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INTRODUCTION India is the first largest country in terms of purchasing power parity and is considered one of the fastest

emerging economics in the world. However, its health status remains a major concern. Infant mortality rate of India is as high as 54.6 while it is around 23 for China. Similarly life expectancy at birth for India is around 64.7 while it is in the range of 77.80 for many countries. Insurance generally comprises of life and non-life (general) insurance. Health Insurance in India comes under general insurance. The development of health insurance in India therefore, has to be seen in the backdrop of the development of insurance in general. Healthcare, with global revenue of over Rs. 2.75 trillion is the largest industry in the world. The nation of India with a population of 1000 million experiences a vast inequity that exists sin the healthcare industry with barely 3 percent of the population covered by some form of health insurance, either social or private. Health insurance schemes are increasingly recognized as preferable mechanisms to finance health care provision. The option of insurance seems to be promising alternatives as its pools and transfers risk of unforeseeable health care costs for a pre-determined fixed premium. We do not social security system, appropriate Health Insurance Schemes for different sections of the society particularly underprivileged and the poor is an urgent need of the hour. Insurance penetration being very low and health insurances share being minimal in the existing situation, the vast majority of the populations are outside the existing Health Insurance System. With the opening up of the insurance market for private entry and the accompanying hype it is being hoped that in the days to come, the teeming population of India can look for health coverage from an array of insurance providers that too at an affordable price. The present series on health and group insurance therefore attempts to trace the significance of health insurance and its basic tenets in preserving the economic value of the lives of the citizens.

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ORIGIN OF HEALTH INSURANCE The concept of health insurance was proposed in 1964 by Hugh the Elder chamberlen form the Peter Chamberlen family. In the late 19th century, early health insurance was actually disability insurance, in the sense that it covered only the cost of emergency care for injuries that could led to a disability. This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance. Patients were expected to pay all other healthcare costs out of their own packets, under what is known as the fee for-service business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance. It is not an easy task to regulated health insurance. Some countries including the US had to launch war-like operation to unearth large scale frauds. Malpractices in health Insurance range from excessive billing to exaggerating severity of hospital patient conditions. In India, Health Insurance is not of recent origin. Concern for loss resulting from accident and illness can be traced to ancient civilizations. In fact, one of the earliest forms of health insurance may have been based on the ancient custom of paying the doctor while in good health and discontinuing payment during periods of illness. This custom existed in South East Asian countries including India. The development of health insurance in existing form in India is based on pattern followed in Europe and America. Health Insurance or medical insurance schemes had developed in India due to industrial relations problems between the employer and the employees. The Corporate Houses used to offer core and non-core benefits to the employees. The insurance policies were granted to large Corporate Houses purely on an accommodation basis. The cover usually offered to the employees was in the nature of hospitalization and domiciliary treatment for dental and nonsurgical eye treatment. The benefits used to be for very small amount. There was no scheme for individuals and families.
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In 1981, the Apex Body of Public Sector Insurance Companies i.e. GIC designed a limited cover for individuals and families for covering their hospitalization needs. This was replaced by a mediclaim policy in the year 1986 under a market agreement to provide insurance benefits to individuals and groups under a group mediclaim policy. The scheme so introduced was modified in 1991 and 1996 in the light of experience and suggestions received from the insuring public and medical fraternity. The benefit provided under the policy was on reimbursement basis on occurrence of a major calamity in the form of accident/sickness to an insured person. The first Mediclaim Insurance Scheme was introduced by GIC in 1986 for people not covered under the above scheme. Prior to 1986, cover against sickness and diseases were provided by extension of Personal Accident Policy. It is interesting to note that even after nearly two decades of health insurance, the population covered by health insurance is only 1% of the total population. The following table demonstrates the progress of health insurance in India: : Year 1999-00 2000-01 2001-02 2002-03 2003-04 People Covered (lacs)% increase 48.94 56.23 77.84 88.02 109.95 Premiums (Rs. In Crs.) 380 519 742 895 1024 Per Capita Premium (Rs.) 777 923 953 994 931

MEANING AND DEFINITION


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Health insurance insures you and your family against sudden medical expenses. A medical emergency can arise due to sudden illness or injury. With medical expenses rising, a health insurance policy would help you sail through a bad patch. Your medical expenses will be taken care of by the Insurance company provided you pay your premium regularly. World health organization defines health as complete physical, mental and social well being and not merely the absence of disease and injury. As per WHO, a countrys Health Systems comprise of all the organizations, institutions and resources that are devoted to produce health actions New India Assurance Company Limited, stressing on the social security aspect of health insurance, in their written note, stated; Basically the philosophy behind the concept of Health Insurance is to provide protection against uncertainty of illness /accident by spreading the risk based on the principle that what is highly unpredictable for an individual is predictable for a group of individuals. Thus, insurance is a system by which Healthcare expenditure of few unfortunate individuals, who suffer from illness/injury, is shared by many fortunate ones who are insured and exposed to the same risk but remain healthy. Oriental Insurance Company, emphasizing the financial security aspects of health insurance, in their written note, stated; Health insurance is a financial mechanism that exists to provide protection to individuals and households from hospitalization expenses incurred as a result of unexpected illness or injury. Under the mechanism, the insurer agrees to compensate or guarantees the insured person against loss by specified contingent event and provide financial coverage for which the insured party pays a premium. The case for health insurance rests on three grounds: a) Illness can not be predicted; b) Financial burden of hospitalization is high and cannot be planned; c) The proportion of people requiring hospitalization due to
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illness or injury in any large population is small thus enabling risk pooling. Pooling of risks, resources, and benefits is the hall mark of any insurance system. Form Social /Mandatory Schemes Scheme The Employees State Insurance Scheme Central Government Health Scheme State Sponsored Schemes (This figure may be enhanced with the recent coverage extended by Assam Government to its undeserving population) Employer Railways Health Scheme based Schemes Defense employees Ex-Serviceman Mining & Plantations (Public Sector) Employers run facilities/reimbursement schemes of private sector/public sector. Commercial Pubic Sector Non-Life Companies Schemes Community Schemes Private Sector non-life Companies Health Segment of Life Insurance companies Community health schemes by NGOs and others 60/80. 100. 8. 2.3 30. 80. 66. 75. 40. Beneficiari es in lacs 253. 43. 5.

WHY HEALTH INSURANCE IS A MUST?

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Health insurance has become a necessity today because it plays a major role in health care. This is because one never knows when illnesses may strike. And in such cases hospitalization and medication expenses can be unaffordable. Health insurance can prove to be a source of support by taking care of the financial burden of your family may have to go through. Advancement in science and technology has brought about a revolutionary change in mans life. It has reduced mortality rates and increased his life span but at the same time has given rise to a number of other ills. Increasing pollution levels especially in metros, stress and strain at workplace, cut throat competition taking its toll are some of the harsh realities. Pollution levels in certain areas are unimaginably high and the areas are nothing short of gas chambers. An individual going to his place of work has to spend long hours in queues, inhaling the vehicular emissions of poisonous carbon monoxide gases affecting his health in the long run. Besides accidents on roads are common features. In such instances timely affordable medical help is the need of the hour. But this may be easier said than done. Treatment for major illnesses or accidents can be unaffordable and may leave you poorer by thousands of rupees. It is especially worse when the patient needs specialized care. Expenses are exorbitant and the situation leaves you mentally devastated also burning a deep hole in your pocket. The family balance is affected, all those comforts of life have to be given up and your family has to make up with bare minimum necessities only. Health insurance takes care of you in such circumstances. It will help you tackle such situations with ease by providing you with timely and adequate medical care. The financial burden of footing huge medical bills is taken care of by health insurance. Besides if the accident causes life long disability to the patient, the earning member of the family, the insurance company will come to the rescue. Primary health care - a basic necessity and right of every individual, is today only a distant dream. The government has done precious little in this regard for the
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masses and hence the private sector has taken up the challenge to exploit the potential of the 92,400 crore healthcare industry. With educational levels going up people are becoming increasingly aware of the need of timely healthcare facilities. But at the same time the high costs of private health care is a major deterrent. The need of the hour is affordable health care for all in order that even the people in remote villages can have access to it. Insurer Fire Public sect New India National United India Oriental Pvt. Sector Total -33.3 -10.9 -1.63 4.67 -1.62 63.5 6.57 2003-2004 Marine Moto -13.32 -21.90 -13.14 -11.32 -4.01 120.85 -3.92 r 13.46 8.06 29.73 3.87 12.28 86.67 18.66 2004-2005 Marine Moto 2.85 -2.31 34.93 -18.57 10.0 48.56 10.22 r 9.30 8.33 19.02 -7.79 14.80 70.39 16.13

Health Fire 28.89 54.92 42.36 10.85 7.78 130.3 35.13 -1.46 2.54 3.05 -6.69 -5.61 28.7 5.39

Health 17.79 27.23 26.28 5.24 6.58 114.21 27.91

INDIAN SCENARIO

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In India, presently the health insurance exists primarily in the form of Mediclaim policy offered to the individual or to any group, association or corporate bodies. The government spending is less than 25 percent against the average spending of 30-40 percent in other developing countries. There is need for regulation for the self-funded health plans by major employers who may not find insurance as a cost effective alternative. According to WHO figures (2002), total health expenditures represent 6.1% of Indias GDP, but most of this amount, representing 4.8% of GDP is the share of private expenditures and only 1.3% of GDP is public expenditure. Of the 4.8% private expenditure, 98.5% are out-of-pocket spending of users. In other words, 77.5% of total expenditure for health care costs is paid by individuals or households (WHO, 2005) and this huge expenditure does not pass through any pooling mechanism. Access to health care in India is still low and with only less than 1% of GDP allotted to public health, there is lack of adequate health infrastructure.

.Penetration of Mediclaim is currently done by state-owned insurance companies, covering only about 2.5 million people i.e. less than 0.50 percent of the countrys population. There are some health insurance schemes issued by four public sector general insurance companies, namely, National Insurance Company Limited (NICL), New India Assurance Company Limited (NIACL), Oriental Insurance Company Limited (OICL) and United India Insurance Company Limited (UIICL). Besides these four companies, Life Insurance Corporation (LIC) of India also offers a few health covers in a limited manner. At present, 82.44% of the entire commercial health insurance business in the country is shared between public companies, while private firms manage the rest 17.56%. The number of beneficiaries under the various forms of health insurance in India is given in the table below

ISSUES AND CONCERNS

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All over the world, insurance coverage is being extended through 3 basic models: i) public financing and public delivery as practiced in the UK until its recent reforms, ii) private financing and public delivery as the model practiced in the US, Singapore, and Taiwan and iii) public financing and private delivery as the Bismarck model, idealized national (public or social) health insurance scheme practiced in Canada, Germany, France, Japan and China. Health care insurance is one such alternative that covers the risk of payment for health care. William C Hsiao (1992) of the Harvard University undertook a comparative study of the three models and concluded that "public financing and private delivery" of health care as practiced in Canada is the best among the 3 models in terms of performance, health outcome, public satisfaction and access to health. There is however, a school of thought that doubts the suitability of this model to Indian conditions on the grounds that: i. ii. countries. iii. The type of federal set up India has is different from the rest. The size of the population is far more than any of the countries The level of the per capita income is far lower than in other

where it is being currently practiced efficiently.

True, these apprehensions cannot simply be shunned off but one redeeming feature of the Indian system is that it has the necessary infrastructure - sizeable public hospitals, not-for-profit voluntary organizations plus highly skilled professionals in different kinds of medical services and decades of experience in managing insurance business. What is therefore needed is a better link-up of these available resources with the ordinary consumer at an affordable price. With the opening up of the insurance market for private entry and the accompanying hype it is being hoped that in the days to come, the teeming population of India can look for health coverage from an array of insurance providers that too at an affordable price. The common negative factors which evolve after looking at various health coverage phase are
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1. Quality of service when facilities are owned by the plan giver. ESIS, CGHS is grossly inferior Reimbursement delays in case out of pocket spending and or rejections of claims 2. Limitations of services Either monetary restriction on the amount available per year or non-comprehensive care of certain pre-existing & chronic ailments. 3. Inadequate information regarding health, ailment, procedures & treatments, cost and outcome 4. Provider malpractices 5. Coatings for comprehensive total care 6. The Low Level of Medical Penetration in India Health care spend in India is considerably lower than that in other countries.. US Life expectancy (avg. # of years) # of Physicians per 1,000 people Healthcare spend (USD per capital Financing for health Healthcare spend (% of GDP) 13.2 8.4 5.5 7.5 5.0 5.3 care is the other aspect of the issue 5365 3036 336 236 62 32 2.7 1.9 1.7 1.2 1.7 0.4 77.4 UK 78.3 Mexico 72.6 Brazil China India Access to health 71.4 72.5 64.0 care service providers and availability of physicians is one part of the issue

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LICENSING HEALTH INSURANCE IN INDIA Health insurance is one of the most regulated forms of insurance business in those countries where it plays a dominant role in financing of health expenditures. Spiraling healthcare costs and rapid technological advances in the medical field have triggered the need for cost-containment by the health insurers without sacrificing the interest of the policyholders or claimants. The nature of loss in health insurance might result in differences of opinion. All these call for intervention by regulatory authorities to protect the consumers However, under the Insurance Regulatory Development Authority (IRDA) in India, the powers of licensing and regulatory insurance, including health insurance, has been mandated under an act parliament. Despite such a regulatory authority, very little has been done by IRDA to lay down ground rules for hospitals which run health plans and may be required to register themselves as insurers or hospital managed organizations (HMO). It may be pertinent to note that in similar situation, the US federal and state health insurance regulation prescribe elaborate legal framework to ensure quality standards for rate regulation, cost containment, etc. HEALTH SECTOR FINANCING One of the major goals for the future health system in India is to ensure good health for the population through access to high quality services. To achieve this goal, there is a need to enlarge coverage and rationalize the current mechanisms for collective health financing. There are at least six dimensions of the choice of health financing policies: Identification of beneficiaries Benefits covered by insurance source(s) of financing Methods for provider payment institutions that pay providers

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OPPORTUNITIES AND CHALLENGES The total percentage of population covered under any sort of medical coverage is in single digits which is woefully inadequate. Further, most of these covered persons belong to the organized sector mainly in sectors like Railways, Defence, Central Government, etc. Within this, only a negligible percentage of the persons are covered under private health insurance. If we are seriously looking at a problem is by resorting to alternative avenues like private health insurance. It is usually mentioned that it is difficult to bring the rural, illiterate folk under the umbrella of insurance. When it comes to health insurance, this argument would not hold any credence as many of the so-called educated people themselves do not understand the importance of having such protection. Thus, there is a monumental task of convincing different classes of the society about insurance in general and health insurance in particular. Let us take a look at how health, as a class, has been performing in the Indian insurance market. A commercial health insurance policy has been introduced in the market in the late 1980s; and thus it remains one of the youngest classes to be introduced in the industry. In spite of that, it is third largest class in terms of gross premium(Rs.78,831 lakh) earned for the quarter-ended June 2006, after Motor (2,39,117) and Fire (Rs. 1,63,286). Further, even if one considers the growth percentage of any class, health has grown by about 44% for the one-year period (June 05 to June 06). In absolute terms, it has registered a growth of Rs.25, 303 lakh from Rs. 53,528 lakh. This compares very favorably with the overall performance of the industry which registered a growth of Rs.1,24,906 lakh, from Rs.5,38,084.32 to Rs.6,62,900.78; which is around 23%. In the process, it has overtaken more conventional classes of insurance like marine and engineering. Looking at in isolation, it has a commendable performance.

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HEALTH CARE PRODUCTS


The following are brief descriptions of some of the major health care products available in world markets today. Capital Disability Policies Disability benefits cover the financial risk to the insured of his/her becoming disabled and are expressed either as occupational disability or the inability to pursue any activity for a living. Permanent Health Insurance Policies Disability income benefits pay a regular income should the insured experience a loss of income upon becoming fully or partially unable to follow their own or similar occupation. The benefit usually pays an income either until the insured has recovered sufficiently from the temporary disability to return to work, or has died or until normal retirement age. A waiting period is usually imposed prior to the commencement of the benefit payment. Dread Disease (or Critical Illness Policies) A Dread disease benefit offers a payment (sometimes an accelerated death payment) on a confirmed diagnosis of a dread disease. This benefit is usually valid in the case of a limited number of listed diseases, which often include the following diseases: Heart attack, Stroke, Coronary artery disease requiring surgery, Cancer, Kidney failure, Surgery for a disease of the aorta, Replacement of a heart value, Organ transplant, Coma Other diseases can also be included and the percentage of the sum assured paid for each disease may be related to the severity of the disease. Long Term Care Policies This policy provides financial security against the risk of needing either home or nursing-home care as an elderly person. Premiums will be paid regularly and will cease either when benefit payments commence or earlier (e.g. at a given age). A group version of this product would enable an employer to provide long term care to retiring employees and their spouses.
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Hospital Cash Policies Hospital Cash policies usually provide the insured with a daily cash amount for the duration of an insureds stay in the hospital. Further benefits are often added in order to cover the additional costs associated with any visit to the hospital. These would often be in the form of a major medical expense policy Major Medical Expense Policies Major Medical Expenses policies often complement a hospital cash policy. The policy would cover the costs associated with specified medical procedures. These would include the cost of any surgery or follow-up visits to a Doctor. The actual benefit would normally be based on a pre-determined fee scale for various different procedures.

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GOVERNMENT/STATE BASED SYSTEMS


The best documented and largest system of health care delivery in India is the diverse network of hospitals, primary health Centres, community health centres, dispensaries and speciality facilities financed and managed by the Central and State local Governments. These facilities are officially available to the entire population either free or for nominal charges. Along with some other networks of village health workers, maternal and child health programmes and speciality disease prevention programmes these public facilities carry out a central role in Indias primary health care system short of durgs and essential supplies and that they sometimes suffer from low morale and inadequate motivation. The health facilities made available to the public are managed and operated under the authority of central and state agencies. The state governments mostly own and mange the public sector delivery system and have to bear the costs of operation. But the Central Government plays a major role on the planning, financing and transfer for resources that determine new investment in health facilities and specialized programmes. Much of the funding for health facilities originates from the Union Ministry of Health and Family Welfare and is channeled to the state governments, which retain considerable authority for the spending decisions. Over the years, the Central Government have been the main source of funds for the primary health care facilities, whereas the states bear the major responsibility of recurrent costs, especially the costs of running hospitals. This system has added to the overall inefficiency of public heath facilities.

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CENTRAL GOVERNMENT HEALTH SCHEME The Central Government Health Scheme (CGHS) was introduced in 1954 as a contributory health scheme to provide comprehensive medical care to the central government employees and their families. It was basically designed to replace the cumbersome and expensive system of reimbursements (Ministry of Health and Family Welfare, Annual Report 1993-94). Separate dispensaries are maintained for the exclusive use of the central government employees covered by the scheme. Over the years, the coverage has grown substantially with provision for the non-allopathic system of medicines as well as for allopathic. In addition, the CGHS reimburses patients for part of their out of pocket costs on treatment at the government hospitals and some other facilities. The list of beneficiaries includes all categories of current as well as former government employees, members of parliament and so on. The CGHS has been in the recent past, widely criticized from the point of view of quality and accessibility.

EMPLOYEES STATE INSURANCE SCHEME Established in 1948, the Employees State Insurance Scheme (ESIS) is an insurance system which provides both the cash and the medical benefits. It is managed by the Employees State Insurance Corporation (ESIC), a wholly government-owned enterprise. It was conceived as a compulsory social security benefit for workers in the formal sector. It benefits 33.4 million workers with income less than Rs.6500/- a month along with their families. Since 1989 the schemes has been expanded, and it now includes all such factories which are not using power and employing 20 or more persons. Mines and plantations are explicitly excluded form coverage under the ESIS Act.

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EMPLOYER-MANAGED SYSTEMS Employer-managed health facilities and the reimbursement of health expenses by employers are the other means of health insurance in India. Generally, the public sector undertakings and big industrial houses have their own dispensary and hospitals and provide medicines, etc, across the counter, usually within the company premises township. These include defence services, educational institutions, particularly universities also provides medical services to their employees. In addition, there are various medical reimbursement plains offered by employees for private medical expenses in the private sector including commercial banks and autonomous institutions. Also, in some organization we may find a self-insurance system known as medical benefit or medical allowance scheme. Under this scheme, employees incurring medical expenses are required to submit their claims to their employees for reimbursement, and reimbursements are not linked to their individual contribution NGO SYSTEMS Health facilities are also provided by voluntary and charitable or Non-government organizations (NGOs). Some of the important NGOs are Child In Need Institute (CINI), Self-employed Womens Association (SEWA), Streehitkarni and Parivar Seva Sanstha. The health care facilities offered by these organizations are a part of their main objectives. Though, these are not exactly health insurance programmes, yet they have potential to generate awareness and associate themselves with the major health insurance.

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MARKET BASED SYSTEMS A. Mediclaim Coverages The GIC holds a major share in the market-based health insurance segment. It introduced the standard Mediclaim health insurance scheme in 1986, and become operational in 1987. This product was later on modified in 1997 to allow for premium differentials for various age group meant for both individuals and groups. As on date, the GIC and its subsidiaries offer the following products: A.1 Mediclaim or Hospitalization Benefit Insurance Policy Suitability Anyone in the age group of 5 to 80 years can take the policy. Children in the age group below the age of 5 years can also be covered from the age of 3 months onwards provided one or both of the parents are covered concurrently. Higher limits are permitted of the policy is in renewal for the preceding three years. Suitable for persons of any nationality but treatment should be availed of within the country and the claim is paid in Indian currency/foreign currency. Salient Features Provides cover, which takes care of medical expenses following hospitalization Cover extends to pre-hospitalization and post-hospitalization for periods of 30 Domiciliary hospitalization is also covered from sudden illness or accident days and 60 days respectively. GIC

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Benefits Reimbursement of medical expenses Discount in insurance premium is allowed on family package, cumulative

bonus and health check. In case of family package cover, a single member can avail of the entire policy limits. The premium paid by a cheque upto a maximum of Rs. 10,000 is totally exempt from income tax. Domiciliary Hospitalization The term means that a patient can be treated at home when he is not in a fit condition to be moved to the hospital or where is no accommodation in the specialist hospital provided The treatment was for a period not less than 3 days.

The sub-limits of sum insured towards domiciliary hospitalization are furnished

in the sum insured and premium schedules.

Exclusions

The facility is not available if any illness is contracted within 30 Any pre-existing diseases Treatment for contracts, benign prostatic hypertrophy, hydrocele,

days from the commencement of risk except in case of an accident.

congenital internal diseases, fistula in anus, piles sinusitis and related disorders for 1st year of policy Requirements
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AIDS or conditions of similar kind

A completed proposal form. If the prosper is a Diabetic, a separate questionnaire completed by the family physician. A.2 BHAVISHYA AROGYA INSURANCE POLICY Suitability Bhavishya Arogya is a life term policy where medical benefits are made available after retirement of the insured. Therefore, by paying premiums during the earning period, one can make a provision for medical benefits after retirement. Persons in the age group- of 25 to 55 years are eligible for this policy. Salient Features

The policy provides hospitalization benefits for lifetime after retirements Premiums can be paid in equated annual installments up to the age of Premiums can also be remitted in lumpsum on one time basis. Discount is

age of the insured. retirement offered for one time payment Benefits The policy comes into force after retirement and provides for hospitalization and domiciliary hospitalization benefits, following an accident or sickness. Other conditions

The minimum sum to be insured is Rs. 50,000 and can be increased in For every Rs. 10,000 increase of sum insured, the premium is loaded Maximum sum insured is Rs. 2 lakh. After commencement of the risk (i.e. after retirement) cumulative

multiples of Rs.10, 000 as a unit, thereafter. by 20%

bonus @ 5% for every successive claim free year is added upto a maximum of 50%.
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Requirements

A completed proposal form Proof of age is necessary as the payment of premium depends on the age

A.3 JAN AROGYA BIMA POLICY This policy was introduced in the year-1998. It is designed to provide hospitalization insurance to poorer sections of the society. The coverage is along the lines of the individual mediclaim policy except that cumulative bonus and medical check up benefits are not included. The sum insured per insured person is restricted to Rs. 5000/-. Premium up to Rs. 10000/- qualifies for tax benefit under Section 80D of the Income Tax Act. Service tax is not applicable to the policy. The premium payable as per the following table Age of the person Up to 45 46-55 56-65 66-70

years Head of the family 70 100 120 140 Spouse 70 100 120 140 Dependent child up to 25 years 190 250 290 330 For family of 2+1 dependent children 190 250 290 330 For family of 2+2 dependent children 240 300 340 380 The policy is available to individuals and family members by duly completing the proposal form. The age limit is 5 to 70 years. Children between the age of 3 months and 5 years can be covered provided one or both parents are covered concurrently. LIC COVERAGES The Life Insurance Cooperation of India introduced a special insurance programme in 1983 which covered medical expenses for only four dreaded diseases. It was withdrawn and introduced subsequently in 1995. At present the modified versions are available in the form of two products viz. Jeevan Asha and Asha Deep
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I.

Jeevan Asha Features Open ended scheme Covers many surgical procedure Fixed benefits for surgical treatment can be availed twice (subject to Exclusive Double/Triple accident benefit. Option to switch over from existing Jeevan Asha plan Suitable for

conditions)

The Jeevan Asha II plan is apt for people who whose family history tends to show hereditary lineage of maladies and afflictions that have required major or minor surgery from time to time. Special Features

Under the Jeevan Asha plan, the major surgical procedures covered for are: Nervous system (non-malignant causes) Respiratory system Cardiovascular system Haemic and lymphatic system

Endocrine & Ocular system

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II.

Asha Deep

Features Cover the risk of four major ailments namely, Cancer (malignant), Paralytic stroke resulting in permanent disability, renal failure of either kidneys or Coronary artery diseases where by-pass surgery has been done. Suitable for:

The Asha Deep II (with profits) policy is best suited for people if they anticipant or have a family history of serious diseases like Cancer, Paralysis, Renal failure and Coronary disease. Special Features

During the term of the policy, if the life assured is afflicted by any of the major ailments listed above and the same is established as per rules (in case of Coronary artery disease, the life assured must have undergone the by-pass surgery), the policyholder will be eligible for the following benefits, the policy is in force for the full sum assured. Immediate payment of 50% of the sum assured Payment of an amount equal to 10% of the sum assured, every year commencing from the policy anniversary falling on or after the date of affliction and ending with the policy anniversary preceding the date of maturity or the date of death of the life assured whichever is earlier. Payment of balance 50% of the sum assured and vested bonuses on the date of maturity or on death of life assured, whichever is earlier. The bonuses will be
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calculated on the full sum assured even though 50% of the sum assured would have been paid earlier A lien for a period of one year will be imposed on all policies on all policies under this plan. If the life assured does not get afflicted by any of the diseases mentioned above, the full sum assured and vested bonuses will be paid on the date of maturity or on death of the life assured, whichever is earlier. Benefits 1. 2. Survival Benefits Sum Assured and vested Bonus on maturity.

Death Benefits Natural: If the life assured is not afflicted by any of the specified ailments, the legal heirs get the full Sum assured + accrued bonus Accidental: Accidental benefits available to the life assured whether afflicted or not afflicted by any of the specified ailments.

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MICRO HEALTH INSURANCE IN INDIA


Health risks and resulting catastrophic financial losses are probably significant threats to the people, particularly persons belonging to lower income groups as these people will be excluded from private health insurance. A health shock leads to direct expenditures for medicine, transport and treatment but also to indirect costs related to loss of wages. Since studies have found a very strong link between health and income poor are the most susceptible to a health shock. Given the problem with public health delivery system, the access to and utilization of these facilities remain problem. Strategy to improve the access by developing insurance system to private providers has been one such area. For low-income people in rural and informal sector market based insurance such as Mediclaim can not meet the requirements because of its high cost. Insurance companies and healthcare providers face high transaction costs and also they do not have local information available with them. This makes their job of providing health insurance to this segment very difficult and schemes which are of local origin have more chance of attracting more members because of high level of trust with them. Several community based organizations in India have focused on developing community based insurance schemes during the last decade. Most of these community based insurance schemes (CBHI) are also known as micro health insurance schemes. Micro insurance is a form of health, life or property insurance, which offers limited protection at a low contribution (hence micro). It is aimed at poor sections of the population and designed to help them cover themselves collectively against risks (hence insurance). More specifically micro insurance and CBHI are different in term interchangeably.

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In India, community health insurance started way back in Kolkata in 1952 which was part of a students movement. This scheme, which is called the Students Health Home (SHH), caters to the schools and universities students of West Bengal. Currently there are more than 20 documented CBHI programmes, of which five were initiated in the past three years community based health insurance schemes is different from normal market based schemes like Mediclaim. Though the basic principle of covering future risks by paying premium in advance is same in all health insurance schemes, CBHI schemes are tailored for local needs and provide health insurance at low cost. CBHI schemes in India can be divided in three broad categories. Table 1 indicates that these three categories are quite distinct from each other in terms of the function of the agency. An agency here can be a NGO, Trust, Hospital or Cooperative etc. their role can vary from performing as intermediary where both treatment and insurance are provided by intermediary itself or where the treatment and insurance are provided by third party. Micro health insurance as mechanism of providing healthcare to the poor, the role of these CBHI schemes will be very crucial. The success of many of these schemes though at a smaller level at present, provides important lessons for the policy makers. One important point to remember here is that CBHI schemes have their own problems which are non-availability of good providers, lack of professional management, financial sustainability issues and non-recognition by IRDA. These problems need to be taken into account while assessing their benefits. Though at present CBHI schemes in India are serving a very small population, it lessons learnt from each of these schemes can be used to design more of such schemes in different parts and at much larger level they can be beneficial.

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Types CBHI (Examples)

TABLE 1: TYPES OF CBHI SCHEMES IN INDIA of Healthcare Health Healthcare Intermediary SEWA, BAIF, Karuna trust Insurer Tribhuvandas Provider Foundation, Sewagram, MGIMS VHS, RAHA Plays role of both insured & provider Provide health care Running Ins. Scheme Low Low May be an Issue Mostly Fixed Indemnity Membership/ Geography Based Low Significant Not an Issue Cashless system mostly Geography Based

DHAN, Yeshaswini Plays role of insurer Provide Insurance Purchase care from independent provider

Role

Plays role of agent Purchase care from providers Purchase insurance from Insurance company

Transaction Costs Benefit

Low-medium on Negligible Is an Issue Mostly Fixed

provision side Informational Problems Payment

Mechanism Indemnity Nature of Membership/ Pool Geography Based

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MICRO HEALTH INSURANCE SCHEMES


UNIVERSAL HEALTH INSURANCE SCHEME (UHIS) YESHAVINI CO-OPERATIVE FARMERS HEALTH SCHEME (KARNATAKA)

Marketed through public insurance companies Covers only Hospitalization expenses (upto Rs. 15,000) Premium Individual: Rs 165/subsidy Rs. 200 Family upto 5 members: Rs. 240/subsidy Rs. 300 Coverage (2005): 1,10,000 Targets people in the age Group (3 months to 65 years) Exclusion: Pre-existing diseases, delivery, pregnancy-related illness

Marketed through the cooperative movement Covers only surgical procedures upto Rs. 100,000 per year Premium: Rs. 120 per/person/per year(Rs.90 for children under 18) Cashless services Hospital network(169) In-house model (No Insurance company) Coverage (2006); 1,830,000 TPA (Family health Plan) Second largest in the world

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THIRD PARTY ADMINISTRATORS.


Its an institution which facilitate a system of cash-less settlement of medical bills for the insured under health insurance has been introduced in India as recently as 2001. The first set of companies was given licenses in March, 2002. Today, there are 25 licensed Third Party Administrators (TPAs). Covered medical expenses are paid by the TPAs directly to the hospital. Administrator It acts a link between the insurer and the hospital. TPAs basically are professional organizations servicing health insurance policies sold by insurance companies by way of facilitating cash less treatment to insured individuals through institutional arrangements with insurance companies and networked service providers i.e. hospitals and nursing homes, etc. The TPAs are registered with and licensed by the IRDA and regulated by IRDA regulations, 2001 as amended from time to time. They will provide quality health care and services at affordable costs, which hitherto was unheard of. The role of TPAs will particularly be beneficial to those sections of society for whom quality healthcare has always remained a dream. By processing claims with due diligence, TPAs are expected to control claims costs for the insurers. In the long run, TPAs are expected to bring in greater professionalism in the health insurance industry, which would augure well for the growth of this segment of insurance business. TPAs are licensed by the Insurance Regulatory and Development Authority. The criteria for licensing are Only a company with a share capital and registered under the Companies Act, Company shall not engage itself in any other business. The minimum paid up capital shall be Rupees One Crore in equity shares. 1956 can function as a TPA.

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FURTHER ISSUES RELATING TO HEALTH INSURANCE POLICIES The Legislative Environment A fine balance between government imposed regulation and self regulation by the industry needs to be found. It a particular industry is over regulated it stifles innovation and development. On the other hand under regulation can result in unwanted practices and fly by night operations. Socio-Economic Environment The socio-economic environment has a significant impact on the type of health insurance policy that consumes will look to buy. If will also have an impact on the claims patterns of consumers. For instance, in a relatively poor society, product demand will be for products that cover day-to-day basic medical care. This will tend to be products which have high frequency of claims where the average claim sizes are relatively low. Post Retirement Benefits Another challenge for the insurance industry is how to deal with post retirement medical benefits. One possible way of dealing with these is to use some form of endowment product ( where premiums are paid during the working life of the insured) to provide a lump sum at retirement date which can be used to pr-fund medical expenses (or a future Medical Expense Policy). IT Systems The measurement and manipulation of data is of essential importance in operating an effective health care management system. There is a vast quantity of data that must be stored and manipulated for the various aspects of health care management.

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In addition this data should be readily available and easily updateable. In short the system should be robust! Investment Strategy Due to the frequency and level of the contribution received for most health insurance products, providers have large amounts of funds that need to be invested in appropriate vehicles. Certain countries (e.g. South Africa) have also introduced reserving requirements, which will result in significant reserves building-up over time for health Insurance products. This has introduced the additional complication of matching assets and liabilities. This is an area where actuarial judgement is essential. Cross Subsidies The issue of cross-subsidies is another item which needs to be carefully considered by any insurer. There often tends to be cross-subsidies in health insurance policies and in particular in medical expenses policy. Even when legislation does not force cross-subsidies, it is quite common for there to be cross-subsidies in health Insurance products. The insurance company needs to examine the level of the crosssubsidies and ensure that the style of their products is such that anti-selection will not result in abuse of these cross-subsidies.

Risk Management The success of any health insurance policy is crucially dependent on appropriate management of the underlying risks which can be best attained by

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of appropriate premiums ment and control of expenses selection

Setting Measure Appropri

Effective underwriting effective claim control Appropriate reserving Internal operational control

ate use of reinsurance avoidance of antiInvestme

nt strategy and subsequent measurement

AIDS

The challenges that faces health insurers is how to deal with AIDS claims, and what product can be designed that meet the needs of AIDS suffers. This is a challenge that has not, in any market, to my knowledge, been fully addressed. In some Southern African countries, insurance companies are offering certain anti-retroviral treatments in order to extend the expected life span of their policy holders. This is one area where health Care Management can be used to delay the payment of insured benefits (normally Life Insurance) and also add the expected life of the insured, thus benefiting all parities concerned.

Medical Savings Account:

One example of a new product introduced to relieve the risk of rising costs is the introduction of medical Savings Account (MSA) as a component of a Medical Expense Policy. The account holder, at each ill health incident, has to take a conscious decision whether or not to draw on savings and deplete his wealth. MSAs can be encouraged fiscally by providing savers with tax breaks not available to savers for other purposes. The funds in an MSA could be used to pay health
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premiums, deductibles or other medical bills not covered by insurance. An MSA minimizes moral hazard. There are two main kinds. One is a short term scheme which can be used at the discretion of the account holder for day-to-day expenses; the other is long term, where the savings are intended to build up to a substantial sum for either major expenditures or for old age.

Future of Health Insurance


Given the situation, there are few issues of concern or barriers towards implementing a social health insurance scheme in India. These are enumerated below along with the possible way ahead. India is a low-income country with 26% population living below the poverty line, and 35% illiterate population with skewed health risks. Insurance is limited to only a small proportion of people in the organized sector covering less than 10% of the total population. C urrently, there no mechanism or infrastructure for collecting mandatory premium among the large informal sector. Even in terms of the existing schemes, there is insufficient and inadequate information about the various schemes. Data gaps also prevail. Much of the focus of the existing schemes is on hospital expenses. There continues to be lack of awareness among people about health insurance. In spite of existing regulation in some States, the private sector continues to operate in an almost unhindered manner. The growth of health insurance increases the need for licensing and regulating private health providers and developing specific criteria to decide upon appropriate services and fees. Health insurance per se, suffers from problems like adverse selection, moral hazard, cream-skimming and high administrative costs. This is coupled with the fact that in the absence of any costing mechanisms, there is difficulty in
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calculating the premium. There is also a need to evolve criteria to be used for deciding upon target groups, who would avail of the SHI scheme/s and also to address issues relating to whether indirect costs would be included in health insurance. Health insurance can improve access to good quality health care only if it is able to provide for health care institutions with adequate facilities and skilled personnel at affordable cost.

INFORMATION ON HEALTH INSURANCE The domestic health insurance market is set for a transformation with foreign players setting their sights on it. Deutsche Krankenversicherung AG (DKV), a Munich Re group's health insurance firm, is entering the under-explored health insurance market through a joint venture with Apollo Hospitals Enterprise. US-based United Health Group, too, is keen on India debut but prefers to wait till the foreign holding limit in the country is raised to 49 per cent from the current 26 per cent. Apollo Hospitals informed the Bombay Stock Exchange that its board of directors authorized Chairman Prathap C Reddy to sign a JV agreement with DKV on Wednesday. DKV is the leader in the European health insurance market. United Health Group International, a division of United Health Group and the largest and most diverse healthcare services company in the US, intends to set up a standalone health insurance firm in India. We are informally looking for partners. The minimum capital requirement of Rs 100 crore (Rs 1 billion) is too high, and if regulatory changes lower it to Rs 50 crore (Rs 500 million), it will be more sustainable.

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Leonardi said, "The regulatory challenges in health are the costs involved in setting up a health insurance company. Health insurance is not regulated as a separate line of business. There needs to be clarity in minimum benefits. B D Banerjee, insurance ombudsman for Maharashtra and Goa, said, "Health insurance products offered by insurers lack versatility with certain exclusions and limits, pre-existing diseases are excluded from coverage. There is no major plan for preventive treatment and cost of insurance is prohibitive for the average middle class."

ICICI Lombard plans biometric health cards Radhika Menon Launch in Manipal for group insurance policy holders The Features Authorizes transactions based on the customers fingerprints treatment at hospitals without having to make advance cash payment Covers head of family, 3 dependents It's now the turn of insurance companies, after banks, to introduce biometric cards in rural and semi-rural areas. ICICI Lombard General Insurance Company plans to offer family biometric cards to group health insurance policyholders. The card will enable policyholders to get hospital treatment without making any advance cash payment. Biometric cards authorise transactions based on the customers' fingerprints. To begin with, ICICI Lombard will launch these cards for health insurance policyholders in Manipal, Karnataka. This family card will cover the head of the
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family and three other dependants, said Mr Pranav Prashad, Head, Rural and Agriculture business, ICICI Lombard. The insurer plans to introduce these cards to 7,000-10,000 policyholders by month-end. ICICI Lombard has tied up with Financial Information Network & Operations Pvt Ltd (FINO) to create this card. ICICI Bank, the parent company, has a 20 per cent stake in the newly launched FINO- a company that provides financial institutions with technological solutions to reach the underserved in the country. ICICI Lombard's family card will contain a smart chip, which carries biometric information, personal details as well as the photograph of the policyholder and three dependants. Mr Rishi Gupta, CFO, FINO, said the `smart card' would also load the sum insured that the policyholder is entitled to. So, when the customer presents the card at the hospital, the balance in the card can be immediately ascertained. Tie-up with hospitals ICICI Lombard will tie up with neighborhood hospitals so that hand-held machines that read these cards can be installed. Mr Prashad said the card would reduce administrative hassles for the customer and would eventually drive down distribution costs. If the experiment works in Manipal, it may extend this service to other rural health and motor insurance policyholders. ICICI Lombard would have to tie up with garages in the case of motor insurance. In rural areas Collecting biometric information in rural areas is, however, ridden with its own set of problems. "The fingerprints of people in the rural areas are not very clear as they perform intense manual labour. So, we take the impression of all the fingers and choose the best two prints of each hand," he said. The card has the capacity to load as many as 15 applications and FINO is in talks with several other finance providers and government agencies. So, besides cash withdrawal, deposits and insurance premium payments, the urban and rural poor may also use this card at the
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neighborhood kirana store and the post office. Among banks, ICICI Bank has introduced biometric cards and Citibank has set up biometric ATMs. Several PSU banks are also on the verge of introducing similar technology for micro-finance customers.

CONCLUSION The Government of India, in one of its economic survey reports, has proclaimed that human development is the ultimate goal of India's developmental plans. It is also being realized that sound long-term development of social sectors, such as education, and health is crucial to sustain economic growth in an increasingly integrated world economy. The government can intervene in the health insurance market in two ways: by directly providing subsidizing insurance or by regulation. These two forms of intervention do not lead to identical results. Provision of partial public insurance, even supplemented by the possibility of opting out, can lead to second beat equilibrium. Regulation of the private insurance market by imposition of a standard contract or by restricting premium rates, on the other hand, can exacerbate the problem of adverse selection and lead to chronic market instability. There is yet another criticism about the Indian health delivery system: urban bias in the allocation of resources. As of 90-91, 66.96 percent of the resources spent on health care had gone to the urban sector which accounts for 25.7 percent of the total population, while only 33.04 percent of the resources had gone to the rural sector, which accounts for 74.30 percent of the total population. The per capita expenditure
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on health care of the urban sector was said to be around Rs.152 as against Rs.26 of the rural sector. The Government being the central player in the health care delivery, the system is suffering from financial constraints and inefficiency in allocating whatever resources available. It is slowly being realized that sole reliance on the public health care system is no longer desirable.

RECOMMENDATION
STAND-ALONE HEALTH INSURANCE COMPANY Stand-alone health insurance companies in the Public Sector with model performance can encourage the Private Sector to perform accordingly keeping in view the issue of affordability of large sections of the needy population and thus help create a conducive environment for spread of health insurance business. Universal Health insurance scheme The subsidy was subsequently enhanced in 2004 and the scheme was confined to the BPL segment of the population only, and in spite of it, the scheme failed to make much head way. An exercise to identify BPL families should be initiated immediately and the entire exercise be completed within a specific time-frame and the scheme should also be made applicable to lower middle class and the people who are just above the Poverty Line.

LACK OF COORDINATION

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The Employees State Insurance Schemes, the Central Government Health Scheme and other Commercial Health Insurance schemes are being operated by three different Ministries viz. the Ministry of Labour, Ministry of Health & Family Welfare and Ministry of Finance respectively and there is no coordination amongst the three Ministries. A pilot health insurance scheme involving the Ministry of Health and Family Welfare, Ministry of Finance, IRDA and Public Sector Insurance Companies should be evolved and launched within a specific time-frame.

LACK OF AWARENESS The level of public awareness about the need, availability and benefits of health insurance in the country is still very low despite the fact that public sector general insurance companies have been operating in the field of health insurance for nearly two decades, beginning from 1986. There is need to create awareness about availability and benefits of health insurance schemes especially in rural areas through a multi-pronged strategy involving the public insurance companies, the central Government, the state Governments and the Panchayati Raj Institutions as well as Non-governmental organizations so that more and more people come forward to adopt Health Insurance schemes. LACK OF PRODUCT VARIETY There is a serious lack of variety of health insurance products in terms of flexibility to cater to the specific needs of different segments of the population. There is an imperative need to introduce long term health insurance products, covering outpatient care, maternity care, pre-existing diseases, suitable products for the aged, abandoned women, widows, physically and mentally challenged, children and the rural poor. LACK OF ADEQUATE HEALTH INFRASTRUCTURE

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The two factors that discourage a majority of potential customers from buying health insurance cover are (i) Lack of adequate health care infrastructure, especially in rural areas where 75% of the countrys population lives, and (ii) The consequent inaccessibility to health care for a majority of the population It feels that strengthening of the existing infrastructure for providing health care to the rural masses is of paramount importance. The Governments of all States and Union Territories may be requested to allot land for development of health infrastructure in rural areas at concessional rates to private bodies/Self-help Groups/cooperatives etc. Soft loans from Life Insurance Corporation of India, Banks and other financial institutions should be made available to these bodies for creation of rural health infrastructure.

CLAIMS MANAGEMENT & THIRD PARTY ADMINISTRATOR SYSTEM Third Party Administrators in the Country have been following unethical practices in collusion with health service providers and insurance companies in settlement of claims. They also lack the competence and necessary infrastructure to fulfill the role and functions expected of them. They also note that complaints relating to claim settlements have increased considerably after the introduction of the TPA System and the increase in cost of premium as also claim costs. a sub-committee of IRDAs Internal Working Group on Health Insurance has, inter-alia, recommended that the insurance companies should take certain concrete steps to provide clear guidelines to enable TPAs to effectively manage and settle claims. LACK OF PROFITABILITY The most health insurance schemes offered by public sector insurance companies are loss-making primarily due to their inability to insure the younger people who are relatively free from major diseases. Besides this, the absence of proper reT.Y.B.B.I 40

insurance facility for health insurance is also adversely affecting the confidence of insurance companies to underwrite health covers on a large scale. the Government and the regulator, after due consultation, prescribe viable targets of health coverage to the insurance companies, both in the public and private sector, and introduce incentives linked to their performance in fulfilling those targets.

POVERTY AND NEED FOR SUBSIDY The premium of health insurance schemes is beyond the economic capacity of people living below the poverty line as well as for a large section of the population living just above the poverty line. The only way to ensure health insurance cover for the poor is through subsidy to be provided by the Government to make the premium affordable for the poor. The only subsidized scheme at present is the Universal Health Insurance Scheme launched in 2003 and it has been confined exclusively to the BPL segments in 2004 with enhanced subsidy. LACK OF DATA The lack of adequate data on morbidity, demographic groups and diseases etc., is a major hindrance in formulating and designing new products in health insurance and thus affect the development and progress of health insurance in the country. A road map should be drawn for establishing a data repository and should be evaluated and examined for expeditious implementation.

POLICY RELATED REFORM INITIATIVES: 1. 2. Decide on regulator for the health care and its financing Private the infrastructure. The government has pumped in billions of

rupees into the infrastructure, which is resultantly very ineffective and nonperforming 3. Allow the financing agencies and insurance companies to dictate the performance of health facilities and the constituents.
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MARKET AND PRACTICE REFORM INITIATIVES: 1. Permit entry of new players and managed healthcare organizations into the health insurance market and introduce risk based capital norms for these entities 2. Introduce rating and credentialing of the providers to encourage standardization of services from various providers. 3. Creation of standards for diseases and treatment procedures to develop a common understanding and database as well as to introduce cost containment measures

4. Creation of an information bank on insurance, diseases, and treatment involving creation of a centralized data warehouse besides the enforcement of standardized billing, claims forms and proposal forms. 5. Portability across players and schemes especially with respect to the pre-existing diseases condition 6. Encourage community initiatives in healthcare financing to complement formal social security schemes that cover regularly employed or self employed, especially in the rural communities. Appropriate Regulation 1. Permit entry of new players and managed healthcare organizations into the health insurance market by reducing minimum capital norms, adopting solvency margins and reinsurance requirements appropriate to this class of business. 2. Consolidation and improvement in cost effectiveness including withdrawal of public subsidies and reform of the ESIS and CGHS schemes.
3. Regulation of private healthcare including creation and enforcement of licensing

procedures, and standardization of fees structure

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