Ayushman Bharat's 70+ coverage: Minimal impact expected on health insurers

On Wednesday, the Union Cabinet expanded the health coverage under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) to all senior citizens aged 70 years or above

Industry experts believe that health insurance companies are unlikely to experience business cannibalisation due to the central government’s decision to extend health coverage to people aged 70 and above, regardless of their income level, under the Ayushman Bharat scheme.

On Wednesday, the Union Cabinet expanded the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) to include all senior citizens aged 70 and older. This move is expected to benefit nearly 45 million families, comprising 60 million senior citizens, by providing Rs 5 lakh in free health insurance coverage per family. The government’s outlay for this expansion is expected to be Rs 3,437 crore.

“The decision to include senior citizens over the age of 70 in Ayushman Bharat is unlikely to impact health insurance companies,” said Avinash Singh, senior research analyst at Emkay Global Financial Services.

This is mainly because individuals in this age group are either already covered by central government schemes or have private health insurance. The majority of the 70+ age group that will gain coverage under the new scheme typically does not constitute the primary target audience for health insurance companies. While the expansion is advantageous for customers who lack coverage, insurers are not expected to face major concerns about customer cannibalisation. The scheme operates under three modes: trust, insurance, or hybrid.

Under the trust mode, the state health agency (SHA) pays empanelled health care providers (EHCPs) for approved claims. Under the insurance mode, an insurance company appointed by the SHA makes payments to EHCPs for approved claims.

The hybrid mode involves the SHA appointing an insurance company for a specific amount of coverage, with claims exceeding the insurance limit paid directly by the SHA to EHCPs. “I don’t foresee much business cannibalisation, as the proportion of 70+ individuals covered by health insurance is currently very low due to high premiums,” said a senior private sector insurance executive.

“In short term, insurance companies should not be overly concerned. In the long term, the introduction of special insurance products featuring co-payments to make coverage more affordable could impact some insurance companies’ plans,” he added.

“For insurance companies, the volume of business from such schemes is crucial. The government will specify the packages, and hospitals will need to agree to them,” said CEO of a private sector general insurer. 

“It is not a major issue for us; however, standalone health insurers might see some impact,” he added.

According to Saurabh Bhalerao, associate director and head of BFSI Research at CareEdge, the scheme is unlikely to have a substantial effect on health insurance companies, as it primarily targets individuals who cannot afford health insurance. 

Additionally, premiums for individual policies in this age group are quite high, so companies generally do not see major business from this demographic.

“Nevertheless, participating companies may gain valuable data that could be used to offer additional coverage,” he added.