Health Insurance – A short case study - RAS | Dr Chetan C Purad | 07/02/17

H
ealth is an important constituent of
human resource development. Good
health is real wealth of society. It not
only increases human efficiency but also
decreases private and public expenditure on
sickness and diseases.
Health insurance can provide financial
protection to households in the event of
health shock and can reduce catastrophic out-
of-pocket expenditure on health care
(Joglekar, 2009). So that it can protect
families from impoverishment and empower
sponsored health insurance schemes are
the patient to seek health care as a right
strongest in their outreach. Private health
(Gilson, 1998). insurance schemes are covering 18.21 %
Health Insurance Coverage in India: population.

The current trends in the health insurance

coverage indicate a quantum leap, especially
since the past few years, mainly because of
the implementation of the health insurance
schemes such as Rashtriya Swasthya Bima
Yojana (2008), Rajiv Arogyasri scheme (2007),
Kalingar (2009) and Vajapayee Arogyasri
scheme (2009).

In India, in the year 2009-10 all forms of

insurance both Government and non-
government together covered approximately
302 million individuals or 25 percent of India’s
population in 2010. And of this nearly 82 Rajiv Aarogyasri Health Insurance Scheme of
percent are covered by government schemes. Andhra Pradesh:
It may be observed that a substantial portion Financing health care of persons living below
is covered (32%) through Rashtriya Swasthya poverty line, especially for the treatment of
Bima Yojana (RSBY), followed by the state of
serious ailments such as cancer, kidney
Andhra Pradesh with has covered 28.34% of
failure, heart diseases, is one of the key
the total beneficiaries through Rajiv
determinants that affect the poverty
Aarogyasri scheme. And Tamil Nadu
(Kalaignar) health insurance covers 14.17% of levels in Andhra Pradesh.
population. These are two states where state
 Health Insurance – A short case study - RAS | Dr Chetan C Purad | 07/02/17

Therefore, Government of Andhra Pradesh without any charges the State government
has launched Rajiv Aarogyasri Health pays full premium for beneficiaries of this
Insurance Scheme on 01.04.2007 to improve scheme. Assuming that the funding is from tax
access of poor to quality medical care and for revenues.
providing financial protection against high
The financial sustainability of the
medical expenses.
government-sponsored schemes for the poor
In order to operate the scheme professionally is a major concern for all stakeholders. It is
in a cost effective manner, public private unlikely that the schemes can sustain
partnership is promoted between the themselves financially without Government
insurance company, the private sector
hospitals and the state agencies. Aarogyasri
Health Care Trust set up by the State
Government for the implementation of the
scheme assisting the insurance company/
Beneficiaries and co-ordinate with Medical

Private sector
hospitals

Aarogyasri
Insurance
Health care State Agencies
company
trust support. With the government also paying for
the large network of public sector health
facilities and services, the rationale for
incurring a dual financial burden i.e. funding
Beneficiaries
the public sector and national insurance
needs to be revisited.

and Health Department, District Collectors, Risk pooling: (Implicit Pooling)

Civil Supplies Department etc.
Funding from tax revenues, the large and
Revenue Collection:1 (Taxes) growing share of direct taxes in gross tax
revenues, prima facia, suggests progressive
In keeping with the government policy on
funding for the scheme. This is also equitable
extending health insurance to the poor

1
A Critical Assessment of the Existing
Health Insurance Models in India – The planning Commission
of India - 2011
 Health Insurance – A short case study - RAS | Dr Chetan C Purad | 07/02/17
because tax revenues from the better-off are
used to subsidize the contribution of the poor.
Purchasing:
This is a state government scheme. Under
this, hospital bills of the insured persons are
paid by the insurance company. The premium
for insurance company is paid by the
government. People do not have to pay
anything under this scheme. The state wanted
to ensure that the benefits of the scheme
reached the poorest, who might otherwise be
deterred from enrolling even if the premium
to be paid out‐of‐pocket was nominal.
The scheme covers 932 therapies in 29
specialties such as cancer, cardiology, poly
trauma etc. There are 380 network hospitals
serving the patients. The benefit coverage
under the scheme increased from 166
procedures to 884 procedures.
Provision of care:
All the insurance schemes currently operating
in India offer beneficiaries the option of
seeking hospital care with either private or
public sector providers. This is significant
because it enables patients to take advantage
of both sectors for affordable care. In
particular, this is beneficial to patients in areas
where the public sector is overburdened or
weak and there is a credible private sector
presence.
Network hospitals: Network hospitals provide
care to Aarogyasri beneficiaries.
Aarogya Mithras: Aarogya Mithras are patient
advocates and assist Aarogyasri beneficiaries
to navigate through the system and ensure
beneficiaries receive quality care. They are
also responsible for community outreach.
Critiques of the Scheme
The priorities of this scheme have been
criticized in India and internationally. The
main criticism has been about the benefit
package that focuses on alleviating the
financial distress associated with catastrophic
illness and ignores health problems faced by
the majority of the poor such as fever and
gastrointestinal disorders.
The two main reasons for the chosen focus of
Aarogyasri are: (1) the purpose of addressing
indebtedness due to health care costs; and (2)
the challenges with monitoring treatment of
ailments without hospitalization. Shukla, et
al., (2011) pointed out that, corporate
hospitals handle the biggest share of the cases
 Health Insurance – A short case study - RAS | Dr Chetan C Purad | 07/02/17

and there is no provision for outpatient
treatment of everyday illnesses that affect the
working capacity of the patient. The focus on
tertiary healthcare and exclusion of all other
forms of medical assistance leads to an
inefficient medical care model with a low level
of real impact on meeting the needs of the
healthcare and the health of the population.
Mitchell et al., (2011) in their study provide
evidence that poor patients continue to spend
significantly on conditions that are not
covered by the Rajiv Aarogya Sri (RAS) at both
government and private facilities. Their
findings show that RAS alone is not likely to
reduce the financial burden of illness on the
BPL population. They suggested that strong
referral system and fundamental changes to
the health system are needed to meet goals of
financial risk protection.
Conclusion: The recent growth of insurance
schemes in India, in many ways, marks a new
phase in India’s quest to provide health care
to all.
The key design features of health insurance
scheme, revenue collection, pooling of funds
and purchasing care need government
intervention in order for the schemes to be
equitable, efficient and effective. In terms
of revenue collection, general taxation is the
main source of funds for both health
insurance schemes and direct public provision
of care. Government must revisit the
decision to bear dual financial burden of
funding the network of public hospitals and
national insurance. The risk pool for most
schemes is comprised of the BPL population
with least ability to pay leading to
segmentation of the society. If the same
schemes are extended to other populations of
the society, the pools will become bigger and
more financially unsustainable unless the
beneficiary contribution is increased as in the
case of rich subsidizing the poor in typical
health insurance. The benefit package and
package rates are the tools of purchasing care
that government can use not only to
control costs but also to monitor public
expenditure on health, but these two need
coordinated effort by different schemes to
optimize benefit for the beneficiaries.
References:
1. Health Insurance in India: Rajiv Aarogyasri
Health Insurance Scheme in Andhra Pradesh
J. Yellaiah (CESS), Department of Economics,
Osmania University, Hyderabad, Andhra
Pradesh.
2. A Critical Assessment of the Existing
Health Insurance Models in India – The
planning Commission of India – 2011
3. http://aarogyasri.telangana.gov.in/
4. http://www.aponline.gov.in/apportal/HomeP
ageLinks/aarogyasri.html