This is the time of the year when all eyes are directed to the Union Budget, which will be presented on 1 February 2020. As always, before giving the actual budget, industry experts make their own assumptions about what potential changes are expected. This year is no different. Having been largely affected by the COVID-19 epidemic last year, the budget is expected to undergo considerable health improvements.
Health insurance has always been an important cover against the financial impact of a medical crisis. Many individuals have opted for cover to protect their savings against expensive medical treatments. Also, during the last year, the epidemic highlighted the importance of health insurance plans. Due to the number of hospital bills in lakhs in severe cases of COVID, people awakened the importance of health insurance policy. Even the Insurance Regulatory and Development Authority of India (IRDAI) directed to launch COVID’s specific health plans – Corona Armor and Corona Protector – which found many buyers.
From a tax angle, the health insurance scheme allows a deduction on the premium paid under section 80D. The deduction limit is INR 25, 000 on the policy covering self, spouse and dependent children. Senior citizens aged 60 years and above can enjoy deduction limit of INR 50, 000. Also, to purchase a policy for parents, you can claim additional deduction of up to INR 50, 000.
Earlier, the additional deduction for parents was INR 25, 000, but in the earlier budget, the limit was raised to 50, 000. Experts believe that this year, as the importance of health insurance has increased, the finance minister may come out and increase the deduction limit. It is expected that the deduction limit for persons below 60 years of age will also be raised from the current limit of INR 25, 000 to INR 50, 000.
This limit increase will have two benefits –
- This will encourage buyers to opt for higher coverage levels and a wider coverage.
- This will make inroads into health insurance policies
The penetration of health insurance in India has been increasing continuously since 2015. From 22% penetration in 2015, the number increased to 35.6% in 2018. (Source: Statista) However, the numbers are still not very impressive. To cross the 50% -mark, aggressive reforms are needed, both by the health insurance segment as well as by the government. While the health insurance segment is constantly strengthening itself, with improved reforms in the 2020 budget, it is expected that the government will also do its part.
What reforms will be proposed by the government on 1 February 2020. Meanwhile, the outlook regarding the strong health reforms for the next financial year is positive.