'IRDA’s age-free health insurance plan could be a game-changer'

The Indian health insurance industry will turn a new leaf if the recent Irda thought of making insurance ‘age-free’ becomes a reality. This is expected to bring relief to the elderly who have no option today but to shoulder the burden of expensive healthcare on their own.

Facts on the rising healthcare costs in India are staggering. Sample this: A Macquarie research published in 2011 predicts that the average percentage of disposable income being spent on healthcare in India will grow from 5% in 2005 to 9% in 2015, a massive 80% jump. There is no doubt that this trend of rising costs will hold firm for a long time, because there are fundamental drivers at work. Some of the obvious and potent drivers which come to mind include:

Rising life expectancy: Rising life expectancy implies that a consumer has to expend more than earlier over his or her lifetime. Average life expectancy has grown over four years in the past decade itself.

Lifestyle diseases:Changing lifestyles are a necessary evil and we have to live with these. Increased incidence of such diseases in India and the fact that these are chronic ailments imply a significant jump in expected healthcare expenses. Going by industry statistics released jointly by CII & KPMG, the diagnostic revenues have grown 25% from testing of lipid profiles, blood glucose levels, thyroid and hormone levels — all of which show a rise in chronic conditions such as cardiac and diabetes. Further, expenditure on life style diseases far out-weighs that in other forms of diseases.

Higher OPD dependence for the elderly:Studies show that the highest rate of patient visits is in the age bracket of 65-75 in the US. There is no reason to believe that this would not be the case in India as we progress. More OPD dependence translates to higher costs. Better but expensive healthcare: The availability of sophisticated diagnostics, technology, drugs and therapies means more expenditure. India is also moving into preventive healthcare with more diagnostic tests being recommended to reduce risk of late/wrong detection. What do these drivers mean for all of us in the insurance ecosystem? These fundamental drivers will force the consumer, regulator and the industry to make choices for change. The good news is that Irda seems to be receptive already.

Age constraints take us away from the optimum: Wouldn’t life be simple were there no constraint? While there has been a steady tick in health insurance premium collections over the past few years, there are regulatory constraints that limit the purchase of insurance products for the elderly. This is quite ironical, given that the covered consumers are more and more ‘at-risk’ as they age. It is akin to the suggestion that a pilot can have the option of bailing out of an aircraft only while it is aground and not after it has taken off!.

All major health insurers in the country have been innovating within the regulatory framework available. We at Max Bupa, for instance, pioneered the ‘any-age-enrollment’ product in 2010 when we began actively promoting our products in India. This has been followed by L&T Insurance, which has extended the age limit by allowing for a co-payer beyond 70. Others like ICICI Lombard and Apollo Munich have also looked at different models to increase the scope of their products for the 65+ age bracket. Co-pay clauses have also created some options for the elder age-group. Max Bupa’s co-pay option for those aged 65 and above has a flat 20% co-payment. All of these are efforts in the right direction. But then, why go for good enough, when great is possible?

The recent Irda statement indicates the recent thinking of doing away with the age limits is something which should be welcome. We have been waiting for such a pro-active policy change, which brings health cover to consumers when they need it the most! Not only does this mean increased protection to the elderly consumers in the country, but also indicates that our industry is progressively maturing in its approach.

Case in point is how the same issue is dealt with in developed economies. National health insurance programmes like USA’s Medicare and Medicaid have no age barrier. In fact, in France, there is a “solidarity” programme where the premiums paid are lowered for the more ill and elderly! The Medicare Advantage programme allows beneficiaries to receive services from private plans.

Looking beyond the US, (which arguably is the biggest per capita spender on health coverage), several players in the UK, including Bupa, offer a no-age limit health insurance option to consumers. Same is the case in Australia. Much can be learnt from these benchmarks.

While regulations are one part of the puzzle, which we have grappled with, the other part is certainly the economics of making the ‘age-free’ health insurance work. It is obvious that the premiums need to increase as the age of the insured increases to account for the higher probability of claims. However, this increase needs to rational and fair. We at Max Bupa see this as an opportunity for structuring new products which can still make the economics work.

Perhaps leaving some chronic conditions out would enable lowering the premiums? Or else, creating products with pooled risk and, thereby, reducing premiums? Ethical considerations such as those in deciding on exclusion of high probability diseases from the coverage also add to the complexity of this puzzle for us. But we are up to this challenge. There would be a lot of strategising and blue-sky thinking to make use of this positive policy change and, at the same time, make the economics work.

For the consumer though, we have to aim for improvement, with no strings attached! Having the option, albeit a little expensive than usual is better than being left with no option for protection. The ‘age-free’ policy does take away undesirable tension from the consumers above the age of 70.

The benefits out-weigh all challenges: The message for us is clear: No amount of complexities and constraints are un-surmountable when seen against the benefit our joint efforts can bring to the 70+ consumers. The regulator today is more inclined to consider that age limits need to stretch to match with increased life expectancy and incidence of lifestyle diseases.

The top players in the industry need to show the way and overcome the issues (and there definitely is a bunch of these to deal with!). But isn’t that what we work for? The satisfaction of relieving the elderly of the economic burden that they carry today alone should be our inspiring though and things will surely fall in place.

What’s needed is pioneering innovation in products and some spine from industry leaders. With this kind of resolve, there’s no doubt that we should be able to bring the best insurance solutions to the consumer, irrespective of age!