7. DEFINITION
• The term Health Insurance is generally used to
describe a form of insurance that pays for medical
expenses. (Joshy D C, 2009).
• It is the payment for the expected costs of a group
resulting from medical utilization based on the
expected expenses incurred by the group. The
payment can be based on community or
experience rating. (Jacobs P, 2004).
•
9. HISTORY FOUNDATIONS
• In history health insurance existed as health care
provided by one’s family, tribe, or village
• During industrial revolution financial contracts for
the cargo of ships developed.
• Then it moved to industrial nations, factory
owners or donations from workers supplied sums
of money for ill or injured workers as needed.
• In mining sickness funds began to be supplied by
owners .
• In addition some factory owners hired company
doctors for sick and injured.
10. • Early Asian Insurers
–Meiji Life Assurance Company, 1888, was
the first life insurance company to open in
Japan.
–Cho-Sun Life Insurance Company, 1921, was
the first company capitalized and owned by
Koreans
–The Great Eastern Life Assurance Company
Limited was founded in Singapore in 1908.
–In india oriental insurance company in
Calcutta.
11. PRINCIPLES OF HEALTH INSURANCE
• Health insurance is based on principles that
affect the alignment of incentives around cost,
quality, and access. These principles are
related to concepts such as information,
predictability of risk, and ways that the
demand for health care may be influenced.
12. • Information problems and asymmetric
information
• Setting premium and rating
• Third party administrators
• Deductables, Coinsurance
• co-payment
• Adverse selection
• Moral hazard
14. INFORMATION PROBLEMS AND
ASYMMETRIC INFORMATION
• Insurers (payers) have information problems.
The primary reason for health insurance
coverage is to protect against unpredictable
risk: the costs of an unexpected illness, injury,
or disability. Young and relatively healthy
persons may pay health insurance premiums
for years before an illness or other disorder
occurs
15. ASYMMETRIC INFORMATION
• The problem of asymmetric information
differs from information problems in that one
party possesses knowledge needed to enable
rational decision making that the other party
lacks. Health insurers face asymmetric
information when consumers do not disclose
conditions such as diabetes, cardiovascular
disorders, serious risk behaviors, or
disabilities.
17. Setting premium and rating
• Health plans must make decisions about the premiums they
charge.
• Experience rating : It is a method used by many traditional
indemnity health insurance plans in which premiums are based on
the utilization or claims history of the group, rather than on the
characteristics of the group’s population as a whole. As a result, a
plan year in which a group experiences an unusual number of
high-cost claims (such as AIDS cases) may result in higher
premiums the following year.
• Community rating is a method in which premiums are based on
the population characteristic of an entire group. In many cases,
community ratings are adjusted for age and sex, and sometimes
other factors as well.
19. THIRD PARTY TRANSACTIONS
• Health insurance represents a third party
transaction; in other words, a provider supplies
goods or services to the consumer (patient) but bills
a private or government insurance entity, which is
the third party.
• As a result, consumers typically are largely
unconcerned with the costs of their care, knowing
that their bills are paid by another party.
• Third party transactions provide incentives to
patients to utilize health care goods and services that
may not be necessary, as they are not sensitive to
the cost of these interventions.
20. DEDUCTABLES, COINSURANCE,
• Deductibles represent minimum threshold payments
before a plan begins to cover health care costs. For
example, there may be a $100 annual deductible for
prescription medications:
• after the beneficiary pays the first $100, the insurance
plan covers the remainder of the prescription
medication costs for the plan year.
• Coinsurance represents a percentage of a given health
care cost that is required by the insurer to be paid by the
beneficiary; by comparison.
21. CO-PAYMENT
• co-payment represents a specific dollar
amount of the given health care cost required
of the beneficiary. For example, a beneficiary
may be required to pay a 20% coinsurance for
the inpatient hospital bed rate after the fifth
inpatient day, or required to pay $20 co-
payment for every visit to a primary care
physician’s office.
22. ADVERSE SELECTION
• Adverse selection is the over-selection of a health plan
based on its coverage of persons likely to have high
health care costs. When the consumer is more
knowledgeable about the probability of illness and
health care costs than the insurer (asymmetric
information), the problem of adverse selection can
occur.
• For example, a health plan providing more generous
coverage to persons with diabetes than competing
health plans unknowingly attracts a greater proportion
of diabetic beneficiaries than would be expected in the
overall risk pool
23.
24. MORAL HAZARD
• Moral hazard represents a plan member’s higher
utilization of covered services. Unlike adverse
selection, it is not that the member is primarily at
higher risk for health care costs, but because
these costs are covered by insurance, the
member utilizes more health care goods or
services than might be necessary.
• For example, a person with vision coverage might
purchase new glasses more frequently, even if
the eye examination indicates that the lens
prescription has not changed.
25. HEALTH INSURANCE POLICY
• It is contract between an insurer and an
individual or group, in which insurer agrees to
provide, specific Health Insurance at an
agreed upon premium. Depending upon the
insurance policy the premium may be payable
in lump sum or in installments.
27. TYPES OF HEALTH INSURANCE
• International health insurance agencies: As a
result of globalization, the international health
insurance agencies have also started showing
interest in the field of health insurance. This is
useful for those going abroad on tourist VISA,
etc.
• Insurance agencies in public sector: In India,
the insurance agencies also undertake health
insurance in the form of medi-claim policies
28. • Insurance in private sector: The private sector
is playing an important role in health
insurance of the people.
• Mandatory Insurance: The examples are ESI
scheme, CGHS, and ECHS (Ex service Man
Contributory Health Scheme).
• Employer based health insurance schemes
for the employees in the private sector not
covered under the ESI scheme.
29. • Community based health insurance: The
example is Yashasvirti scheme of Karnataka
government for farmers.
• Cashless health insurance: After the
formation of Insurance Regulatory and
Development Authority (IRDA), the cashless
insurance has resulted into development of
the Third Party Administrators.
30. SOCIAL HEALTH INSURANCE
• The SHI is based on income-determined contributions
from mandatory membership of, in principal, the entire
population with the government subsidizing the
financially vulnerable sections.
• The existing mandatory health insurance schemes in
India the Employees’ State Insurance Scheme (ESIS)
and the Central Government Health Scheme (CGHS)—
were first started as pilot projects in 1948 and 1954,
respectively in the context of achieving universal
coverage via the SHI.
33. ESI SCHEME
• Enacted in 1948, the Employees’ State Insurance
(ESI) Act was the first major legislation on social
security in India.
• The scheme applies to power using factories
employing 10 persons or more, and non-power and
other specified establishments employing 20
persons or more, with employees’ earnings up to Rs
7500 per month being covered, along with their
dependants.
• The current coverage stands at 84 lakh employees
and 353 lakh beneficiaries across 22 States and
Union Territories.
34. CENTRAL GOVERNMENT HEALTH SCHEME
(CGHS)
• The Central Government Health Scheme (previously
known as Contributory Health Service Scheme) for the
Central Government employees was first introduced in
New Delhi in 1954 to provide comprehensive medical
care to Central Government employees.
• CGHS covers employees and retirees of the Central
Government, and certain autonomous, semi-
autonomous and semi-government organizations.
• It also covers Members of Parliament, governors,
accredited journalists, Widows receiving family
pension, Ex Governors, Ex Judges of Supreme Court
and high courts and members of the general public in
some specified areas.
• The families of the employees are also covered under
the scheme.
35. CGHS
• Benefits under the scheme include medical
care at all levels and home visits/care as well
as free medicines and diagnostic services.
• These services are provided through public
facilities (including CGHS-exclusive allopathic,
ayurvedic, homeopathic and unani
dispensaries) with some specialized treatment
(with reimbursement ceilings) being
permissible at private facilities.
36. CGHS
The Facilities under the Scheme include:
• (a) out-patient care through a network of dispensaries
• (b) Supply of necessary drugs
• (c) Laboratory and X-ray investigations
• (d) Domiciliary visits
• (e) Hospitalization facilities at Government as well as private
hospitals .
• (f) Specialist consultation
• (g) Pediatric services including immunization
• (h) Antenatal, natal and postnatal services
• (i) Emergency treatment
• (j) Supply of optical and dental aids at reasonable rate, and
• (k) Family welfare services.
•
37.
38. PRIVATE HEALTH INSURANCE
• Since the liberalization of the insurance industry
in 2000 India has been promoting private players
to enter the health insurance sector. With the
enactment of the IRDA (Insurance regulatory
authority of india), the industry now has a
regulatory framework to protect the interests of
policy holders.
• Some of the private are
• Star health, reliance, ttk prestige, LIC, oreintal
Insurance,National insurance
42. THIRD PARTY ADMINISTRATORS
• Third Party Administrator (TPA) is an organization
that processes insurance claims for a separate
entity. This can be viewed as “outsourcing” the
administration of the claims processing, since the
TPA is performing a task traditionally handled by the
company providing the insurance.
43. CONDITIONS FOR TPA’S
• 1. A company registered under the companies’ act
1956 can function as TPA.
• 2. Minimum paid up capital of the company shall be
in equity share amounting to Rs. 1 crore.
• 3. At least one of the directors of the company
should be a qualified doctor registered with Medical
Council of India (MCI).
• 4. TPA is to be licensed by the IRDA the cost of
application is Rs. 20,000.
• 5. On approval, a further sum of Rs. 30,000 is to be
deposited with IRDA as License fees.
• 6. Once the application is rejected it can be
entertained only after a gap of 2 years.
44. SERVICES OF TPA
• 1.Benefit management: Designing tailor made
insurance scheme.
• 2. Medical management: The TPAs tracks the line of
treatment & ensures genuine treatment.
• 3. Issue of identity cards to the policy holders.
• 4. Cashless hospitalization is ensured.
• 5. Faster processing of claims.
45. • 6. Providing benefits like:
a. Toll free telephone facility
b. Provision of ambulance services
c. Identification of hospital
d. Attending to medical emergencies of insured persons
e. Reducing work load of patients
f. Quality of care
g. Discounts
h. Package pricing
i. Priority appointments and admissions.
j. Claim administration like documentation, coverage
claim submission and arranging payment for services
provided.
46. BENEFITS OF TPA
• 1. Admission to network hospital is beneficial
because one gets cashless insurance and not over
charged by the hospital.
• 2. TPAs verify the treatment and ensure that the
hospital charges are correct and at negotiated rates.
• 3. The TPAs are advantageous to health insurance
companies also because they bring down the claims
as a result of vigilant administration.
• 4. The TPAs scrutinize all the claims before
settlement and can also guide patients for availing
particular treatment as there are number of doctors
among the employees of TPAs.
47. DISADVANTAGES OF TPA
• 1. Under the cashless insurance as the TPAs are to be
reimbursed by the insurance companies there is
tendency that the TPAs may influence the hospital
for fewer tests to reduce the cost.
• 2 There can be difference in treatment proposed by
the TPAs and the hospital.
• 3. There can be dispute over settlement of claims
between the doctor and TPA which may affect the
treatment plan of patient.
• 4. Cash trapped TPAs:
a. TPA’s funding may be inadequate by the insurance
companies.
b. The insurance companies can advance to the extent
it has been guaranteed by the bank.
49. IRDA
• The IRDA was passed in December 1999 by
Parliament.
• The Act allows for the entry of private sector entities
in the Indian insurance sector, including health
insurance, and envisages the creation of a regulatory
authority.
• The IRDA is supposed to protect the interests of the
policy-holders, promote efficiency in the conduct of
insurance, regulate the rates and terms and
conditions of the policies offered by insurers and
direct the maintenance of solvency margins.
• The IRDA has wide powers for accounting and
auditing insurers
50. COMPOSITION OF IRDA
• As per the Section 4 of IRDA Act’ 1999, Insurance
Regulatory and Development Authority (IRDA.
which was constituted by an act of parliament)
specify the composition of Authority. The
Authority is a ten member team consisting of:
• a. A Chairman;
• b. Five whole-time members;
• c. Four part-time members, (All appointed by the
Government of India).
51. Duties, Powers and Functions of IRDA
• Subject to the provisions of this Act and any other
law for the time being in force, the Authority shall
have the duty to regulate, promote and ensure
orderly growth of the insurance business and
reinsurance business.
• Issue to the applicant a certificate of registration,
renew, modify, withdraw, suspend or cancel such
registration.
• Protection of the interests of the policy holders in
matters concerning assigning of policy, nomination
by policy holders, insurable interest, settlement of
insurance claim, surrender value of policy and other
terms and conditions of contracts of insurance.
52. Duties, Powers and Functions of IRDA
• Specifying the code of conduct for surveyors and loss
assessors.
• Promoting efficiency in the conduct of insurance
business.
• Promoting and regulating professional organizations
connected with the insurance and re-insurance
business.
• Levying fees and other charges for carrying out the
purposes of this Act.
• Regulating investment of funds by insurance
companies.
• Supervising the functioning of the Tariff Advisory
Committee
54. UNIVERSAL HEALTH INSURANCE
SCHEME
- For providing financial risk protection to the poor, the
Government announced a UHIS in 2003. Under this
scheme, for a premium of Rs 365 per year per person,
Rs 548 for a family of five and Rs 730 for a family of
seven, health care for an assured sum of Rs 30,000 was
provided. BPL families were given a premium subsidy of
Rs 200 per annum.
- The scheme was redesigned in May 2004 with higher
subsidy and restricting eligibility to BPL families only.
The subsidy was increased to Rs 200, Rs 300 and Rs 400
to individuals, families of five and seven, respectively.
- To make the scheme more saleable, the insurance
companies provided for a floater clause that made any
member of the family eligible as against the Mediclaim
Policy which is for an individual member.
55. UHIS
• During 2004, the Government also provided an
insurance product under which for a premium of Rs
120 the sum assured was Rs 10,000. This was, to be
available only for self-help groups (SHG). However, the
intake is reportedly negligible.
• The reasons for this poor intake are similar to those
cited above. With the Common Minimum Programme
(CMP) committed to having a UHIS, there has been
much effort and debate to evolve a suitable and
sustainable design.
• To expand the health insurance business,
recommendations are also being made to reduce the
minimum pre-qualification of Rs 100 crore equity as it
will require 15 years to break even.
• Another set of recommendations is for permitting
TPAs and hospitals to introduce health insurance
products
57. COMMUNITY BASED HEALTH
INSURANCE
• In recent years, community health insurance (CHI)
has emerged as a possible means of:
• (1) improving access to health care among the poor.
• (2) protecting the poor from indebtedness and
impoverishment resulting from medical
expenditures
• CHI schemes involve prepayment and the pooling of
resources to cover the costs of health-related
events. They are generally targeted at low-income
populations, and the nature of the ‘communities’
around which they have evolved is quite diverse
58.
59. HEALTH INSURANCE IN KERALA
• The comprehensive Health Insurance scheme to
benefit entire Kerala was launched on October 2,
2008. Those who join the scheme will get benefit
from December 1.
• The scheme will cover all the districts of the State.
Government will distribute ‘Smart Cards’ to an
estimated 22 lakh families expected to enroll in the
scheme.
• It will cover 11.79 lakh BPL families as identified by
the Planning Commission for inclusion in the
centrally sponsored Rashtriya Swasthya Bima Yojana,
around 10 lakh families additionally identified as BPL
families by the State Government and APL families
that are ready to pay the insurance premium amount
60. REASONS FOR POOR PENETRATION OF HEALTH
INSURANCE
• Lack of regulations and control on provider
behavior
• Unaffordable premiums and high claim ratios
• Reluctance of the health insurance
companies to promote their products and
lack of innovation
• Too many exclusions and administrative
procedures.
• Inadequate supply of services
• . Co-variate risks
61. CONCLUSION
• Insurance serves an important function in
medical care. Having insurance does not
protect a person against illness, but it can
provide a measure of protection against the
financial consequences of an illness