HEALTH INSURANCE

DR.BHARAT PAUL

CONTENTS

Introduction Importance of Health Insurance Health Insurance in India Types of Health Insurance

Social Health InsurancePrivate Health InsuranceCommunity Health Insurance

The Way Ahead References

INTRODUCTION

Method to finance healthcare. “ 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 up the loss caused to any one member” #

#-ILO (International Labor Organization) 1996

Background

1818- Advent of life insurance business in India. Oriental insurance company set up in Calcutta. It failed in 1834.

1829- Madras Equitable started life insurance business in Madras Presidency.

1870- British Insurance Act

The Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency

Background

1912- Indian Life Assurance Companies Act 1928- Indian Insurance Companies Act 1938- Insurance Act 1950- Insurance Amendment Act 1956- Life insurance sector nationalized 1972- General Insurance Business

(Nationalization) Act

Background

1973-National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd.

1994- Malhotra committee recommended private sector to enter the insurance industry

1999-IRDA(Insurance regulatory and development authority) set up

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. 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.

Basic elements in health insurance

Risks in Health Insurance-

Adverse selection

Sick people enrol in large numbers as compared to healthy.

Cream skimming (risk selection)

Opposite of adverse selection. Insurance companies selectively choose low-risk individuals

Risks in Health Insurance-

Moral hazard- fact of being insured changes the behaviour of the patient or the provider

Supply side moral hazard Demand side moral hazard

Functions of Health Insurance

A health insurance programme has two main functions

To increase access to healthcare. To protect households from high medical

expenses at the time of illness.

Importance of Health Insurance

Average medical expenses of an Indian household is 6.5 per cent of the annual income. #

It increases sharply to around 37.4 per cent in case of major ailments.

According to a study “India Knowledge @ Wharton Report” around 65 per cent of people remain in debt for life due to their expenditure on major health problems.

# - NCAER(National council of applied economic research) study in 2012

Importance of Health Insurance

Direct out-of-pocket payments could push 2.2% of all healthcare users and one-fourth of all hospitalized patients, into poverty in a year. #

Health insurance is the ticket to healthcare and the best mechanism to finance healthcare to protect one’s savings, avoid debts and miseries.

#-National Commission on Macroeconomics and Health, Ministry of Health and Family Welfare, Govt of India.

HEALTH INSURANCE IN INDIA

According to the World Health Organization (WHO), in 2011, India has spent only 3.9 per cent of gross domestic product (GDP) on the health sector which is the lowest amongst the BRICS (Brazil, Russia, India, China, South Africa) member countries.

Amongst the BRICS nations, in 2011, Russia’s out-of-pocket expenses stood highest at 87.9 per cent closely followed by India (86 per cent), China (78.8 per cent), Brazil (57.8 per cent), and South Africa (13.8 per cent).

HEALTH INSURANCE IN INDIA

On the other hand, these expenses in developed economies of US and UK were comfortably poised at 20.9 per cent and 53.1 per cent respectively.

High potential for the health insurance segment in India.

Gross premiums for health insurance increased by 16 per cent from Rs 13,212 crore in 2011-12 to Rs 15,341 crore in 2012-13. #

# - IRDA annual report 2013

HEALTH INSURANCE IN INDIA

The health insurance premium has registered a compounded annual growth rate (CAGR) of 32 per cent for the past eight financial years.

Over 300 million people, or more than 25 percent of India’s population, gained access to some form of health insurance by 2010, up from 55 million in 2003-04. #

More than 180 million of these were people below the poverty line.

# - “Government-Sponsored Health Insurance in India: Are You Covered? – World Bank Report in 2012.

TYPES OF HEALTH INSURANCE

Health Insurance

Social PrivateCommunity

Based

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 employees and the Employees' State Insurance Scheme (ESIS) for the low-paid industrial workers.

The eligible people contribute towards a specific health fund. This fund then finances specific benefits for them.

Rashtriya Swasthya Bima Yojana (RSBY) for BPL families is a recent addition.

ESI Scheme

Established in 1948, the Employees’ State Insurance Scheme (ESIS) 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 semi-government body headed by the Union Minister of Labour as Chairman and a Director General as the Chief Executive.

ESI Scheme

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, and road transport.

ESI Scheme

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 availing the benefit.

Act does not include employees whose wages exceed Rs. 25000 per month.

ESI Scheme

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. 100.00 shall be exempted from payment of contribution

Benefits

1) Sickness Benefit: At the rate of 70% 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 years.(80% of wages)

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.

Benefits

3) Disablement Benefit :- In cash, 90% 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 :- Paid at the rate of 90% of wage in the form of

monthly payment to the dependants of a deceased Insured person in cases where death occurs due to employment injury or occupational hazards.

Benefits

5) Funeral Benefit :- An amount of Rs.10,000 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, specialist services, ambulance services, and indoor services.

Problems in ESI Scheme

Large numbers of posts of medical staff remain vacant due to high turnover and low remuneration.

Rising costs and technological advancement in super specialty treatment.

Patient satisfaction is low. In rural areas, the access to services is also a

problem.

CGHS (Central Government Health Scheme) The CGHS provides comprehensive health

care facilities for the Central Govt. employees and pensioners and their dependents residing in CGHS covered cities.

Started in New Delhi in 1954.

Operational in 25 cities in India.

BENEFICIARIES

All Central Govt. Servants Pensioners and their family members. Hon'ble Members of Parliament Hon'ble Judges of Supreme Court of India. Employees & Pensioners of Autonomous

Bodies covered under CGHS. Former Judges of Hon'ble Supreme Court of

India and Hon'ble High Courts Freedom Fighters

Grade Pay Monthly contribution

Upto Rs.1650                                 

Rs 50

Rs.1800, Rs.1900, Rs.2000Rs.2400 and Rs.2800                      

Rs 125

Rs 4200 Rs 225

Rs.4600, Rs.4800, Rs.5400and Rs.6600                                   

Rs 325

Rs 7600 and above Rs 500

Monthly contribution towards CGHS(w.e.f 1 June 2009)

CGHS (Central Government Health Scheme) Main components-

The dispensary services Family welfare & M.C.H. Services Specialists consultation facilities Hospitalization Provision of medicines

Network- 254 allopathic dispensaries,  19 polyclinics , 78    Ayush

dispensary/  units    3 Yoga Centres, 65 Laboratories, 17 Dental Units

Problems in CGHS

Slow reimbursementDemand side moral hazard – Many

patients are self-referred. It appears that most patients prefer to bypass the dispensaries and directly avail of specialist services.

Poor quality care- Long waiting periods, inadequate supply of medicines and equipments.

Private hospitals to stop CGHS cashless scheme from March 7,2014.

The Times Of IndiaCGHS owes these hospitals around Rs 200 crore in unpaid

services and "unreasonably low" CGHS tariffs .

Universal Health Insurance Scheme

Launched w.e.f. 14.7.2003 for BPL families.Standard product with an annual cover of

Rs 30,000 for a family. Premium of Rs. 165 per year per person,

Rs.248 for a family of five and Rs.330 for a family of seven.

Universal Health Insurance Scheme

Reasons for failure: The public sector companies found it to be

potentially loss making .Improper identification system of

beneficiaries.Cumbersome paper work.

RSBY(Rashtriya Swasthya Bima Yojna) Started on 1st April 2008. Launched by Ministry of Labour and

Employment, Government of India to provide health insurance coverage for Below Poverty Line (BPL) families.

Beneficiaries under RSBY are entitled to hospitalization coverage up to Rs. 30,000/- for most of the diseases that require hospitalization.

RSBY(Rashtriya Swasthya Bima Yojna Pre-existing conditions are covered from day

one and there is no age limit. Coverage extends to five members of the family

which includes the head of household, spouse and up to three dependents.

Beneficiaries need to pay only Rs. 30/- as registration fee.

Central (75%)and State(25%) Government pays the premium to the insurer selected by the State Government on the basis of a competitive bidding.

Unique features of RSBY

Empowering the beneficiary Business Model for all Stakeholders  Information Technology (IT) Intensive Safe and foolproof Portability Cash less and Paperless transactions-

biometric enabled smart card.

RSBY Plus

Introduced  on 1st March 2010 in Himachal Pradesh.  An additional benefit of Rs 1,75,000 is provided

under  Critical care for meeting the expenses of surgical procedures.

From 1st January 2013, extended to other categories viz. APL MNREGA Building & Other Construction Workers, Persons with more than 70% disability, Domestic Workers and Street Vendors.  

MNREGA- Mahatma Gandhi National Rural Employment Gurantee Act

APL- Above poverty Line

Private Health Insurance

A voluntary health insurance wherein people can enroll and purchase the insurance product of their liking, paying a risk-rated premium.

Eg.Asha deep plan II , Jeevan Asha plan II, Jan Arogya policy, Raja Rajeswari policy, Mediclaim policy.

Out of these ‘Mediclaim’ is the most sold product.

Mediclaim

Introduced in 1986.A voluntary health insurance scheme -

public and private 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 package opted for.

Mediclaim

The subscribers are usually the middle and upper class as there is a tax benefit ( Under Sec 80 D of Income Tax Act)

Pre-existing diseases are covered from the fifth year of policy provided the renewals are done without break in insurance.

IRDA(Insurance Regulatory and Development Authority) Set up in 1999. Agency of Government of India for insurance

sector supervision and development.  Headquarter at Hyderabad, Andhra Pradesh  Composition

1 Chairman 4 whole time members 4 part time members.

IRDA(Insurance Regulatory and Development Authority) Authority to protect the interests of holders of

insurance policies, to regulate, promote and ensure orderly growth of the insurance industry.

Proposal to increase FDI(foreign direct investment) in insurance from 26% to 49%.

TPA (Third Party Administrator)

Organization that processes insurance claims or certain aspects of employee benefit plans for a separate entity.

Outsourcing the administration of the claims processing.

Eg. E-Meditek –TPA for Oriental Insurance Company in Delhi NCR.

INSURANCE OMBUDSMAN

Created on 11 November 1998. Quick disposal of the grievances of the insured

customers and to mitigate their problems involved in redressal of those grievances.

Ombudsman are drawn from Insurance Industry, Civil Services and Judicial Services.

Appointed for a term of three years or till the incumbent attains the age of sixty five years, whichever is earlier.

INSURANCE OMBUDSMAN

Twelve Ombudsman across the country with different geographical areas as their areas of jurisdiction.

The ombudsman shall pass an award within a period of three months from the receipt of the complaint. The awards are binding upon the insurance companies.

If the policy holder is not satisfied with the award of the Ombudsman he can approach other venues like Consumer Forums and Courts of law.

Issues In Private Health Insurance-

Many times insurance claims are rejected due to small technical reasons. This leads to disputes .

The most important area of dispute is the knowledge and implications of pre-existing conditions .

There is no analysis on what is fair practice and what is unfair practice .

High premiums.

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.”

Characteristics of CHI

Community-based social dynamics and risk pooling, where the schemes are organized by and for individuals who share common characteristics (geographical , occupational, ethnic, etc.)

Solidarity, where risk sharing is as inclusive as possible within a given community and membership premiums are independent of individual health risks.

Characteristics of CHI

Participatory decision-making and management.

Nonprofit character. Voluntary affiliation.

Models of CHI

Type I (HMO Model)Type II (Insurer Model)Type III (Intermediate Model)

Type I (HMO Model)

Type II (Insurer Model)

Type III (Intermediate Model)

CHI in India

Yeshaswini Scheme Karuna Trust SEWA scheme ACCORD scheme Rajiv Aarogyasri CHI Scheme Kalaignar Insurance Scheme Vajpayee Arogyasri Scheme

Yeshasvini Cooperative Farmers Health Care Scheme Covers Co-operative farmers of Karnataka. Inaugurated on 14 November 2002 ,

operationalised in June 2003. Beneficiaries contribute a small amount of

money every year to avail any possible surgery during the period.

Yeshasvini Cooperative Farmers Health Care Scheme Implemented through network hospitals to

provide cost effective quality healthcare facilities to the Co-operative farmers.

Nearly 823 defined surgical procedures. Maximum benefit up to Rs 2,00,000/-

Salient features A person should be a member of Rural Co-

operative Society of the State. All family members of the main member are

eligible to avail the benefits. Each beneficiary is required to pay prescribed

rate of annual contribution every year. Presently [2013-14] member contribution is Rs.210.

The higher age limit fixed is 75 years . Scheme covers entire state of Karnataka

particularly Rural Areas excluding Corporation and Urban cities.

SEWA Scheme

Self Employed Women's Association Insurance scheme in Gujarat. Started in 1992

The insurance scheme called VimoSEWA proposes a composite package, simultaneously covering: life, assets and health care while also providing maternity benefits.

The insurance plan is open to all women operating in the informal economy and their families without any age limit.

SEWA Scheme

Premium per year is Rs 175- Rs 375 Maximum benefit up to Rs 75000.

Karuna Trust

Principle of PPP( Public Private Partnership). Began with management of a PHC at

Gumballi in Yelandur Taluk ,Karnataka. Has expanded to include 50 PHCs in

partnership with the state governments of Karnataka, Andhra Pradesh, Orissa, Arunachal Pradesh, Manipur and Meghalaya.

Equal focus on promotive, preventive, curative & rehabilitative care.

Karuna Trust

Provides CHI for a low premium of Rs.22/person/year.

Key features No disease exclusion Immediate settlement of claims Rs.50 per day as compensation for wage loss for in

- patients and Rs. 50 per day out - of - pocket expenditure.

Rs. 500 for patients who undergo surgery in addition to Rs. 500 for drugs.

ACCORD – AMS – ASHWINI (AAA) CHI Scheme ACCORD is a local non-governmental

organisation (NGO) staffed by a group of professionals and adivasi youth.

Established in 1986, it works exclusively for indigenous groups, or ‘the adivasis’, of Gudalur taluk, Nilgiris district, Tamil Nadu.

ACCORD -Action for Community Organisation, Rehabilitation and Development ASHWINI -Association for Health Welfare in the Nilgiris AMS - Adivasi Munnetra Sangam (AMS)

ACCORD – AMS – ASHWINI (AAA) CHI Scheme The health programme consists of a two-tier

structure –a network of seven health centres, manned by medical assistants and a 20-bed hospital with all basic facilities, including obstetrics and surgery.

The health centres provide a mixture of curative and preventive care.

Those between six months to sixty years are eligible to enrol as per the NIAC (New India Assurance Corporation)guidelines.

Rajiv Aarogyasri CHI Scheme

RACHI Scheme started as a PPP model for all

the families below poverty line from 1st April 2007 in Andhra Pradesh.

Beneficiaries for the RACHI scheme are identified through the white ration cards provided as part of Annapoorna and Anthyodaya Anna Yojana Scheme, for BPL families.

Rajiv Aarogyasri CHI Scheme

Covers nearly 8 crore people who live below poverty line in 23 districts of AP.

The state government is the sole funding agency for this health insurance scheme.

Kalaignar Insurance Scheme

Launched in 2009 in Tamil Nadu. The government in contract with Star

Insurance has put in place an insurance program for families earning Rs. 72,000 or less annually.

Biometric smart cards issued. 1.43 crore families enrolled.

Vajpayee Arogyashree Scheme Launched in Karnataka in 2010. To improve access of BPL families (5 members)

towards quality tertiary medical care . Identification of beneficiaries through BPL ration

cards. Government of Karnataka/ Trust will pay the

premium on behalf of the BPL beneficiaries for the insurance.

Sum assured will be Rs.1,50,000/- on a family floater basis per year.

Vajpayee Arogyasri Scheme

Objectives- To Cover Catastrophic illnesses Universal Coverage of BPL (Rural + Urban)  Catastrophic illnesses can wipe out decades of

savings of BPL families.  To protect life time savings of BPL families

which would be wiped out in case of catastrophic illness.

Problems in CHI

Problem of adverse selection as premiums are not based on assessment of individual risk status .

Fail to include the poorest of the poor . They have low membership and require

extensive financial support . Poor design and management.

The Way Ahead

Health insurance has become one of the most prominent segments in the insurance space today and is expected to grow significantly in the next few years.

A World Bank report estimates that about half of the country’s population, can be covered with health insurance by 2015.

The main challenge is to see that it benefits the poor and the weak in terms of better coverage and health services at lower costs .

References

A Critical Assessment of the Existing

Health Insurance Models in India-PHFI,2011 ESI Act - www.esic.nic.in/esi_act.php Verma R et al.Health Insurance: Need Of The Hour In

India. International Journal of Basic and Applied Medical Sciences.2013 ; 3 (2) :161-5

CGHS - msotransparent.nic.in/cghsnew Community Health Insurance and Universal Coverage:

Multiple paths, many rivers to cross – WHO 2010 IRDA -www.irda.gov.in/