Health insurance in India- Dr Suraj Chawla

Dr Suraj Chawla
JR, Department of Community Medicine,
PGIMS, Rohtak

Contents

 Health Insurance
 Definition
 Milestones
 Essentials
 Functions
 Basic elements
 Risks & Risk management
 Social Health Insurance
 Central Government Health Scheme (CGHS)
 Employees' State Insurance (ESI)
 Rashtriya Swasthya Bima Yojana (RSBY)

Contents

 Private health insurance – Mediclaim
 Community health insurance
 Health Insurance – The Way Ahead
 Pillars of change and Enablers for growth
 References

Health Insurance

 According to ILO “the reduction or elimination of the uncertain
risk of loss for the individual or household by combining a larger
number of similarly exposed individuals or households who are
included in a common fund that makes good the loss caused to
any one member”
 Simply, in a health insurance programme, people who have the
risk of a certain event contribute a small amount (premium)
towards a health insurance fund.
 This fund is then used to treat patients who experience that
particular event (e.g. hospitalisation).

Health Insurance: Milestones

 Social security in India for medical emergencies is as old as the
Indian civilisation.
 However, health insurance as we know it today was introduced
only in 1912 when the first Insurance Act was passed.
 The current version of the Insurance Act was introduced in 1938.
 In 1972 the insurance industry was nationalised and private
insurance companies were brought under the umbrella of the
General Insurance Company (GIC).

Health Insurance: Milestones

 The winds of liberalisation that blew across India in the 1990s
affected the insurance industry also.
 Private and foreign companies were allowed to enter the
market in 1999 with the passage of the Insurance Regulatory
Development Authority (IRDA) bill.

Indian Health Scenario

 Total Expenditure on health in India is 6% of GDP
 Government spending is less than 20% against the average
spending of 30-40 % in other developing countries
 Indian health insurance industry stands at INR 10,500 crores
 Currently, in India only eight million people (about 0.8% of the
total population) are covered under Mediclaim, whereas in
developed nations like USA about 75% of the total population
are covered under some insurance scheme.
 Health insurance industry in India is one of the fastest growing
segments and with more and more private companies in the
sector, the situation may change soon

Health Insurance Premium

Source: IRDA official site

10,500
Crores

Essentials in Health Insurance

 Prepayment and risk pooling: Individuals or families pay when
they are healthy and are able to pay. However, when they are
affected by illness, the insurance fund can be used to finance
their healthcare needs.
 Health insurance functions when there are large numbers
enrolled. This is because with large numbers, the chances of
adverse events are reduced and so is the outflow from the
insurance fund.

Essentials in Health Insurance

 Solidarity: A successful health insurance programme requires
people to contribute, knowing fully well that their contribution
may not help them directly, but will help others who require
the support.
 Without this value, a health insurance programme is likely to
fail as people will insist on withdrawing at least their
contributions from the fund. This will destroy the concept of
health insurance.
 Yet another value, rarely talked about is one of equity. A
health insurance programme should ideally promote both
horizontal equity and vertical equity. This promotes cross-
subsidy between equals and also between unequals.

Functions

A health insurance programme usually has two main functions:
1. To increase access to healthcare
2. To protect households from high medical expenses at the time
of illness

Basic elements in a health insurance programme

Risks in Health Insurance Programme

 There are three main risks that are peculiar to health insurance:
 Adverse selection – Normally we expect that both the healthy
and sick would enrol in a health insurance programme.
However, if poorly designed, there is a chance that the sick will
enrol in larger numbers as compared to the healthy. Thus the
programme becomes unviable as the outflow exceeds the
inflow.
 Cream skimming (risk selection) – This is the opposite of
adverse selection and occurs when insurance companies
selectively choose low-risk individuals and reject the high-risk
individuals.

Risks in Health Insurance Programme

 Moral hazard – This takes place when the fact of being insured
changes the behaviour of the patient or the provider. There are
two types of moral hazard.
 In the supply side moral hazard, we find that the provider
tends to intervene unnecessarily or charge higher bills for an
insured patient.
 In the demand side moral hazard, the patient tends to demand
more care, or indulges in risky behaviour, because of the
insurance status.

Managing risks in a health insurance
programme

 Moral hazard – This takes place when the fact of being insured
changes the behaviour of the patient or the provider. There are
two types of moral hazard.
 In the supply side moral hazard, we find that the provider
tends to intervene unnecessarily or charge higher bills for an
insured patient.
 In the demand side moral hazard, the patient tends to demand
more care, or indulges in risky behaviour, because of the
insurance status.

Types of Health Insurance

Health Insurance Plans

Community Based /
Private Social Micro Insurance

Social Health Insurance

 There are two mandatory and contributory health insurance
schemes in India – the Central Government Health Scheme
(CGHS) for the government of India‟s civil servants and the
Employees' State Insurance Scheme (ESIS) for the low-paid
industrial workers.
 Here the eligible people contribute through a payroll tax
towards a specific health fund. This fund then finances specific
benefits for them.
 Rashtriya Swasthya Bima Yojana (RSBY) for BPL families is
recent addition in social insurance.

Central Government Health Scheme (CGHS)

 The CGHS was introduced in 1954 as a contributory health
scheme to provide comprehensive medical care to the central
government employees and their families.
 Currently, there are approximately 5.5 million beneficiaries. The
staff contributes a nominal amount (ranging from Rs 30 to Rs
300 per month) from their salaries.
 It provides service through following categories of systems:-
 Allopathic
 Homeopathic
 Indian System of Medicines

CGHS Beneficiaries

Besides Central Government employees, the scheme also provides
services to:
 Members and Ex-members of Parliament
 Judges of the Supreme Court and High Court (sitting and
retired)
 Freedom Fighters
 Central Government Pensioners, Employees of Autonomous
bodies
 Ex-Governors and Ex-Vice-Presidents of India

CGHS Facilities

The benefit package includes both outpatient care and
hospitalisation. The medical facilities are provided through
Wellness Centres and polyclinics.
 248 Allopathic dispensaries
 19 polyclinics
 78 Ayush dispensary/units
 3 Yoga Centres
 65 Laboratories
 17 Dental Units
 Also uses the facilities of the government and approved private
hospitals to provide inpatient care and reimburses the expenses
to the patient.

CGHS - Problems

 Equity – In a country where the government spends about 1.1%
of the GDP on healthcare, it is unacceptable that a sizable
amount of this goes to the better-off section of the society.
 Demand side moral hazard – It is noted that more than 80% of
the hospitalised patients are self-referred. It appears that most
patients prefer to bypass the dispensaries and directly avail of
specialist services.
 Poor quality care – There are regular complaints about long
waiting periods, inadequate supply of medicines and
equipment and unhygienic conditions
 High out-of-pocket expenditure

Employees' State Insurance Scheme

 Established in 1948, the Employees‟ State Insurance Scheme
(ESIS) is an insurance system, which provides both cash and
medical benefits. It was conceived as a compulsory social
security benefit for workers in the formal sector.
 The Employees‟ State Insurance Corporation (ESIC) manages
the scheme and is a corporate semigovernment body headed
by the Union Minister of Labour as Chairman and a Director
General as the chief executive.
 Number of insured persons covered under the ESI Scheme
reached 16 million in 2010-11.


 The Act compulsorily covers:
(a) all power-using non-seasonal factories employing 10 or
more persons;
(b) all non-power-using factories employing 20 or more
employees, and
(c) service establishments like shops, hotels, restaurants,
cinemas, road transport and newspapers.


 Act does not include employees of Indian navy, military or air
force; or whose wages exceed Rs. 15000 or as prescribed by the
Central Government.
 To avail of the sickness benefit, the employee has to have
worked for 78 days prior to the sickness. Similarly, to avail of
the maternity benefit, the woman has to have worked for 70
days prior to the sickness.


Contribution :-
 State Governments share 1/8th of expenditure on medical
treatment and attendance (7/8 being borne by the ESIC).
 Employees pay on an average 1.75% of the wages and
employers contribute 4.75% of the wage bill. The employee
who is getting daily wage of less than Rs. 70.00 shall be
exempted from payment of contribution.


Benefits :-
1) Sickness Benefit:
 At the rate of 50% of the daily average wage is given to the
employee for a maximum period of 91 days in one year. In
diseases like tuberculosis, leprosy, fracture, malignancy etc, the
sickness benefits are extended to two year.
2) Maternity Benefit:
 At the rate of full wages for a period of 84 days in case of
pregnancy and 6 weeks in case of miscarriage or MTP.


3) Disablement Benefit :-
 In cash, 72% of the wages is given to the temporary disabled
person during the period of disablement. In case of permanent
disablement, the payment is made at the same rate for the
whole of his life in the form of pension.
4) Dependent Benefit :-
 Widow or adopted child (up to the age of 18 years or till the
daughter get married) of the diseased person gets the cash
payment may be in the form of pension.


5) Funeral Benefit :-
 An amount of Rs. 5000 is paid to the eldest surviving member
for the funeral purpose.
6) Medical Benefit :-
 All member of the worker gets the medical cover including the
Outdoor treatment, domiciliary treatment facilities by the
panel system, specialist services, ambulance services, and indoor
services.

ESIS-Problems

 Less than half the enrolees use the ESIS facilities because of the
low quality of care
 Many of the staff are not aware of the benefits. The employers
also do not disseminate the information to their staff.
 There is duality of control, with both the ESIC and the State
governments trying to establish superiority
 Poor penetration in rural areas

Universal Health Insurance Scheme

 Government of India launched the Universal Health Insurance
Scheme (UHIS) in 2003
 Standard Mediclaim product with an annual cover of Rs
30,000 for a family
 Scheme marketed by the public sector insurance companies
and was targeted at the BPL population.
Reasons for failure:
 Lack of willingness of Insurers/other stake holders
 Improper identification system of beneficiaries
 Inadequate coverage / benefits
Now superseded by RSBY

Rashtriya Swasthya Bima Yojana
(RSBY)

 The RSBY is a project under the Ministry of Labour and
Employment
 Started in April, 2008 and has been implemented in 25 states
including Haryana
 Scheme will be implemented by the State Government in a
phased manner and entire country is to be covered in 2012-13.
 Total sum insured of Rs 30,000 per BPL family on a family
floater basis
 A total of 23 million families have been enrolled as of February
2011

Rashtriya Swasthya Bima Yojana
(RSBY)

 Pre-existing diseases to be covered from day 1
 Coverage of health services related to OPD and hospitalization
 Cashless coverage of all eligible health services in public as well
private hospitals
 Provision of Smart Card
 Provision for transport allowance (actual with limit of Rs.100
per visit) but subject to an annual ceiling of Rs.1000

FUNDING-RSBY

 Contribution by GOI : 75% of the estimated annual premium of
Rs 750, subject to a maximum of Rs. 565 per family
 Contribution by the State Governments: 25% of the annual
premium and any additional premium beyond Rs 750
 Every "below poverty line" (BPL) family holding a yellow ration
card pays Rs 30 registration fee to get a biometric-enabled
smart card containing their fingerprints and photographs.
 Administrative cost to be borne by the State Government
 Cost of Smart Card to be borne by the Central Government. An
additional amount of Rs.60 per beneficiary would be available
for this purpose

RSBY- Facts

 In the Union Budget for 2012-13, the government made a total
allocation of about 1100 crores towards RSBY.
 Although meant to cover the entire BPL population,(about
37.2 per cent of the total Indian population according to the
Tendulkar committee estimates) it had enrolled only around 10
per cent of the Indian population by March 31, 2011.
 The scheme has won plaudits from the World Bank, the UN
and the ILO as one of the world's best health insurance schemes.
Germany has shown interest in adopting the smart card based
model for revamping its own social security system.

Private Health Insurance

 A voluntary health insurance wherein people can enroll and
purchase the insurance product of their liking, paying a risk-
rated premium
 Both public and private insurance companies market a variety
of health insurance products
 Out of these „Mediclaim‟ is the most sold product

Mediclaim

 Introduced in 1986
 A voluntary health insurance scheme offered by the public
sector (and since 1999 the private sector) health insurance
companies
 Anybody (3 months to 80 years) who can afford the risk-rated
premium is eligible to join the scheme
 The premium depends on the age, risk and the benefit
package opted for
 The subscribers are usually the middle and upper class,
especially as there is a tax benefit in subscribing

Insurance Regulatory Development
Authority (IRDA)

 A regulatory body, controlled by the Indian
Government, governing insurance companies
across India
 The headquarters of IRDA -located at Hyderabad
Aims:
 To protect the interests of the policyholders, and
 To regulate, promote and ensure orderly growth
of the insurance industry

Third Party Administrator (TPA)

A TPA is a specialized health service provider, introduced by the
IRDA, rendering the following broad-spectrum services:

 Networking with hospitals

 Facilitating hospitalization processes

 Claim processing and settlement

Claim Disputes/Grievances

 Ombudsman is a special court
constituted under IRDA for
addressing grievances associated
with Insurance claims.

 The claimant can approach the
Ombudsman for resolving claim
issues.

Strengths of the Mediclaim policy

 The only voluntary health insurance policy in the country
currently, with about > 8 million subscribers
 Provides protection against catastrophic health expenditure
 Easily available in most insurance companies
 Is being modified to make it customer friendly

Private Health Insurance: Issues & challenges

Faced by Insurance Companies
Key Issues Description
 Limited Influence  Limited healthcare delivery network
over healthcare
delivery 
Insufficient data on consumers & disease
mechanism patterns, absence of standardization of
 High claim ratio healthcare costs & significant levels of
frauds leading to under-pricing of
insurance products and higher value of
claims
 Limited product  Insufficient data on Indian consumers &
development disease patterns and limited control of
healthcare delivery network resulting in
limited product and pricing innovation


Faced by TPAs
 Limited influence Varying treatment costs across providers due
over healthcare to limited bargaining power
delivery network  Lack of standardization & accreditation in
most healthcare facilities leading to difficulty in
 Funding support judging the authenticity of procedures & costs
 Limited funding support from the Insurance
company impacting the claims disbursement
time
 Delays and issues in claims processing
leading to negative perceptions by insurance
companies & consumers about TPAs


Faced by Healthcare Providers
 Pricing demands  Lack of standardization and
from Insurance accreditation norms for healthcare
companies resulting in unreasonable pricing
demands by insurance companies
 Lack of  Low health insurance penetration and
affordability lack of affordability of the consumers
in the cities and rural areas to support
the investment in healthcare
infrastructure in these areas

Community health insurance

“any not-for-profit insurance scheme aimed primarily at the
informal sector and formed on the basis of a collective pooling of
health risks, and in which the members participate in its
management.”
 While the CHI movement is vibrant in Africa, it is slowly picking
up momentum in India.

Characteristics of CHI in India

 Initiated by NGOs / CBOs

 Mainly to improve access to health care

 The members varies from 1000+ to more than 2 million

Models of CHI

3 basic models of CHI
 Provider model (Direct Model)
 Insurer model (Mutual Model)
 Linked model

Provider (Direct )model

Hospital

Community

Insurer (Mutual) model

NGO Hospital

Community

Linked model

NGO Hospital

Community

Yeshasvini

 Organized by the Yeshasvini Trust, Karnataka
 Eligibility – Cooperative farmers and their families
 Premium – Rs 120 + 30 per person per year
 Benefit – any surgery up to Rs 1 lakh per hospitalization and 2
lakh per patient per year
 Providers – Empanelled hospital > 300
 Administration by TPAs

Karuna Trust

 Initiated in September 2002
 Organized by Karuna Trust, Karnataka
 Eligibility – BPL families in talukas where Karuna trust works
 Premium – Rs 20 per person per year
 Benefit – hospitalization expenses upto Rs 2500; loss of wages
upto Rs 1500; payment to the doctors upto Rs 1500
 Providers – Only government hospitals
 First year > 60,000 members, now around 100,000.

Performance of CHI

 Able to reach out to the weaker sections of society
 Provide some form of health security
 Has improved access to health care
 Has protected households, but only partially
 Has not improved quality of care for the patient
 Many of them require external subsidies

CHI- Conclusions

 An useful tool to improve access to health care and protect
families from impoverishment
 But there are some pre-conditions that need to be met –
 Trustworthy organization
 Good quality providers
 Community with some means
 Managerial skills

Health Insurance – The Way Ahead

 Creating awareness on Rights & Responsibilities
 Standardization of Cost
 TPAs
 Health Providers
 Increased Tax benefit
 Removal of Service Tax
 Gradation of Health service providers
 Pool for Senior Citizen

Health Insurance – The Way Ahead

 Renewability / Portability
 Compulsory Health Benefits for organized sector
 Government role on mass healthcare initiatives

Pillars of change and Enablers for growth

Pillars of Change Enablers for Growth Outcome
• Consumer • Product & Pricing • Healthy
Awareness Innovation Vibrant
• Standardization • Technology India
of Health care costs • Channel Innovation
and Accreditation
norms
• Healthcare
Infrastructure
• Data & Information
Exchange

References

 Planning and Implementing Health Insurance Programmes in
India; Dr. N. Devadasan; Institute of Public Health Bangalore,
India,In collaboration with the WHO India Country Office:
Website www.iphindia.org Email: mail@iphindia.org
 Central Government Health Scheme mohfw.nic.in/cghs.htm
 Employees State Insurance Scheme of India. Citizens Charter.
New Delhi: Employees State Insurance Corporation; 2006(cited
March 1, 2010). p.1-8. Available from:
http://esic.nic.in/citizen_charter.htm
 http://en.wikipedia.org/wiki/Employees%27_State_Insurance

References

 Issues in Micro Health Insurance in India – Role of Government :
India Insurance
ifmr.ac.in/cmf/internship/june0508nishantjain.ppt
 Department of economic and statistical analysis,Haryana 2010;
publication no. 946 ;deptt. website: www.esaharyana.gov.in
 Government of Haryana , economic survey of Haryana, 2009-
2010;issued by: department of economic and statistical analysis
Haryana
 http://www.medindia.net/slideshow/health-insurance.asp#4
 http://en.wikipedia.org/wiki/Rashtriya_Swasthya_Bima_Yojana

Health insurance in India- Dr Suraj Chawla

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