old age: This is doable/ achievable but almost always deferred despite every good intention. (How often have you heard yourself say “I will start hitting the gym in earnest next week/ as soon as I am done with this deadline.”). Further, maintaining good health is no guarantee of controlled medical expenses in old age, as it does not protect you against congenital/ hereditary conditions, accidents, etc.

On a macro-economic level, this is poised to be problem of gigantic proportions. Our country will be a lot older in another 15-35 years (see illustration) and our population pyramid will start to resemble those of more developed economies. This is also the period over which most of today’s existing workforce will retire.

 

An older population will result in a much higher spending (as illustrated). This will also be the period when most of today’s workforce will retire and not have employer provided health insurance.

 

Add to this, the fact that the bulk of healthcare expenses incurred in India is out-of-pocket, private spending. Insurance actually pays for very little (pointing to the low penetration of health insurance in our country), and the final nail in the coffin, increase in healthcare spends (more expensive treatments) coupled with healthcare inflation (as shown below) will erode people’s ability to afford healthcare or deplete their savings dramatically and you have a recipe for a slowly building disaster of national proportions.

 

The government, regulator as well as the healthcare and insurance industries need to address this problem today, while we have the time to tackle it with well thought out initiatives. While many solutions abound in the realm of improving manpower and infrastructure for healthcare, financing this for a massive ageing population will be next to impossible for any government. Providing free subsidised healthcare for a population of our size will amount to serious fiscal profligacy on the government’s part, something India can ill afford.

 

A part of this problem can be addressed by development of better products which enable private citizens to create their own safety nets for healthcare expenses in the future. Given the abysmal levels of health insurance penetration in our country, we are in serious need of far reaching solutions which need to be built today, so that they can be delivered tomorrow.

Deferred protection products could be a significant contributor to solving this problem. It addresses typical problems like:

“My employer already covers me, why do I need to buy additional health insurance?” Well don’t buy health insurance for today. Buy health insurance for when you won’t be covered by your employer, that is, when you are retired.”

[Source: https://www.tomorrowmakers.com/articles/health-insurance/a-case-for-deferred-health-insurance]