Budget 2015: Increase in health insurance deduction limit Rs 15K to Rs 25K announced

The FM announced an increase in limit of deduction of health insurance premium from Rs 15,000 per year to Rs 25,000 annually. For Sr. citizens and very Sr. citizens (above 80 years of age), this limit has been increased from the current Rs 20,000 to Rs 30,000. Very Sr. citizens , who are not covred under any health plan, would also get an additional benefit of Rs 30,000 as deduction for medical treatments.

"This is being done to encourage people to take health insurance as a pert of our social security preogramme," said FM Arun Jaitley.

India now spends Rs. 4000,000 crore annually on health, but commercial health insurance is only Rs. 20,000 crore (or 5%). As a result, India is dominated by “out-of-pocket” spending which economic analysis has shown to be the most inefficient form of health financing.

The average health insurance cover size at present it is somewhere between 2-3 lakhs sum insured and the average premium paid in urban areas is around Rs 8,000. However, medical inflation is few notches above general inflation and the ticket size should grow.



"An increase in the tax exemption limit on health insurance would go a long way in motivating people to consider higher sum insured policies and hedge against the spiralling medical cost. This may address the need for an adequate cove," said Antony Jacob, CEO of Apollo Munich Health Insurance.

The FM also announced a choice between an ESI plan or any other health plan recognised by IRDA for salaried employees as a choice of health cover (including private players) from their employers. This is expected to provide better quality coverage.