NATIONAL LAW UNIVERSITY ODISHA

INSURANCE LAW

TOPIC – HEALTH INSURANCE LAW

SUBMITTED TO : SUBMITTED BY :
DR. DIVYA SINGH RATHOR PARUL PRIYA NAYAK
(Assistant Professor) (18BA074)
 TABLE OF CONTENTS

Introduction................................................................................................................................3
Health insurance in India...........................................................................................................4
Brief History...........................................................................................................................5
Current StaTUS of Health Insurance.........................................................................................6
1. “Rashtriya Swasthiya Bima Yojana”(RSBY).................................................................6
2. “Employment State Insurance Scheme”(ESIS)...............................................................7
3. “Central Government Health Scheme”(CGHS)..............................................................7
4. “Aam Aadmi Bima Yojana”(AABY)..............................................................................7
5. Jana shree BimaYojana...................................................................................................7
6. Universal Health Insurance Scheme (UHIS)..................................................................8
Key Challenges in the Healthcare..............................................................................................9
 Affordability and accessibility chasm.............................................................................9
 High variation in quality of services...............................................................................9
 Medical health insurance penetration:............................................................................9
 Associated social facilities..............................................................................................9
 Absence of regulatory and standardized operating procedures.......................................9
 Lifestyle changes...........................................................................................................10
Prospectus: Directions for the Future.......................................................................................11
Regulation of Health Insurance............................................................................................11
Review and Revise Mediclaim.............................................................................................12
I. Premium structure.....................................................................................................12
II. Out-patient coverage..............................................................................................12
III. Limit exclusions for pre-existing conditions.........................................................12
IV. Require greater efficiency in processing of claims................................................12
V. Increase Visibility..................................................................................................13
VI. Require greater monitoring of fraud and excessive fees........................................13
CONCLUSION........................................................................................................................16
BIBLOGRAPHY.....................................................................................................................17

2|Page
 INTRODUCTION

Health Insurance is a way of mitigation of financial risk arising out of bad health condition by
paying smaller amounts (around 3-5% of your total risk cover, these are called premiums)
over a period of time. An insurer takes responsibility of collection of such premiums,
building the pool & then paying the costs of those people who fall sick. The cost paid are
called the claims & those are accepted / rejected basis conditions of the contract between
customer & insurer.

Holistically speaking, it’s the healthy who pay the premium starting at early age & expect the
insurance company to pay them the claim when they are old & ailing.

As the insurance company is liable for payment of claims, it may so happen that many
unhealthy people may pay small premium & join the plan to get bigger claim pay-outs.
Hence, screening of members willing to enrol is very important & hence beyond certain age
(around 45 years), members need to undergo medicals. This process is called underwriting. A
combination of underwriting & policy conditions called Exclusions (things that insurer would
not pay) keep the unhealthy away from taking under advantage of the plan & thus helping
insurer avoid making losses.

It's important that the insurer does not make losses & goes out of business as people buy
health insurance with long term view & they expect the insurer to be around in business when
they get old & would need their claims to be paid due to ailments of old age.

3|Page
 HEALTH INSURANCE IN INDIA

The“concept of Health Insurance was proposed in the year 1694 by Hugh the elder
Chamberlen from Peter Chamberlen”family. In 19th Century “Accident Assurance” began“to
be available which operated much like modern disability insurance. This payment model
continued until the start of 20th century. During the middle to late 20th
century”traditional“disability insurance evolved in to modern health insurance programmes.
Today, most comprehensive health insurance programmes cover the cost of routine,
preventive and emergency health care procedures and also most prescription drugs. But this is
not always”the case”1.

Health“Insurance is more appropriate. Health insurance is very well established in many

countries. But in India it is a new concept except for the organized sector employees. In India
only about 2 per cent of total health expenditure is funded by public/social health insurance
while”18 per cent is funded by government budget. In many other low and middle income
countries contribution of social health insurance is much higher”2.

Despite “some progress, the current state of India's healthcare outcome leaves much to be
desired. It has glaring challenges around high out-of-pocket spending, inequality of services,
and fragmented social and regulatory standards. Since 2001, medical insurance has gained
ground amid the proliferation of private health insurance entities. However, it still remains a
minor contributor in the current healthcare ecosystem”3.

Amid its ongoing transformation, “a government driven universal healthcare delivery and
financing model is likely. However, PHIs still have a key role to play in shaping goals of
access, cost and quality. With healthcare financing opening to private players, current
challenges offer opportunities. A strong synergy between private and public players,
complementing each other is a major objective. A focused approach encompassing public and
private sectors and leveraging emerging technology will play a disruptive role in the
healthcare transformation ahead”4.

1
Bhat, R. and E. B. Reuben (2002). Management of Claims and Reimbursements: The Case of Mediclaim
Insurance Policy, Vikalpa, Vol. 27, No. 4, Accessed on 20 September 2021
2
Peters, D. et al. [a] Introduction, Private Health Insurance and Public Health Goals in India, Report on a
National Seminar, the World Bank, May 2000.
3
Ibid
4
Hsiao, William C. (2007). Why Is A Systemic View Of Health Financing Necessary?. Health Affairs,
26(4). https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.26.4.950 Accessed on 22 September 2021

4|Page
PHIs “need to carefully design and implement their strategies in a 1.3 billion-strong
population segmented in various strata. There are key trends around operational efficiency,
integration and standardization and customer awareness of which PHIs should be cognizant.
Their response to these trends will likely define the cornerstones of success stories” in India.

Brief History
Since , a tax planning tool. Health“insurance evolved slowly in tandem with general
insurance with both sharing key landmarks. The growth of healthcare delivery too was
limited in the pre-liberalization (pre-1991) era. However, after economic liberalization in
1991, care delivery equipment, methodology, and process sharing from developed
nations”became“mainstream”. With“the improvement in healthcare delivery and increase in
disposable income, life expectancy had increased to 65 years by 2011. The Insurance
Regulatory and Development Authority (IRDA) legislation in 2000 served as a key milestone
in healthcare insurance. It opened up the health insurance industry to private”players.

5|Page
 CURRENT STATUS OF“HEALTH INSURANCE”

The“health situation and the provision of services vary considerably from one State to
another. Although public health services in principle provide free basic health care to all, the
care provided by most state health systems suffers from inadequate resources and poor
management. As a result, the majority of the population turns to private health services that
offer more expensive care and of very unequal”quality.

In India, the“health system mixes public and private providers. Public health facilities - local
clinics providing basic care, regional hospitals, national hospitals - are funded by the federal
states and the federal state and managed by the state”authorities.

Public“health services differ greatly from one federated state to another. In some states such
as Tamil Nadu or Kerala, public health facilities play their role as the first stage of the care
journey, but, outside of these few states, the public sector does not reach the goal to provide
the basic health needs of the”population.

India's“public health expenditures are lower than those of other middle-income countries. In
2012, they accounted for 4% of GDP, which is half as much as in China with 5.1%. In terms
of public health spending per capita, India ranks 184th out of 191 countries in 2012. Patients'
remaining costs represent about 58% of the total. The remaining costs borne by the patient
represent an increasing share of the household budget, from 5% of this budget in 2000 to over
11% in 2004-2005. On average, the remaining costs of poor households as a result of
hospitalization accounted for 140% of their annual income in rural areas and 90% in”urban
areas.

1. “Rashtriya Swasthiya Bima Yojana (RSBY)”

RSBY (“Rashtriya Swasthiya Bima Yojana”) “has been launched by Ministry of Labour and
Employment, Government of India to provide health insurance coverage for Below Poverty
Line (BPL) families. The objective of RSBY is to provide protection to BPL households from
financial liabilities arising out of health shocks that involve hospitalization. Beneficiaries
under RSBY are entitled to hospitalization coverage up to Rs.30,000/- for most of the
diseases that require hospitalization. Government has even fixed the package rates for the
hospitals for a large number of interventions. 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.

6|Page
30/- as registration fee while Central and State Government pays the premium to the insurer
selected by the State Government on the basis of a competitive bidding”5.

2. “Employment State Insurance Scheme (ESIS)”

Employees “State Insurance Scheme of India, is a multidimensional social security system
tailored to provide socio-economic protection to worker population and their dependants
covered under the scheme. Besides full medical care for self and dependants, that is
admissible from day one of insurable employment, the insured persons are also entitled to a
variety of cash benefits in times of physical distress due to sickness, temporary or permanent
disablement etc. resulting in loss of earning capacity, the confinement in respect of insured
women, dependants of insured persons who die in industrial accidents or because of
employment injury or occupational hazard are entitled to a monthly pension called the
dependants benefit”6.

3. “Central Government Health Scheme (CGHS)”

The “Central Government Health Scheme” (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, Central Govt. Health Scheme is”now in
operation in Allahabad, Bhubaneshwar ,Bhopal ,Chandigarh, Ahmedabad ,Bangalore , ,
Hyderabad, Jaipur , Jabalpur Chennai ,”Delhi , Dehradun ,Guwahati , , Kanpur , Kolkata ,
Mumbai , Nagpur , Patna , Lucknow ,“Meerut ,“Pune , Ranchi , Shillong , Trivandrum and
Jammu. The“Central”Govt Health Scheme provides comprehensive healthcare to the CGHS
Beneficiaries in India. The medical facilities are”provided through Wellness Centres
(previously) referred to as”CGHS”Dispensaries”7.

4. “Aam Aadmi Bima Yojana (AABY)”

Aam admi bima yojana, a “Social Security Scheme for rural landless household was launched
on 2nd October, 2007. The head of the family or one earning member in the family of such a
household is covered under the scheme. The premium of Rs.200/- per person per annum is

5
Dr. Saumitra Mohan (15 May 2017) Rashtriya Swasthya Bima Yojana (RSBY)". Indian policy and
development. Accessed on 23 September 2021
6
Team Acko July 22, 2021 ,ESIC - Employees' State Insurance Scheme: Eligibility, Coverage And Benefits
https://www.acko.com/health-insurance/employees-state-insurance-scheme/ Accessed on 23 September 2021
7
“Central Government Health Scheme” https://www.bajajfinservmarkets.in/insurance/health-
insurance/pradhan-mantri-jan-arogya-yojana-pmjay/central-government-health-scheme-cghs.html Accessed on
24 September 2021

7|Page
shared“equally by the Central Government and the State Government. The member to be
covered should be aged”between 18 and 59 years”8.

5. “Jana shree BimaYojana”

Jana shree Bima Yojana (JBY) was “launched on 10th August 2000. The Scheme replaced
Social Security Group Insurance Scheme (SSGIS) and Rural Group Life Insurance Scheme
(RGLIS). 45 occupational groups have been covered under this scheme. It provides life
insurance protection to people who are below poverty line or marginally above poverty line.
Persons between aged 18 years and 59 years and who are the members of the identified 45
occupational groups are eligible to be covered under the Scheme”9.

6. “Universal Health Insurance Scheme (UHIS)”

The “four public sector general insurance companies have been implementing Universal
Health Insurance Scheme for improving the access of health care to poor families. The
scheme provides for reimbursement of medical expenses upto Rs.30,000/- towards
hospitalization floated amongst the entire family, death cover due to an accident @
Rs.25,000/- to the earning head of the family and compensation due to loss of earning of the
earning member @ Rs.50/- per day upto maximum of 15 days. The Universal Health
Insurance Scheme (UHIS) has been redesigned targeting only the BPL families. The
premium subsidy has been enhanced from Rs.100 to Rs.200 for an individual, Rs.300 for a
family of five and Rs.400 for a family of seven, without any reduction in benefits”10.

8
"आयु ष्मान भारत राष्ट्रीय स्वास्थ्य सं रक्षण (ने शनल हे ल्थ प्रोटे क्शन) योजना - Ayushman bharat". Infnd. 17 June 2015. Accessed
on 24th September 2021
9
‘Janashree Bima Yojana” https://www.godigit.com/health-insurance/schemes/janashree-bima-yojana Accessed
on 24th September 2021
10
World Health Organization (November 22, 2010). The world health report: health systems financing: the path
to universal coverage. Geneva: World Health Organization. ISBN 978-92-4-156402-1.

8|Page
 “KEY CHALLENGES IN THE HEALTHCARE”

 “Affordability and accessibility chasm”

There is a “large gap between healthcare delivery and financing in urban areas and rural
areas. While a majority of the population resides in rural India (68.4 %), only 2% of qualified
doctors are available to them.7 The rural population relies heavily on government-funded
medical facilities. This gap is exacerbated because the private and public systems do not
complement each other. Affordable care (government hospitals or community-based care)
suffers from quality issues and is unable to cater to the basic healthcare needs of the
population. While some private care delivery centres and professionals are accessible to the
needy, they are not affordable for a majority of the population”11.

 “High variation in quality of services”

Often an “individual has to reach out to multiple levels of care delivery providers
(professionals, physicians, government hospitals, and private providers) to seek care for the
same episode. This leads to compartmentalized care with cost and quality concerns”12.

 “Medical“health insurance”penetration:”
Health “insurance is a minor contributor in the health- care ecosystem.10 Insurance payment
structures are based on an almost retrospective arrangement of indemnity-based payments.
Indian insurance has been limited to critical illness coverage for inpatient surgical” 13
procedures and often one-time lump-sum pay-outs.

 “Associated social facilities”

Inadequate“social determinants of health such as nutrition, food security, water and
sanitation is a major hindrance in the success of healthcare delivery and”financing.

 “Absence of regulatory and standardized operating procedures”

There“is a need for a strong regulatory framework to organize and standardize healthcare
delivery and financing. The dominant reimbursement method is fee for service (FFS)”which

11
“4 Challenges Facing the Health Care Industry” , “https://online.regiscollege.edu/blog/4-challenges-facing-
the-health-care-industry/ Accessed on 9th” October 2021
12
Rita Sharma , “Challenges Healthcare” , https://www.finoit.com/blog/top-10-healthcare-challenges/
Accessed on 9th October 2021
13
Ajay Shah, “Health insurance” , https://www.cnbctv18.com/finance/health-insurance-industry-an-overview-
of-2020-and-outlook-for-2021-7868711.htm Accessed on 10th October 2021

9|Page
differs “from provider to provider. Providers are the dominant entities and influence the
pricing and contract”14 arrangement.

 “Lifestyle changes”
There“have been disruptive lifestyle changes in the country over the past two decades mainly
due to the rapidly evolving urban economy and the Indian middle class. It is estimated that
around 130 million people may suffer from lifestyle diseases such as diabetes and obesity in
the next few years, leaving a $160 billion hole in the national economy”between 2010 and
2015.

14
Institute of Medicine (US) Committee on Monitoring Access to Personal Health Care Services; Millman, M.
(1993). Access to Health Care in America. The National Academies Press, US National Academies of Science,
Engineering and Medicine.

10 | P a g e
 PROSPECTUS: DIRECTIONS FOR THE FUTURE

In “India has limited experience of health insurance. Given that government has liberalized
the insurance industry, health insurance is going to develop rapidly in future. The challenge is
to see that it benefits the poor and the weak in terms of better coverage and health services at
lower costs without the negative aspects of cost increase and over use of procedures and
technology in provision of health care. The experience from other places suggest that if
health insurance is left to the private market it will only cover those which have substantial
ability to pay leaving out the poor and making them more vulnerable”15.

Hence “India should proactively make efforts to develop Social Health Insurance patterned
after the German model where there is universal coverage, equal access to all and cost
controlling measures such as prospective per capita payment to providers. Given that India
does not have large organized sector employment the only option for such social health
insurance is to develop it through co-operatives, associations and unions”16.

The “existing health insurance programmes such as ESIS and Mediclaim also need
substantial reforms to make them more efficient and socially useful. Government should
catalyse and guide development of such social health insurance in India. Researchers and
donors should support such development”17.

“Regulation of Health Insurance”

The“foregone points regarding a complete review of the health insurance sector are related to
its regulation as well. This suggestion is applicable to all the health insurance agencies, be it
the GIC or any other corporation or company. In addition to regulation of premium structure,
exclusion clauses, extent of coverage, etc, the following measures may also be”necessary.

i. Discourage ‘dreaded disease’ or“other specialised policies: The government should

discourage schemes like the one currently offered by LIC which covers only four selected
diseases. Such specialisation further segments the coverage rather than”broaden it.

ii. Encourage“health insurance for the specially vulnerable: Health insurance cover for the
elderly, unemployed, permanently disabled, etc, deserves special”attention. Subsidised
insurance“plans for these categories of people are worth exploring. Mediclaim benefits,
15
Insurance Information Bureau of India. (2018). Health Insurance Fact Book 2017-18
https://admin.iib.gov.in/Uploads/Document/255/health_insurance_fact_book_201718 pdf
16
Ibid
17
Ibid

11 | P a g e
 now available only to employees, their spouses and children, may be extended to
dependent adults (perhaps just grandparents initially) for a supplementary premium. This
is just one example of which can be”done

“Review and Revise Mediclaim”

If the“objective of providing some kind of insurance to the general population is a priority
area for health policy planners, a beginning can be made by carefully reviewing the
Mediclaim system. Some areas which need particular attention are”as follows.

I. “Premium structure”
The“current premiums are too high in relation to claims payments. The current bonus and
‘malus’ system for adjusting claims is such that the insurer is always guaranteed at least a 20
per cent margin over the previous year’s level of incurred”claims. Also“there does not appear
to be a mechanism through which premiums are reconciled according to settled claims rather
than proffered claims. Finally, the discount on group insurance for large employers is un-
realistically large. Revising the premium schedules will make health insurance more
accessible to individuals from lower socio-economic”categories

II. “Out-patient coverage”

There “is a need for insurance cover to meet the growing cost of out-patient treatment. The
reasons why some people pay a great deal out of pocket even when they are already covered
by the GIC or the ESIS should be identified so that corrective measures could be devised.
The obtaining of referrals before going to expensive secondary and tertiary facilities can be
encouraged by providing for the GIC to give lower reimbursement when higher-level care is
sought without a referral”18.

III. “Limit exclusions for pre-existing conditions”

At present Mediclaim does not cover most of the chronic or pre-existing conditions. This
leaves out large segments of the population who suffer from diseases like diabetes, hearing
dis- orders and STDs. Such exclusions should be carefully reviewed and amended, for
example, exclusions for pre-existing conditions can be made valid for not more than a year.

18
Out-patient coverage: Private sector insurance in India
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6482741/ Accessed on 27th September 2021

12 | P a g e
IV. “Require greater efficiency in processing of claims”
Consumers“should be given a time schedule so that there is no uncertainty about the amount
of reimbursement and the time within which they can hope for reimbursed. Delays in
prepayment and arbitrary denial of claims need”to be minimised”19.

V. “Increase Visibility”
In“our assessment Mediclaim is not an exceptionally popular scheme. Most prospective
consumers know little or nothing about it. This should be rectified through”publicity.

VI. “Require greater monitoring of fraud and excessive fees”

The “government should make it mandatory for all insurance companies to devote more
resources to monitoring fraudulent claims and establishing schedules of appropriate fees for
specified procedures”20.

19
Susan Berndt July 20th, 2020 “Healthcare Claims Processing Workflow: Tools and Processes to Increase
Efficiency” https://sdata.us/2020/07/20/healthcare-claims-processing-workflow/ Accessed on 29 September
2021
20
July 24, 2019 Operational Risk: Fraud Risk Management Principles , https://www.occ.treas.gov/news-
issuances/bulletins/2019/bulletin-2019-37.html Accessed on 30th September 2021

13 | P a g e
 CONCLUSION

There “are two important limitations of the present health care system and its financing in
India. The first limitation is exceptionally high health care expenditure over three- fourths of
which is private out-of-pocket expenditure. The other one relates to unsatisfactory outcomes
of these expenses. Most of the out-of-pocket expenses are borne by households engaged in
low- income informal economic activities. Those in the organised sector are covered by
health plans. But the majority of the low-income people are left to suffer either from poor
health-care delivery or to incur high out-of-pocket expenses, or both. Even those covered by
health plans experience growing inefficiencies and low quality of services. A revamp of the
health system with expanded and improved health insurance facilities, is therefore” essential.

14 | P a g e
 BIBLOGRAPHY

 Bhat, R. and E. B. Reuben (2002). Management of Claims and Reimbursements: The

Case of Mediclaim Insurance Policy, Vikalpa, Vol. 27, No. 4,

 Peters, D. et al. Introduction, Private Health Insurance and Public Health Goals in India,
Report on a National Seminar, the World Bank,

 Hsiao, William C. (2007). Why Is A Systemic View Of Health Financing Necessary

Health Affairs,

 Dr. Saumitra Mohan (15 May 2017) Rashtriya Swasthya Bima Yojana (RSBY)". Indian
policy and development.

 "आयु ष्मान भारत राष्ट् रीय स्वास्थ्य सं रक्षण (ने शनल हे ल्थ प्रोटे क्शन) योजना - Ayushman bharat".
Infnd.

 World Health Organization (November 22, 2010). The world health report: health
systems financing: the path to universal coverage. Geneva: World Health Organization.
ISBN 978-92-4-156402-1.

HYPERLINK

 https://online.regiscollege.edu/blog/4-challenges-facing-the-health-care-industry

 https://www.finoit.com/blog/top-10-healthcare-challenges/

 https://www.cnbctv18.com/finance/health-insurance-industry-an-overview-of-2020-
and-outlook-for-2021-7868711.html

 https://admin.iib.gov.in/Uploads/Document/255/health_insurance_fact_book_201718

 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6482741/

 https://sdata.us/2020/07/20/healthcare-claims-processing-workflow

 https://www.godigit.com/health-insurance/schemes/janashree-bima-yojana
 https://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-37.html

 https://www.acko.com/health-insurance/employees-state-insurance-scheme

 https://www.bajajfinservmarkets.in/insurance/health-insurance/pradhan-mantri-jan-
arogya-yojana-pmjay/central-government-health-scheme-cghs.html

15 | P a g e
16 | P a g e