Understanding the impact of rising Health Insurance Premiums on everyday life

Over the past few years, rising health insurance premiums have become a growing concern. According to an analysis, more than 10% of policyholders experienced health insurance premium increases exceeding 30%, while 53% reported increases of up to 10%. These spikes reflect economic and structural shifts in the healthcare and insurance sectors.

With escalating medical inflation and hospitalization costs, families are not wondering whether they should purchase health insurance or not!

The key factors behind rising health insurance premiums are:

• Increased number of claims.

• New value-added benefits.

• Aging population.

• Lifestyle diseases.

• Regulation rebalancing.

The result? The cost of living and health insurance is rising more rapidly than income growth. This article explores:

• Why are health insurance premiums going up.

• Impact of increasing health premiums.

• How to manage increasing health insurance costs.

• Tips to lower health insurance premiums.
  

Watch out for inflation-adjusted premiums instead of opting for fixed expenses. That policy you can afford now could prove unsustainable in the future.

Why Are Health Insurance Premiums Going Up?

A single reason is not responsible for the rising health insurance premiums. Here are the key causes that can lead to rising health insurance premiums:

A. Medical Inflation and Health Insurance Premiums

India's medical inflation rate is approximately 14% in 2025. Increasing costs of diagnostics, advanced surgeries, and branded drugs are pushing insurers to increase premiums.

B. Early Lifestyle Disease Onset

Younger adults are now being diagnosed with diabetes, hypertension, and cardiac issues. The rise in chronic diseases leads to bigger and more regular claims. This impacts the insurer's risk pool and their pricing considerations.

C. Increased Coverage Mandates

Today's policies are no longer limited to inpatient care. Features like mental health support, OPD cover, home care, and COVID-related treatments are now standard. While this enhances utility, it also increases the overall cost of coverage.

D. Regulatory Solvency Mandates

IRDAI's revised solvency norms have mandated insurers to maintain higher capital buffers, which are vital for sustainability but add to operational costs.

Expert Insight: "We're not in a price hike cycle, we're in a pricing reset to reflect real-world risks and system sustainability," said Saurabh VijayVergia, Founder & CEO of CoverSure, speaking to CNBC-TV18

The Direct Impact of Increasing Health Premiums on Families

The effect of rising health insurance costs is most apparent in how it influences household budgets. The health insurance cost burden now rivals EMIs, school expenses, and retirement funds.

Here is an example:

A ₹15,000 average family floater policy in 2021 can now cost ₹22,000 or even more in 2025. This reflects a 46% increase over just 3 years. Such increases don't correspond to income increases, particularly among the salaried middle class.

A. Budget Trade-offs

Such a high increase tends to push families to:

• Reduce coverage amount to keep premiums affordable.

• Let go of necessary add-ons such as room rent waiver or OPD.

• Delay renewals, risking policy lapse, and waiting period reinstatement.

For individuals who are maintaining families with EMIs, school fees, and taking care of elderly parents, health insurance becomes a sacrifice.

B. Monthly Budget and Health Insurance Premiums

Rising health insurance premiums are affecting expenses and emergency savings. Premiums impact the cost of living, health insurance budgets, and outpace salary hikes, which may lead to stress and delayed lifestyle purchases.

Reduced Quality Healthcare Access for Some

With health insurance becoming unaffordable to low-income families and senior policyholders, the risk of cancelling or reducing coverage increases. This threatens access to quality care.

A. Fixed Income Families at Risk

Fixed-pension citizens face premium hikes of 2x–3x post-retirement. Many policyholders are forced to reduce their coverage or even cancel it, leaving them with high out-of-pocket costs on hospitalization.

B. Deferred or Denied Care

Without coverage, many families:

• Delay trips to hospitals until health problems worsen.

• Rely on local clinics or public hospitals.

• Ignore follow-up tests or rehabilitation.
  

C. Preventive Healthcare is Overlooked

Preventive screening or mental health counseling isn't usually included in most entry-level and mid-range policies. When costs increase, families jump to lower-tier policies, leaving preventive healthcare amenities behind.

Impact on Retirement and Long-Term Financial Planning

Retirement is a time when health risks rise; and so, do insurance rates. That makes the age-related increase in health insurance premiums challenging for older individuals.

A. Premiums Triple After 60

After one crosses 60 years of age, premiums become three times what it was during the 40s. For instance, a premium of ₹20,000 paid at 45 may rise to ₹65,000-₹75,000 at retirement. This is not just due to age, but also due to the increasing addition of critical illness cover, OPD benefit, and risk-based underwriting.

B. Eroded Retirement Corpus

Medical inflation with risk due to aging can deplete savings faster than expected. In some cases, health insurance may consume 20–25% of retirement income annually.

C. Downgrading Coverage

Retirees consider switching plans due to rising premiums. They move to low-benefit schemes with expensive co-payments, or lose essential riders at the very time when they need protection the most.

Psychological Stress and Health Decisions

The impact of rising health insurance premiums generates emotional and mental tension, especially for middle-aged and elderly policyholders.

Most people nowadays live with nagging doubts:

• "Will my insurance company raise the premium again this year?"

• "What if they deny my renewal after a claim?"

This insecurity affects peace of mind, especially for those living with chronic conditions or dependent relatives.

A. Treatment Options Based on Cost

Instead of selecting hospitals or doctors by excellence or specialization, policyholders might be limited to:

• Lists of insurer-designated hospitals.

• Hospitals with lower co-pay requirements.

• Semi-private rooms or general wards.
  

B. Omitting Preventive or Mental Health Care

To cut costs, most policyholders forego preventive checks, therapy sessions, or periodic diagnostics. This results in increased costs later on.

AssetPlus Insight: Premiums are increasing, but so are benefits. Pay attention to plans that reward healthy lifestyles, provide loyalty bonuses, and ensure lifetime renewability.

Changes in Insurance Buying Behavior

India's youth is reacting to rising inflation and health insurance premiums in the following ways:

A. Delayed Insurance Purchase

Several young employees believe that insurance would be cheaper if bought later, or that being young protects them. The fact is that early purchase locks in low costs forever. It also avoids waiting periods and provides cover for critical illness at a better rate.

B. Super Top-Ups and High Deductibles on the Rise

Policyholders are looking for super top-up plans to augment total coverage without raising the base premium. A base plan of ₹5 lakh with a top-up of ₹15 lakh and a deductible of ₹5 lakh provides extensive coverage at reasonable prices.

C. Sub-Limits and Co-Pays

To reduce upfront premium payments, people are choosing room rent capping, disease-specific sub-limits, and co-pay clauses. These choices lower premiums, but create cost pressures when hospitalized.

D. Switching Plans Due to Rising Premiums

Because insurers are using individualized underwriting and wearable data, customers are being more educated and informed when it comes to value. They're avoiding hefty plans because premiums are going up, and they're demanding more openness.

What Policyholders Can Do - Tips to Lower Health Insurance Premiums

Despite the healthcare inflation impact, you can control increasing health insurance costs without affecting the quality.

A. Review Annually

Like mutual funds, you must review health insurance annually for premium alterations, exclusions, new riders, and IRDAI-induced enhancements.

B. Purchase Early

Getting a policy at 25 years instead of 35 can mean 40–50% savings during the policy term. The difference in premium can be put to other use by way of SIPs.

C. Maximize Super Top-Ups

A top-up can be useful for policyholders who invest in a base cover of less than ₹5 lakh. This way, the younger lot can enhance protection for a small price.

D. Go for Wellness-Linked Plans

Opt for plans that reward gym-goers, wellness lifestyles, or non-smoking profiles. You can avail both cash and physical benefits.

E. Leverage Family Floaters Strategically

Small nuclear families under the age of 50 can save a lot using a floater cover, compared to individual covers. Ensure the sum insured is proportionate based on the overall health needs.

F. Explore Portability Options

Switching plans due to rising premiums beyond market standards is a right under the IRDAI guidelines. Porting retains continuity of waiting periods and bonuses.

Role of Insurance Providers and Regulators

While the direct burden is on people, the insurers and the regulators must intervene to address the rising health insurance premiums.

Insurers' Responsibility - Transparency and Innovation

Insurers must maintain greater pricing transparency as premiums increase. Unfortunately, most of them are unaware of what determines their annual increase, whether it's the claims ratio, the new benefits added, or solvency needs.

Insurers also must provide clear benefit disclosures, adjustable options, and modular policies with the capacity to add or remove riders such as:

• OPD cover.

• Mental health counseling.

• Critical illness cover.

• Reimbursement of room rent.
  

Regulatory Push: IRDAI and Policy Innovation

India's insurance regulator has taken strong initiatives in recent times:

• Reduced waiting periods for pre-existing ailments.

• Encouraged coverage of mental illnesses and OPD procedures.

• Directed solvency margins on behalf of policyholders.

But still, there needs to be more action. For instance, capping excessive hikes, disclosing underwriting reasons, and harmonizing premium calculation disclosures will restore trust.

AssetPlus Insight: MFDs must stay updated on regulations and guide clients through reforms that affect pricing or eligibility, such as the inclusion of chronic diseases or changes in GST rate negotiations.

Conclusion: From Price Pressure to Proactive Planning

The impact of rising health insurance premiums shapes the way Indian families plan for healthcare and long-term savings. Given the rising inflation rate, lifestyle risks, and health insurance premiums, policyholders must reassess their approach to managing health insurance.

Get in Touch with AssetPlus for Insurance Support

AssetPlus offers digital tools, professional guidance, and customized suggestions to make health insurance easier and smarter. MFDs and health insurance professionals can:

• Help consumers navigate the cost and health insurance premiums every month.

• Keep up with evolving plans due to rising premiums.

• Help clients select a policy that suits their future requirements.

• Compare policies among carriers.

• Track long-term premium growth.

• Get reminders of policy renewals, add-ons needed, or portability eligibility.

Take the first step to learn more about health insurance advisory with AssetPlus today.

Get in touch with your financial expert for proper insurance guidance.

FAQs

Why are health insurance premiums going up?

Key reasons for the rising costs of health insurance premiums are the increasing cost of medicine, rising claims, the introduction of new benefits, and stricter supervisory norms.

How do I lower health insurance premiums without sacrificing coverage?

You can buy early, opt for top-up plans, use wellness-related benefits, and shop around annually using tools like AssetPlus to get adequate coverage at a decent price.

Is switching plans due to rising premiums a good idea?

Yes, in case of a greater value elsewhere or if your current premium is disproportionately high. IRDAI promotes portability, and you don't lose waiting period benefits when you change.

What is the average health insurance cost burden in India in 2025?

You can buy individual plans from ₹5,000 to ₹20,000 every year, and family floaters from ₹10,000 to ₹50,000. The premiums depend on the policyholder's age, location, diseases, and riders.

What is the impact of increasing health premiums on my retirement plan?

After the age of 60, premiums can increase three times and affect your fixed pension. Plan with inflationary estimates.