Mumbai: ICICI Prudential Pension Funds Management Company has launched the country’s first Swasthya Pension Scheme under the regulatory sandbox of the Pension Fund Regulatory and Development Authority, seeking to help subscribers build a long-term retirement corpus while creating flexibility to meet medical expenses.
Speaking at the launch, PFRDA chairman Sivasubramanian Ramann said that the critical feature of the Swasthya Pension Scheme was to bring about discipline in not spending the long-term savings for health and bringing to them the benefits of aggregation. He said the intention was to supplement health insurance scheme “in future, there could be consideration of verifying whether a subscriber already has health insurance before opening a Swasthya account, reinforcing its complementary role,” he said.
Sumit Mohindra, CEO, said recent reforms in the National Pension System (NPS) enabled such innovation. “The product stems from a gap in health financing. There is about 38% insurance penetration which exists in the medical space.” For nearly 40% of the population, health expenses are met out of pocket.
“The average household spends about 15 to 20% of its income on medical expenses. Around one fourth of hospitalisation costs are met by people selling off their assets,” he said.
Mohindra described it as “a pension plan, primarily a pension plan which is designed to also combine retirement planning with some healthcare flexibilities.” For the proof of concept, the fund has “launched a version which is a high equity exposure because… primary objective is long term growth in terms of retirement planning.” Over time, more conservative options may be introduced depending on subscriber risk appetite.
The key feature is liquidity for medical needs. “The different thing in NPS Swasthya is that multiple withdrawals can be made up to 25% of own contribution.” In a regular NPS account, partial withdrawals are capped at four times during the tenure. “Here you can technically withdraw four times up to that 25% within a couple of days.”
There is additional flexibility during emergencies. “In case of medical emergencies where the corpus or the requirement exceeds 70% of the corpus, then the premature closure is allowed and the money will be paid directly to the health service provider and whatever is the balance will be moved to the common scheme.”
The scheme has been designed as a fully digital journey. For the proof of concept, the health network is anchored by Apollo Hospitals. Subscribers can access the Apollo 24.7 app, the Apollo pharmacy, Apollo hospitals and diagnostics. The customer will have an option to make payments using the Swasthya Pension Scheme. While the 24.7 app can be used nationwide for medicines and tests, physical pharmacies and hospitals are currently restricted to Bengaluru and Hyderabad during the pilot phase. KFin Technologies is the digital partner.
Mohindra was clear that the scheme complements, not replaces, health insurance. Use cases include pharmacy-linked expenses, OPD consultations, diagnostics and hospitalisation. “But largely we would prefer it, we would position it as for copay,” he said.
Subscribers can enrol through the company’s website or via the Apollo 24.7 app during the sandbox phase.
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