Insurance Update: Insurance policy holders might soon experience some relief. Reports suggest that after talks between insurance companies and the government, hospitals could maintain their treatment rates steady until 2026. This action could provide relief to policyholders. Consistent treatment rates will lessen the chances of premium hikes for policyholders, and the lack of increased costs will enable them to make the most of their policy limits. This decision is also crucial as insurance companies are dealing with rising expenses due to recent GST changes.
What’s the latest? Sources have disclosed that the Department of Financial Services (DFS) stepped in and facilitated meetings between hospitals and insurance firms to explore the option of keeping treatment rates unchanged for the upcoming year. These discussions reportedly commenced after insurance companies voiced their concerns about the challenges of absorbing the heightened costs from the GST adjustment without raising premiums.
While the reduction in GST rates is advantageous for customers, the overall operational expenses are expected to rise since insurance companies can no longer reclaim input tax credits as they did previously. Currently, medical inflation in India is estimated to be around 14%. Typically, insurance companies raise premiums by 8–12% annually to counter this inflationary pressure.
However, the already escalating costs due to GST changes may hinder companies from implementing these increases while also passing on the benefits of the 18% GST reduction to customers. What will be the advantage? If this proposal is approved, the decision to freeze hospital rates will aid in managing healthcare costs and limit possible premium increases next year. This will be beneficial for policyholders.