Health Insurance in India- Suraj Chawla

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Health Insurance in India

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Health Insurance in India Dr Suraj Chawla JR, Depar t ment of Community Medicine, PGIMS, Rohtak

Contents:

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:

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

Health Insurance:

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:

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:

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:

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 :

Health Insurance Premium 10,500 Crores Source: IRDA official site

Essentials in Health Insurance:

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:

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:

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

Basic elements in a health insurance programme:

Basic elements in a health insurance programme

Risks in 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:

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:

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:

Types of Health Insurance Health Insurance Plans Private Social Community Based / Micro Insurance Risk Rated & offered by Commercial Organization Government initiated Community Rated & Normally managed by Community / Groups

Social Health Insurance:

Social Health Insurance

Social Health 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):

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 a re 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:

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:

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 A lso uses the facilities of the government and approved private hospitals to provide inpatient care and reimburses the expenses to the patient.

CGHS - Problems:

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:

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.

Employees' State Insurance Scheme:

Employees' State Insurance 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, road transport and newspapers .

Employees' State Insurance Scheme:

Employees' State Insurance Scheme 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.

Employees' State Insurance Scheme:

Employees' State Insurance 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 . 70.00 shall be exempted from payment of contribution.

Employees' State Insurance Scheme:

Employees' State Insurance Scheme 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.

Employees' State Insurance Scheme:

Employees' State Insurance Scheme 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.

Employees' State Insurance Scheme:

Employees' State Insurance Scheme 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:

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:

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) :

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) :

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:

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:

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:

Private Health Insurance

Private Health Insurance:

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:

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):

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) :

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 :

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 :

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:

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

Private Health Insurance: Issues & challenges:

Private Health Insurance: Issues & challenges Faced by TPAs Key Issues Limited influence over healthcare delivery network Funding support Description Varying treatment costs across providers due to limited bargaining power Lack of standardization & accreditation in most healthcare facilities leading to difficulty in 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

Private Health Insurance: Issues & challenges:

Private Health Insurance: Issues & challenges Faced by Healthcare Providers Key Issues Pricing demands from Insurance companies Lack of affordability Description Lack of standardization and accreditation norms for healthcare resulting in unreasonable pricing demands by insurance companies Low health insurance penetration and 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:

Community Health Insurance

Community health insurance :

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:

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 :

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

Provider (Direct )model:

Provider (Direct )model Community Hospital

Insurer (Mutual) model:

Insurer (Mutual) model Community Hospital NGO

Linked model:

Linked model Community Hospital NGO

Yeshasvini:

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:

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:

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:

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 :

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 :

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

References:

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:

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

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