It contains a brief overview of health insurance.

1. HEALTH INSURANCE
DR.BHARAT PAUL

2. CONTENTS
 Introduction
 Importance of Health Insurance
 Health Insurance in India
 Types of Health Insurance
Social Health Insurance
Private Health Insurance
Community Health Insurance
 The Way Ahead
 References

3. 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

4. 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

5. 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

6. 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

7. 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.

8. 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.

9. Basic elements in health insurance

10. 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

11. 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

12. 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.

13. 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

14. 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.

15. 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).

16. 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

18. 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.

20. TYPES OF HEALTH INSURANCE
Health
Insurance
Social Private
Community
Based

21. 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.

22. 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.

23. 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.

24. 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.

25. 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

26. 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.

27. 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.

28. 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.

29. 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.

30. 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.

31. 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

32. Grade Pay Monthly contribution
Upto Rs.1650 Rs 50
Rs.1800, Rs.1900, Rs.2000
Rs.2400 and
Rs.2800
Rs 125
Rs 4200 Rs 225
Rs.4600, Rs.4800, Rs.5400
and Rs.6600
Rs 325
Rs 7600 and above Rs 500
Monthly contribution towards CGHS(w.e.f 1 June 2009)

33. 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

34. Problems in CGHS
Slow reimbursement
Demand 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.
TheTimes Of India
CGHS owes these hospitals around Rs 200 crore in unpaid services and
"unreasonably low" CGHS tariffs .

35. 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.

36. 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.

37. 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.

38. 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.

39. 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.

40. 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

41. 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.

42. 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.

43. 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.

44. IRDA(Insurance Regulatory and
DevelopmentAuthority)
 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.

45. IRDA(Insurance Regulatory and
DevelopmentAuthority)
 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%.

46. TPA(Third PartyAdministrator)
 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.

47. 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.

48. 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.

49. 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.

50. 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.”

51. 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.

52. Characteristics of CHI
 Participatory decision-making and
management.
 Nonprofit character.
 Voluntary affiliation.

53. Models of CHI
Type I (HMO Model)
Type II (Insurer Model)
Type III (Intermediate Model)

54. Type I (HMO Model)

55. Type II (Insurer Model)

56. Type III (Intermediate Model)

57. CHI in India
 Yeshaswini Scheme
 Karuna Trust
 SEWA scheme
 ACCORD scheme
 Rajiv Aarogyasri CHI Scheme
 Kalaignar Insurance Scheme
 Vajpayee Arogyasri Scheme

58. 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.

59. 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/-

60. 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.

61. SEWAScheme
 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.

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

63. 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.

64. 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.

65. 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)

66. 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.

67. RajivAarogyasri 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.

68. RajivAarogyasri 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.

69. 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.

70. VajpayeeArogyashree
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.

71. VajpayeeArogyasri 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.

72. 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.

73. The WayAhead
 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 .

74. 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/