Medical Inflation and Its Effect on Health Insurance Premiums

Medical inflation is a term that describes the steady increase in the cost of medical treatment and healthcare services. In India, medical inflation has been rising at an alarming rate, and it has a significant impact on the health insurance premiums that people have to pay. In this article, we will understand the connection between medical inflation and premiums of medical insurance plans.

What is Medical Inflation?

At its core, medical inflation is used to define the increase in the expenses related to health and healthcare services. These costs include the cost of medicines, diagnostic tests, doctor's fees, and hospitalisation charges. Type of treatment and procedure might also be considered under the definition of medical inflation. Medical inflation in India rose at an alarming rate of 14% in 2021, which was more than that of China. ^[1]

What are the reasons for medical inflation?

The following factors might be considered as the reasons behind medical inflation:

1. New technology

With advancements being made in technology that can make medical procedures quicker and reduce the risk factor, the impact is felt on the cost of accessibility of such technology. Treatments for cancer and heart diseases are some of the examples. The technology being invented is aimed at making the treatment more precise and effective. However, the cost of development of such technology from scratch, procuring the parts, and the duration of development raises the cost overtime. Also, as most of this technology is usually developed abroad, importing the machinery and training personnel to operate it also makes such technology inaccessible for many patients.

2. Medical tourism

India has gained a reputation of having better healthcare facilities at an affordable rate. This explains why people from other Asian countries, African countries, and even from United States of America come to India for treatment. Most patients who come to India from abroad require an organ transplant or knee or hip replacements. This demand impacts the cost of healthcare facilities.

3. Treatment cost per person

The rise in the cost of treating one person is used to define the rise in the cost of basic components of the treatment. This includes price of medical supplies, expenses related to the hospital staff, doctors, and required tests.

How medical inflation impacts health insurance?

The rising medical inflation in India has a significant impact on health insurance premiums. As the cost of medical treatment and healthcare services increase, so does the burden on insurance companies. Thus, insurance companies need to pay a higher compensation and eventually they pass on this cost to the customers in the form of higher premiums. This impact might be more severe for senior citizens and people with pre-existing medical conditions. These people are more likely to need medical treatment, which can get expensive compared to the treatment required by younger people. As insurance companies must compensate more for senior citizens, the premium of their policy also increases. Additionally, insurance companies have to deal with rising claims due to the increase in medical inflation. As more people need medical treatment, the number of claims increases, which puts pressure on the insurance companies to pay more for medical treatments. This can result in higher premiums for customers to cover the increased costs.

How to tackle the impact of medical inflation?

While it may be challenging to stop medical inflation, there are some ways that you can tackle its impact on the cost of your policy:

1. Choose the Right Policy

Choosing the right medical insurance policy can help reduce the impact of medical inflation on your premium. Look for policies that offer suitable health cover for your medical needs and affordable premium. Compare the policies offered by different insurers and choose one that provides the best value for money.

2. Opt for Higher Deductibles

The deductible is the amount you have to pay out-of-pocket before your insurance coverage kicks in. Choosing a higher deductible can help lower the premium. However, make sure that you can afford to pay the deductible if and when you need to file a claim.

3. Maintain a Healthy Lifestyle

Maintaining a healthy lifestyle can help reduce the impact of medical inflation on the premium of your policy. A healthy lifestyle can help reduce the risk of developing medical conditions and require treatment. Some insurance companies have certain concessions for customers who maintain a healthy lifestyle based on the wellness products opted.*

Conclusion

While medical inflation in India is a significant concern for people looking to purchase medical insurance, the measures mentioned above might come in handy when you are browsing through different plans. Getting in touch with an insurance agent to explore the different types of health insurance plans might help you in selecting a suitable policy for you and your loved ones.   * Standard T&C apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.