Industry Odisha Bureau, Oct 29: A proposal for a mandatory 10% co-payment in retail health insurance is drawing scrutiny. The General Insurance Council has suggested policyholders bear 10% of admissible medical expenses. Insurers would cover the remaining 90%. Full details of the proposal are not yet public. It remains an industry suggestion, not an approved regulatory rule.
The aim is to give policyholders a direct financial stake in treatment costs. Shared costs could deter unnecessary tests, longer hospital stays and pricier rooms. Lower claims might, in theory, ease premiums. Writing in Mint, M. S. Sahoo argues the plan raises concerns. He links them to three sources of market failure.
Health insurance made up 43% of the general insurance market in April-September 2026. Between 2018-19 and 2024-25, average group premiums fell 25% to ₹2,233. Group coverage quadrupled to 275 million people over that period. Average premiums for individual policies, excluding family floaters, jumped 140% to ₹11,188. Coverage there shrank from 15.5 million to 10.5 million. These trends do not prove causation, but suggest higher prices deter buyers.
The first concern is information asymmetry. Individuals usually know more about their health risks than insurers do. If healthier buyers leave, the risk pool worsens and average claims rise. Insurers may then raise premiums, pushing out more healthy customers. Economists call this cycle adverse selection. Sahoo warns co-payment could hasten such exits among already costly retail policies.
The second concern is competition. Insurers currently compete on premiums, co-payments, deductibles, networks and exclusions. A higher-premium policy without co-payment is as valid as a cheaper one with it. A uniform mandate would remove that choice and weaken product differentiation. Sahoo distinguishes optional features from an industry-wide requirement.
The third concern involves hospital costs patients cannot control. Patients rarely have the knowledge or bargaining power to challenge bills. Overcharging, duplicate claims and unnecessary procedures are recognised problems in healthcare. Economists often describe this as provider-induced demand. Co-payment shifts part of that burden without fixing hospital incentives, Sahoo argues.
Claims data complicate the overuse argument. In 2024-25, incurred claims ratios were 92% for group policies. They were 79% for family floaters and 75% for other individual policies. These ratios compare claims with earned premiums and cannot prove overuse alone. But they suggest retail customers are not the main source of claims pressure. Health premiums grew 53% between 2023 and 2025, while broker commissions rose 118%. Average retail health commission rates reportedly climbed from 10% to 30%.
Policyholders already bear exclusions, waiting periods, sub-limits and non-admissible items. A mandatory co-payment would add to that load, especially for high-premium individual buyers. Sahoo supports co-payment as an optional product feature. He calls for safeguards for emergencies and affordable policies up to a set sum insured. Real cost control may need tighter hospital pricing, claims scrutiny and distribution reform. Otherwise, co-payment risks shifting bills rather than cutting them.
