With health care costs rising 18 per cent annually, having a high cover has become a necessity

In the early 80s, a tonsillectomy - the surgical removal of the tonsils common amid children - would cost Rs 100. Today, it has increased by 100 times to Rs 10,000 or more, depending on the city or hospital where the surgery takes place. Recovering the cost of this operation, however, is probably easier today than it was then.

That’s because the concept of health insurance was scarcely known. Indeed, the products available were fairly rudimentary. For government employees, there was insurance in the form of Central Health Scheme. There was the Employees State Insurance Scheme for blue-collar workers. Most of the hospitals were run by government bodies or large public limited companies, where you could get treatment at nominal or no cost. Things have changed since. There are government-sponsored general insurance companies and at least 20 private insurance companies offering products.

In 1986, when health insurance products were launched under the ’Mediclaim’ name by government insurance companies, the minimum sum for policies was Rs 15,000 and the maximum was Rs 5 lakh. Today, the minimum sum assured offered by public sector general insurance companies is Rs 50,000 and for private sector companies, it is Rs 1 lakh. But for 95 per cent of the policies sold online the sum assured is a minimum Rs 3 lakh, says Yashish Dahiya, co-founder and Chief Executive Officer, Policybazaar.com.

It is no coincidence that the cost of health care has grown more than exponentially. A hysterectomy or a cesarean-section cost between Rs 10,000 and Rs 15,000 in the 80s; today, it will cost not less than Rs 50,000. Angioplasty was a new procedure and there was no surgery for cataract. There was no MRI scan, only a CT scan. These developed later but as Dr Dilip Sarada, Indian Medical Association, State President, Maharashtra, points out, "As new technology was introduced, the cost for medical procedures also increased. The cost has increased multi-fold due to corporate hospitals. It is not feasible to run a small hospital of four to five beds, due to expenses for land, infrastructure and staff salaries."

A report by Marsh India pegs medical inflation at just over 18 per cent. Where consumers used to buy policies of Rs 1 lakh sum assured, today they are willing to pay premiums of Rs 1 lakh, for policies with sum assured of Rs 1 crore, says Divya Gandhi, head of general insurance & principal officer at Emkay Insurance Brokers.

The average premium per policy in 2003-04 was Rs 4,166 and the number of people insured per policy was four. By 2010-11, the premium per policy had increased to Rs 14,120 and the number of people insured per policy was six.

In 2006, the first standalone company was set up, Star Health Insurance. There are now five such companies. They are Max Bupa Health Insurance, Religare Health Insurance, Apollo Munich, Cygna TTK and Star Health.

In 2008, the central government launched the Rashtriya Swasthya Bima Yojana a social assistance scheme for below the poverty line families. Subsequently, Andhra Pradesh, Tamil Nadu and Maharashtra started state-sponsored insurance schemes. These helped widen the reach of health insurance.

Towards the end of 2009-10, companies started introducing innovations like covers for maternity and wellness treatments. Today, there are covers for pre-existing illness (albeit at a higher premium), day-care procedures where no hospitalisation is required, family critical illnesses and products with covers as large as Rs 50 lakh to Rs 1 crore.

An important step by Irda was the definition of pre-existing illness which made coverage of these after a maximum of four years a standard procedure. Allowing of portability of policies, the option to transfer to another company without any disruption in the waiting period, was another important feature, introduced in 2011.

Segar Sampathkumar, general manager, New India Assurance says the health insurance sector saw an annual growth of over 35 per cent in gross premiums between 2001-02 and 2013-14. "Although there was a slight tapering in the last two years, more and more hospitalisation will be funded by insurance as penetration improves," he says.

Although corporate health care does offer people better access to medical treatment, there remains the issue of whether it could push up costs, with over-investigation by doctors becoming as common as it has in the US. More to the point, perhaps, most of this evolution in health insurance does little to improve the average Indian’s access to health care.