Key Highlights
- In FY25, India's health insurance premiums surpassed ₹1.07 lakh crore, exceeding the national health budget.
- Public health spending remains around 1.5% of GDP, below the 2.5% target, highlighting reliance on private insurance.
The cost of buying individual health insurance is now higher than the money the central government allocates to health and family welfare, health research and healthcare programs.
Examining annual reports from the Insurance Regulatory and Development Authority of India and the Union Budget shows that, for a short period following the pandemic (2021-22 and 2022-23), insurance premium collections went down, but they are now higher than the national health budget.
Despite Health Ministry spending and additional spending by Ministries of Labour and Defence, India’s total spending on health falls short: it accounts for just 2% of the Union Budget and 1.5% of GDP which is lower than the 2.5% target set by the National Health Policy.
This trend does more than just change budgets; it is a change in the foundation of how Indians get medical care. Depending on private insurance more and more means that medical care now connects more to a person’s financial ability which can cause severe inequalities, especially for those without coverage or only partial coverage.
The argument is made that insurance as the main form of health coverage can widen inequalities if the public system is underdeveloped. Most of India’s workforce is in the informal sector and this group does not have access to proper insurance. Public health services are constantly struggling due to being underfunded and overly busy.
Private insurance plans regularly have provisions for exclosing certain treatments, requiring co-payments and restricting their total coverage amounts which makes them less effective in helping people avoid high medical costs. Most policies do not include outpatient care, the care that is most often given and instead pay for hospital treatments. This way, health care assistance is focused only on limited issues and funds are moved away from important preventive and group health plans that are needed long term.
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There is a risk that this might make the public and politicians less interested in enlarging universal health coverage. Overreliance on insurance risks resulting in a two-tiered system: one for those who can afford private plans and another, often overlooked, for those who cannot.
While insurance can help with healthcare access, experts warn that it cannot replace a well-funded public health system. Fragmented care, exclusion of the most vulnerable, and a shift away from viewing healthcare as a public good.
