Dr. Padma Bhatia

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HEALTH INSURANCE IN INDIA
Dr. Padma Bhatia Assistant Professor
Department Of Community
Medicine G.M.C., Bhopal. M.P. India.
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HEALTH IS A HUMAN RIGHT

• ITS AFFORDABILITY ACCEPTABILITY HAS TO BE
  ASSURED FOR URBAN A/W/A RURAL, WELL TO DO TO THE
  POORER SECTION OF THE SOCIETY.

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Agenda

• Healthcare and health insurance in India
• Macroeconomic trends and indices
• Current schemes and coverage
• Global experience and the objectives of health
  insurance reform
• Devising an appropriate model for India
• Segmenting the market
• Framework for reform
• Managing the reform process

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Health Care scenario

• Before independence - dismal condition.
• High morbidity, mortality and Infectious
  diseases.
• After independence - emphasis on PH care.
• Present Problem-
• High mortality, negligible MCH care.
• Urban-Rural divide7030.
• Population Size of the country.
• Declining funds to HealthCare Sector-CG/State.

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Health Care Scenariocontd

• At any given point of time 40 to 50
• million of population on medication for major
  sickness. About 200 million days are lost
  annually.
• The annual rate (range) of out-patient rural
  30-152/1000, urban 9-81/1000 and for
  hospitalization rural 16-76/1000, urban
  5-38/1000.

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HEALTH CARE FINANCING IN INDIA

• The share of public financing in total health
  care is just about 1 of GDP compared to 2.8 in
  other developing countries.
• Beneficiaries are both poor a/ w/ a well-fed
  section of society.
• Over 80 of the total health financing is private
  financing,much of which is out-of-pocket payments
  (i.e. User charges) and not any prepayment
  schemes.

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Health care spend in India is considerably lower
than that in other countries
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The proportion of insurance in health care
financing in India is extremely low
Health care financing in India 2002,
83 from private sector spending
86 from out-of-pocket expenses
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The World Health Organization has defined
possible approach to financing of health
expenditure

• Using central / state revenues
  for health

Tax-funded

• Channeling loans, grants etc.
  to healthcare

Public
Social security

• Compulsory premium contributions to health

Externally funded
Total health expenditure

• Payments to health care providers for services

Out-of-pocket
Private

• Premium contributions towards health support

Private health ins.

• Channeling donations etc. to healthcare

Externally sourced
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Social Security Concept

• Defined as the security that the
  society furnishes to some organizations against
  certain risks to which the members of society are
  exposed

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Social Security Advantage

• The financial burden of sickness cannot be borne
  by the individual. It must
  be widely distributed throughout the country.
• Sickness is not an individuals misfortune but
  the calamity is to taken as community state
  responsibility.

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Health insurance typically helps a patient manage
health care costs beyond a threshold amount
through pooling

• As a contingent claim instrument, health
  insurance is an efficient way to help individuals
  prepare for health care

Patient expenditure (INR)
Insurer payment (from premium pool)
Stop-loss level
Individual payment
Co-insured
Deductible
Health care expenditure (INR)
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WHAT IS HEALTH INSURANCE?

• SYSTEM OF ASSURANCE TO MAKE CONTINGENCIES OF
  HEALTH CARE EXPENSES.
• TO PROVIDE PROTECTION AGAINST FINANCIAL LOSS BY
  UNFORSEEN SICKNESS.
• TO MEET COST OF GOOD MEDICAL CARE.
• RELIEVES ANXIETY AND TENSION.

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Origin of Health Insurance

• International
• 1883 Bismarck- sickness benefit to workers.
• 1911 Lloyd George- National Health Insurance
  Scheme to cover sickness expense, medical relief,
  drugs compensation of wages lost, to improve
  quality of life and improve industrial
  production.
• J.F.Kimball prepayment system of health care.

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Origin of Health Insurance

• National
• 1923 Workmans compensation Act.
• 1948 ESI Act passed.
• 1952 First ESI hospital established.
• Mudaliar Committee(1959-1961) recommendations
• Long range health insurance policy for all.
• Small fee for availing health services.

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Origin of Health Insurancecontd

• National
• 1999 IRDA act passed.
• 2001 Insurance amendment Act
• Emphasis on TPAs.

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Forms of Insurance Available

• Indemnity Insurance where the insurer first pay
  to the hospital and claim is made. E.g. Jeevan
  Asha II, Asha Deep II, Mediclaim.
• Cashless Claim FacilityTPAs who bear the
  expenses on behalf of insurance company. Patients
  need not to pay directly as a rule e.g. Bajaj
  Alliance.
• CBHI (Community Based Health Insurance).

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The key issue related to financing of health
care in India revolves around the lack of
adequate insurance . . .

• Limited coverage
• Only around 10 of the population is covered
  through health financing schemes
• Geographic spread in terms of health care
  facilities and financing awareness is limited
• Selection criteria by suppliers often restricts
  the poor (and more likely to be ill) from
  affordable pre-payment schemes
• Moral hazard and Adverse selection
• Claims ratios for Mediclaim and Jan Arogya
  policies have been in the range of 120 130.

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The key issue related to financing of health care
in India revolves around the lack of adequate
insurance contd

• System leakages
• Provider malpractices leading to over-charging or
  pre-selection / selective recommendation
• Lack of universal schemes
• Limitations in terms of coverage of illnesses as
  well as treatment options
• Alternative therapies often not considered /
  included under insurance

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The experience of different countries suggests
that private insurance has an important role to
play in overall health care

• Source of health insurance in countries with
  targeted, non-universal access to health care
  coverage
• e.g. Netherlands restricts public health coverage
  to an income threshold
• Private health insurance has enhanced access to
  timely hospital care
• e.g. In UK, waiting time reduction and private
  health insurance coverage have led to a virtuous
  cycle.

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The experience of different countries suggests
that private insurance has an important role to
play in overall health care

• Private health insurance has increased service
  capacity and supply by injecting financial
  resources up front e.g. In the US, private health
  insurance has financed hospitals in terms of
  doctors and facilities through the HMO set-up
• Private health insurance increases choice
  (provider, benefits, cost-sharing) for the
  individual e.g. In Australia, private health
  insurance offer the option of access to spare
  capacity and elective care in non-public
  institutions

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Global experience provides some key learning on
health insurance policy design

• Balancing risk-spreading and incentives offered
• Balancing the need to encourage health insurance
  against moral hazard (individuals choose more
  care) and principal-agent problems (providers
  supply more care)
• Integration of insurance and health care
  provision
• Managing doctor loyalties with patient and
  insurer under managed care

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Global experience provides some key learning on
health insurance policy design . . .contd

• Approach to competition and portability
• Balancing the need for consumer choice against
  adverse selection (sick preferring more generous
  plans)
• Focus on health as against financing of health
  care
• The over-riding objective should be to improve
  health rather than the financing of health care
  services

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Some key considerations related to formulation of
approach to HI in India . . .

• Differential approach
• -Formal sector (government and
  non-government workers)
• Self-employed segment
• Poor / Unemployed segment
• Scope and structure of health insurance cover
• Product and segment coverage
• Portability across service providers
• Cap on premium amounts
• Risk-adjusted approach
• Nature of fiscal incentives
• Subsidies and tax incentives for health insurance
  as against health care

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As a result, the traditional model for health
insurance needs to change...

• Fixed fees
• Service charges

• Voluntary premiums

Insurer/

• Mandatory premium

Inter-mediaries
Government / Employer

• Mandatory premium

• Costs up to deductible

• TPAs etc.

Individual
Provider

• Could be allied to insurer or be a government
  approved provider

Financial flows Service flows
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to one that allows the flexibility to serve
different segments of the population, in an
efficient manner

• Health insurance providers may need to align
  themselves to overall health care including
  financing, preventive health care and health
  outreach in order to grow coverage
• Regulations and policy must be designed to
  encourage this

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Community-based initiatives have been
particularly cost- efficient in reaching out to
the poor / unemployed segments
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How CBHI can be made Reachable

• Effort for social mobilization strengthening of
  people organization
• Training and capacity building, special emphasis
  on PRIs and Women Organization
• Demand Driven social services, Building of
  alliances and partnerships
• Advocacy for Pro poor policies.

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Managing the reform process would require several
infrastructural and market changes to be effected

• Appropriate market segmentation, awareness
  initiatives, product innovation, and incentives
• Easing of entry norms for specialist health
  insurance companies
• Provider rating and credentialing
• Centralized database for health insurance
  experience statistics
• Efficient back-office support for underwriting
  and claims processing

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Conclusion

• Health insurance is an emerging important
  financial tool in meeting health care needs of
  the people of INDIA. CBHI is to be further
  explored so that the disadvantaged section get
  maximum benefit.
• In India at present no Pan-India Model of HI.
• All different forms need to be explored.