Health insurance companies are unlikely to see cannibalisation of business because of the central government’s decision to provide health coverage to people aged 70 years and above, regardless of their income level, under the Ayushman Bharat scheme, said industry experts.
On Wednesday, the Union Cabinet expanded the health coverage under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) to all senior citizens aged 70 years or above. This move is expected to benefit approximately 45 million families, having 60 million senior citizens, with Rs 5 lakh free health insurance cover on a family basis. The government’s outlay is expected to be Rs 3,437 crore for this beneficiary base expansion in the scheme.
“The government’s decision to expand the scope of Ayushman Bharat to include senior citizens over the age of 70 is unlikely to have a major impact on companies in the health insurance space,” said Avinash Singh, senior research analyst, Emkay Global Financial Services.
This is primarily because individuals in this age group are either covered under central government schemes or have private health insurance coverage. And the uncovered majority in the 70+ age group that will get coverage under the new scheme are generally not the target audience for health insurance companies, Singh said, adding that while the announcement is beneficial for customers who are not currently covered, insurers are unlikely to face significant concerns about customer cannibalisation.
The scheme is implemented under the trust mode, insurance mode, or hybrid mode. Under trust mode, the state health agency (SHA) makes payments to empanelled health care providers (EHCPs) for the approved claims; under insurance mode, an insurance company is appointed by the SHA, and they make payments to EHCPs for the approved claims; and under hybrid mode, the insurance company is appointed by the SHA for a certain amount of coverage, and the claims not covered under the insurance limit are paid directly by the SHA to EHCPs.
“I don’t see much cannibalising of business as the current proportion of 70+ people covered under health insurance is very low since premiums are very high,” said a senior private sector insurance executive.
“So, in the immediate term, insurance companies have nothing to worry about. Having said that, in the long term, the launch of special insurance products featuring co-payments to make coverage more affordable could potentially impact the plans of some insurance companies,” he added.
“For insurance companies, it is a matter of volume of business from such schemes. The government will list out the packages, and the hospitals will have to agree to that,” said the chief executive officer of a private sector general insurer. “For us, it is not an issue; standalone health insurers may see some impact,” he added.
According to Saurabh Bhalerao, associate director & head – BFSI Research, Care Edge, the scheme is unlikely to significantly affect health insurance companies, as it primarily targets individuals who cannot afford health insurance. Additionally, premiums for individual policies in this age group are quite high, so companies generally do not see substantial business from this cohort.
“However, participating companies will gain valuable data that they could potentially use to offer additional coverage,” he added.
First Published: Sep 12 2024 | 7:01 PM IST
