The Economic Risks of Mandatory Health Insurance Co-payments
Mandatory cost-sharing may trigger adverse selection and reduce accessibility for retail policyholders.
1Proposed Mandatory Co-payment Structure
The General Insurance Council has proposed a mandatory 10% co-payment for all retail health insurance policies. Under this framework, the insured party would bear 10% of admissible healthcare expenses, while the insurer covers the remaining 90%. Specific details regarding the implementation of this mandate currently remain outside the public domain.
2Market Trends and Premium Growth
Between 2018-19 and 2024-25, average premiums for individual policies surged 140%, rising from ₹4,662 to ₹11,188. During this same period, coverage for these policies dropped from 15.5 million to 10.5 million. These figures suggest that higher price points significantly deter demand, potentially exacerbating the exclusion of retail customers from the market.
3Adverse Selection and Risk Pools
Mandatory co-payments risk driving healthier individuals out of the insurance pool, as they may find the added cost unjustifiable. This exit worsens adverse selection, forcing insurers to raise premiums further to cover rising average claims. Such a cycle creates a feedback loop that ultimately threatens the long-term accessibility of health insurance.
4Impact on Product Differentiation
Currently, health insurance products compete through varied premiums, coverage limits, and co-payment structures. A uniform industry mandate would eliminate co-payment as a tool for product differentiation, restricting consumer choice. This shift raises significant questions regarding collective industry influence and the potential weakening of competitive dynamics within the broader insurance sector.
5Limitations of Cost-Sharing Logic
The proposal assumes that 'skin in the game' discourages unnecessary procedures. However, patients often lack the medical expertise or bargaining power to challenge hospital billing decisions. Overcharging and duplicate claims are systemic issues that co-payments fail to address, effectively shifting financial burdens to patients without correcting the underlying incentives of providers.
6Distribution Costs vs. Patient Burden
Data from 2023 to 2025 shows health premiums grew by 53%, while broker commissions spiked by 118%. Retail health commission rates increased from 10% to 30%, highlighting significant distribution cost inflation. A mandatory co-payment does not address these rising commissions or inflated hospital billing, instead placing additional pressure on retail policyholders.
7Claims Ratios and Evidence Gaps
In 2024-25, incurred claims ratios reached 92% for group insurance, 79% for family floaters, and 75% for individual policies. These figures do not definitively prove overutilization in the retail segment. Without clear evidence linking retail claims specifically to unnecessary consumption, the necessity of a broad, mandatory co-payment remains economically questionable.
8Strategic Policy Recommendations
Co-payments should remain a voluntary product feature rather than a mandatory industry requirement to preserve consumer choice. Regulators should prioritize hospital oversight, transparent pricing, and rigorous claims scrutiny over simple cost-shifting. Effective reform must address the root causes of healthcare inflation rather than merely transferring financial responsibility to the insured.
Original article: mint - money — The Economic Risks of Mandatory Health Insurance Co-payments