The Union Budget 2024’s decision to apply an 18% GST on health insurance premiums has a major impact on all of us. It also changes our attitude to our insurance choices and financial planning. Let’s explore this decision further:
Impact of 18% GST on Health Insurance Premiums
The effect of introducing GST on health insurance premium is larger than what we think.
Here is how:
- Higher premiums: The rise in health insurance rates is the most direct and obvious effect of the increased GST rate. For many homes, financial stability mostly consists of health insurance. It guards against unanticipated medical costs that could otherwise exhaust savings. The 18% GST has clearly added to the financial weight of maintaining health coverage. This rise in premium costs makes it more difficult to balance home budgets, particularly for those already dealing with other growing expenses.
- Policy decision-making: Many customers have to make difficult decisions about their health insurance as premiums rise. While some defer buying insurance completely, others may choose to cut their coverage level to keep their policies reasonable. Inappropriate coverage can result from this uncertainty or scaling back. It leaves people and families more exposed to the financial effects of medical problems.
- Reduced affordability: The increased cost directly affects the affordability of health insurance. Health coverage is becoming a luxury for some rather than a basic protective measure. This shift could decrease the number of people who can afford comprehensive health insurance, which is contrary to the broader goal of universal health coverage. Reduced affordability also begs questions regarding long-term health effects for those who choose not to have required coverage because of financial restrictions.
- Insurance penetration: The healthcare industry has always aimed to raise the insurance penetration rate. It wanted to ensure that more people are covered with healthcare free from financial difficulty. Nonetheless, the higher GST on health insurance is probably going to hinder these initiatives since more expenses would discourage potential new policyholders from getting coverage. This is especially alarming in a country like India, where many people still lack insurance and are thus susceptible to financial shocks connected to their health.
What You Can Do: Tips for Managing Increased Health Insurance Costs
There are several ways you could control and maybe lower your health insurance expenses. These include:
- Shop around: Comparing health insurance plans from several providers is more crucial than it has ever been. Searching around will help you to find the best deal for your budget. This does not only imply searching for the least expensive choice. It means striking a balance between coverage and affordability that fits your family or personal health requirements.
- Customise your coverage: Make your health insurance plan fit for your particular situation. Review the kind of medical treatments your family and you usually require and modify your coverage accordingly. Steer clear of purchasing extraneous items that raise your premiums. For instance, if you are young and healthy, you might not need a plan including comprehensive aged care services.
- Opt for higher deductibles: Your premium might be much reduced by agreeing to pay a larger deductible. If you seldom see a doctor and can control little medical costs out-of-pocket, this is a sensible approach. But be sure you have the money to pay the deductible should a significant health problem arise; this sum is paid before your insurance starts to pay.
- Tax deductions: Take advantage of the tax deductions under Section 80D of the Income Tax Act. Health insurance premiums qualify for tax deductions, which help to somewhat mitigate the financial effects of the GST increase.
- Group insurance options: These types of plans are generally more reasonably priced than individual policies, and many companies provide them. Because of the mass negotiation done by companies, the plans frequently come with reduced premiums and better terms. Think about enroling if your company provides such a plan. It can be a reasonably affordable choice.
- Review your plan annually: Policy specifics and health insurance needs vary yearly. Reviewing your health insurance coverage annually is essential. Given current tax rules and market conditions, this is to ensure it still satisfies your demands.
- Use health savings accounts (HSAs): Without central tax obligation, funds in these accounts can be accessed for eligible medical costs. This can be another approach to control expenses, particularly when coupled with a high-deductible health plan.
Conclusion
As a policyholder, you must be careful when going for health insurance coverage. Comparing several insurance packages before deciding on one is crucial. It guarantees that you choose a plan that offers sufficient coverage and your financial situation.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is not intended as a substitute for professional advice, diagnosis, or treatment. Please consult your general physician or another certified medical professional for any questions regarding a medical condition. Relying on any information provided in this blog is solely at your own risk, and ICICI Lombard is not responsible for any effects or consequences resulting from the use of the information shared.