Impact of the Union Budget 2025 on the Health Insurance Sector

The Union Budget 2025 introduced several significant reforms poised to reshape India's health insurance landscape. These measures aim to enhance accessibility, encourage industry growth, and address the evolving needs of the population. Below is an in-depth analysis of the key provisions and their anticipated impacts:

1. Increase in Foreign Direct Investment (FDI) Limit

The government has raised the FDI limit in the insurance sector from 74% to 100%. This policy shift is expected to attract a surge of global insurers into the Indian market, fostering increased competition and innovation. As a result, consumers may benefit from a broader array of insurance products and improved service quality. Moody's anticipates that this move will bolster sector growth and enhance profitability. 

2. Tax Reforms Benefiting the Middle Class

To stimulate domestic consumption, the budget has introduced substantial personal income tax cuts. Individuals earning up to ₹1.2 million annually are now exempt from income tax, an increase from the previous threshold of ₹700,000. This change is designed to increase disposable income for middle-class families, enabling greater investment in health insurance policies and other financial instruments. 

3. Inclusion of Gig Workers in Health Insurance Schemes

Recognizing the expanding gig economy, the budget proposes the issuance of unique identification cards to gig workers, effectively formalizing this segment of the workforce. This initiative aims to extend health insurance coverage and other social security benefits to freelancers, contract workers, and platform-based employees, providing them with financial protection against health-related expenses. 

4. Enhanced Healthcare Infrastructure Investment

The budget allocates a 10% increase in funds to the health sector compared to the previous fiscal year. This investment focuses on expanding access to quality healthcare, addressing emerging health challenges, and strengthening infrastructure. Improved healthcare facilities are expected to make health insurance policies more valuable, as policyholders will have access to better medical services. 

5. Expansion of Health Insurance Accessibility

The health insurance industry has advocated for policy reforms to make health insurance more affordable and accessible, especially amid rising healthcare costs. Proposals include expanding the Ayushman Bharat scheme beyond its current 34.2 crore beneficiaries through innovative financing models and increasing coverage amounts for complex procedures in super-speciality hospitals.