Health Insurance must be considered the best financial Security, given that there is no Social Security for middle- and above-income groups (except for a few government schemes like Ayushman Bharat, with limited clarity and ambiguity in claim settlement and hospital coverage). Especially with rising medical inflation and hospitalization costs & rise in lifestyle diseases like hypertension, diabetes, and Claustral etc. However major factor that significantly cost of health Insurance was also GST on health Insurance it which contributed 18% so the overall cost increased by18 % when anyone pays the premium. But recent news on GST 2.0 on health Insurance really helped to Individuals who were little bit hesitant on buying health Insurance may enjoy the removal of GST on health Insurance premiums.
In recent months, news regarding GST on Health Insurance, or commonly known as GST on (140)Medical Insurance premiums, not only helps the new buyer to get the benefit on it but also encourages and gives financial respite to existing policyholders whose policies are due for renewal on 22.10.2025 onwards
GST Impact on Health Insurance / Medical Insurance
- Higher cost for Individual – GST increases the overall premium paying cost by 18% For example, if any family has having Floater policy of Rs. 50000 base premium due to GST, then they must pay 9000 as GST on it, and the total outflow becomes 59000.
- More Burdon on Senior Citizen: Usually, in Health Insurance / Mediclaim Premium Increase is when the age increases and when anyone crosses beyond the age of 60 premium significantly increases and along with if anyone consider the GST impact on health Insurance, it increases according to base premium hence the more the base premium more the GST in actual ( Although % remain same as @18% )
- One of the Lowest Insurance Penetration in the population : Many People who want to buy health insurance either postpone or withheld their decision of this 18% cost increase and GST of Health Insurance Premium.
Unnecessary Financial Burden increase : Due to GST, the total outgo increase by 18% which significantly increase the premium outgo from the end used (Insured ) Pocket.
· Negative Impact on preventive Health care: Higher cost of Insurance premium due to GST discourage individuals for opting the health Insurance and using the feature of preventive health check-up.
Should GST on health Insurance be reduced?
- Health Insurance / Mediclaim is necessity not luxury: Like Purchasing Assets, car, travelling for leisure considered the luxury but health Insurance specially in current environment where social security is minimal ( in contrast to western countries ) having Health / Mediclaim Insurance is necessity not luxury so reduced or NO GST will encourage to normal public to opt for it as this is essential for protection of their life & health.
- Encourage to buy more people to buy Health Insurance: Lower cost directly impacts to higher penetration, especially lower / lower middle and middle income group.
- Support for the country’s Universal Health Coverage: Affordable health Insurance can help to achieve the goal of providing universal health Coverage among all citizen.
- Reduce financial burden specially on Senior Citizen : Specially Senior Citizens who have comparatively higher premium due to their age their major part of their expenses goes towards their medical needs, and a reduction in GST will help them to reduce the cost.
- Align to global trend: In most of the world, either there is no tax or a minimum tax on health insurance, so a reduction in the same will align our Health insurance premiums towards world practice.
GST on Health Insurance Premium: Should It Be Reduced?
From a Customer or insured perspective, it is highly beneficial to reduce GST on Health Insurance / Mediclaim premiums.
- While normal Inflation is ranging between 4%-6% Medical Inflation ranging 8%-10% hence healthcare is becoming costlier day by day.
- Insurance Premium rise with age, and it becomes very much costly for Senior citizen.
- Families having a chronic disease history spend significantly higher premiums on health Insurance / Mediclaim.
- Lower GST on Premiums bring more people under Insurance cover.
Conclusion
Understanding GST on health insurance is crucial for every policyholder. The 18% GST significantly adds to the cost of health insurance premiums, affecting affordability and discouraging many individuals from securing adequate medical coverage. With rising healthcare costs, the pressure on families, working individuals, and senior citizens continues to increase.
There was strong industry wide demand and Expectation regarding reducing the GST on health insurance premium and exempting certain categories altogether. A reduction in GST have made health insurance more affordable but also help in increasing insurance penetration across the country, ultimately improving the healthcare ecosystem.
Now changes are introduced, policyholders must stay informed, compare plans wisely, and choose coverage that best fits their medical and financial needs.
