Session 2015-16

INTRODUCTION OF INSURANCE
With such a large population and the untapped market area of this population
insurance happens to be a very big opportunity in India. Today it stands as a business
growing at the rate of 15-20 per cent annually. Together with banking services, it adds
about 7 percent to the country’s GDP .In spite of all this growth the statistics of the
penetration of the insurance in the country is very poor. Nearly 80% of Indian
populations are without Life insurance cover and the Health insurance. This is an
indicator that growth potential for the insurance sector is immense in India. It was due to
this immense growth that the regulations were introduced in the insurance sector and in
continuation “Malhotra Committee” was constituted by the government in 1993 to
examine the various aspects of the industry. The key element of the reform process was
Participation of overseas insurance companies with 26% capital. Creating a more
efficient and competitive financial system suitable for the requirements of the economy
was the main idea behind this reform.
Since then the insurance industry has gone through many sea changes .The
competition LIC started facing from these companies were threatening to the existence of
LIC. Since the liberalization of the industry the insurance industry has never looked back
and today stand as the one of the most competitive and exploring industry in India. The
entry of the private players and the increased use of the new distribution are in the
limelight today.
INTRODUCTION OF HEALTH INSURANCE
Health insurance is a safeguard against rising medical costs. A health insurance
policy is a contract between an individual and a group, in which the insurer agrees to
provide specified health insurance at an agreed upon price (the premium). Depending
upon the policy, premium may be payable either in a lumpsum or in installments. Health
insurance usually provides either direct payment or reimbursement for expenses
associated with illnesses & injuries. The cost & range of protection provided by Health
insurance depends on the insurance provider & the policy purchased. There are many
health concerns including the following which accentuate the demand for health
insurance:

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 Environment pollution is causing serious health problems to humans.

 The fast spreading AIDS, poisonous gases, various wastes including nuclear
waste generated by the people are seriously endangering the life on earth.
 A person may face serious monetary problems for the medical treatment &
hospitalizations during life.
Nowadays, most companies give the benefit of health insurance to its
employees.
Health insurance is a part of a larger business set-up and tends to remain a loss
leader in the initial stages and can become viable only in urban context with large-scale
risk pooling and effective demand. These experiments do not convey in full measure the
potential of insurance to risk pooling, community rating and controlled administrative
costs, limited exclusions and co-payments. Health insurance properly developed and
regulated can act as a bridge between patients and providers balancing quality care at
reasonable costs with an effective and accountable health care. We need big players as
insurers with staying power and competence to deal with large risk pooling and
innovative product. In this article, therefore, the author analyses various issues
concerning health insurance in India

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OBJECTIVES OF THE STUDY

 To understand the position of health insurance in India

 To understand the different schemes of health insurance provided by different

companies.

 To find out the future of Insurance sector in India

RESEARCH METHODOLOGY

To be able to estimate the reliability of a report, the methods which it is based

upon have to be considered. Hence, this third chapter, methodology, will give the reader
an insight into my research process, selection and data collection.

Data Collection :

My work began with a literature study, followed by preparation for my data

collection. My data collection included the detail about various health insurance
companies and their schemes, which I analyzed. I drew conclusions from the analysis
which gave me an answer to our purpose. The different steps are separately presented
below under corresponding headlines.

Limitations

 The study is confined to limited period.

 Accuracy of the study is purely based on the secondary data.

 The analysis and conclusion made by me as per my limited understanding and

there may be something variation in the actual situation.

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Why Health Insurance

Health is a human right, which has also been accepted in the constitution. Its
accessibility and affordability has to be insured. While the well-to-do segment of the
population both in rural & urban areas have acceptability and affordability to wards
medical care, at the same time cannot be said about the people who belong to poor
segment of the society. It is well known that more then 75% of the population utilizes
private sectors for medical care unfortunately medical care becoming costlier day by day
and it has become almost out of reach of the poor people. Today there is need for
injection of substantial resources in the health sectors to ensure affordability of medical
care to all. Health insurance is an important option, which needs to be considered by the
policy makers and planners.
 Recognition as an industry: In the mid 80's, the healthcare sector was
recognized as an industry. Hence it became possible to get long term funding from
the Financial Institutions. The Government also reduced the import duty on medical

equipments and technology.

 Socio Economic changes: The rise of literacy rate, higher levels of income and
increasing awareness through deep penetration of media channels, contributed to
greater attention being paid to health. With the rise in the system of nuclear families,
it became necessary for regular health check-ups and increase in health expenses.
 Brand Development: Many family-run business houses, have set-up charity
hospitals. By lending their name to the hospital, they develop a good image in the
market, which further improves the brand image of products from their other
businesses.
HEALTH SECTOR IN INDIA
Till now, in India, the health sector i.e. the primary health care system has been
managed mainly by the shallow structure of government health-care facilities and other
public health care systems in a traditional model of health funding and provision. But, it
is unable to justify the demand for health security by over 200 million of the health
insurable population in India, mainly due to service costs being out of reach of many

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people, absence of good and effective number of physicians, low rate of education
programs, less number of hospitals, poor medical equipment and over all, the poor budget
of government towards the health program. Even Social insurance schemes available in
India, such as the Employee State insurance Scheme (ESIS) and Central Government
Health Scheme (CGHS) have restricted coverage to a very small segment of the
population, around 3 per cent.
The market is already seeing a rise in number of players and in making insurance
products, new companies will have to adopt systems which factor in all potential risks. In
such a scenario, it’ll be difficult to say what will be the differentiator across the different
Players — products, pricing or service?
There is also the case of the neglected health insurance sector. Will there be more
players venturing into this sector? The poor health scenario in India does offer a gamut of
options for new players.
This paper looks at the opening of the insurance sector and its implications with
specific reference to the health insurance sector, the current scenario, future positions,
Bottle necks that could be faced, future growth potentials and comparisons with similar
South Asian countries which also have economies which are opening up.
Determinants of Viable Health Insurance
Similar studies on the effect of community risk sharing in health care in Rwanda,
India and Thailand have been undertaken by different research institutes. These studies as
well as the Senegal case have been selected as part of the work of the Commission on
Macroeconomics and Health of the World Health Organisations. This commission
examines the interrelations among investment in health, economic growth, and poverty
reduction. All the studies are based on household surveys on the effect of community
financing schemes (CF schemes) and have used the same methodology for data analysis.
The following points summarize important findings of the different studies with respect
to the design of the schemes:
 Flexibility in Paying Procedure
In Rwanda the households who could not afford to pay the premium in one bit,
were allowed to pay in installments to a tontine before joining a pre-payment scheme. In
addition, church based groups collected fees for the indigent, disabled, orphans etc. The

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paying of contributions by charitable organizations has also be reported in the Senegal

study, which has given otherwise excluded people the chance to participate in the
mutuals. Some mutual even start collective activities from which they use some of the
earnings to pay membership fees.
Another example for a possible source of financing is organizing a tombola or
lottery. In conclusion there are various possibilities to adapt paying procedures to the
local level requirements. In this context, the role of the state also needs to be explored
e.g. the possibilities for demand targeted subsidies
 Experience in Social Protection and Community Participation
Community financing schemes (CF schemes) are often set up by voluntary, non-
profit oriented organizations. These organizations act as an insurance broker between the
interest of a health care provider and the expectations and needs of their members. To
deal with these ambiguities is of major importance and requires trained personal. In this
context it must be stressed that the administrative procedure for handling claims should
be as simple and transparent as possible. The SEWA example but also other experiences
(e.g. Grameen Bank in Bangladesh) shows that mutual insurance schemes are likely to
perform better, when they are linked to an organization which already has experience in
the field of financial services and social protection.
 Existence of a Viable Health Care Provider
The success or failure of health insurance schemes is largely dependent on the
existence of a viable health care providers, e.g. to the hospital that offers services to the
insured. Decisions taken by the health care provider have an impact on mobilizing
demand for CF schemes as well as on the financial balance of the scheme. The
Senegalese case study was enlightening in that respect: From the beginning of the mutual
health organization movement, it has been supported by the hospital St. Jean de Dieu.
The administration of the hospital had recognized that their ultimate target group – the
poor – couldn’t pay their fees, but it was also not possible for the hospital to allow for a
general exception of fees for the poor. The creation of mutual health organization allowed
to directly targeting their clientele in a cost effective manner. Beside the financial support
which the hospital gives to the mutuals an equal important point is the well recognized
quality of care. The delivery of services with high quality is a very important point for

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mobilizing demand in the mid to long run. In some settings it will even not be possible to
set up a viable insurance scheme and mobilize demand before quality of care is not
improved, because if people feel that they will get no “value for money” at the hospitals
or health posts, they would be unwilling to pay premiums.
 Community and Household Characteristics
The demand for health insurance is a crucial factor if the benefits expected from
community financing schemes are to be realized. The demand of households for health
insurance depends not only on the quality of care offered by the health care provider, on
the premium and benefit package, but also on socio-economic and cultural characteristics
of households and communities. Widespread absolute poverty among potential members
can be a serious obstacle to the implementation of insurance. This argument was
frequently put forward from non-members in Senegal. If people are struggling for
survival every day, they are less willing to pay insurance premiums in advance in order to
use services at a later point in time. Social exclusion may persist even if barriers to access
are reduced for part of the population, and exemption mechanisms for the poorest or
sliding scales for premiums that might be a remedy are not easy to implement. After or
before the introduction of health insurance, rising incomes, that may be brought about by
development projects, can be necessary to attract members and realize the potential
benefits of CF. SEWA’s activities in this direction are a good example.

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Health Insurance Schemes:

Based on ownership the existing health schemes can be broadly divided into
following categories:-
 Government or state-board systems (including CGHS & ESIS)
 Market-based systems (Private & Voluntary).
 Employer provided insurance systems.
Government/State Based Systems:
The best documented &target system of health care delivery in India is the diverse
network of hospitals, primary health centre, community health centre, dispensaries &
speciality facilities financed & managed by the central & 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 & child
health programmes & speciality disease prevention programmes these public facilities
carry out a central role in India’s primary health care system studies have shown that
these facilities are mostly under funded, understaffed & short of drugs & essential
supplies & that they sometimes suffer from low morale & inadequate motivation.
The health facilities made available to the public are managed & operated under
the authority of central & state agencies. The state government mostly own & manage the
public sector delivery system & have to bear the costs of operation. But the central
government plays a major role in the planning, financing & transfer of resources that
determine new investment in health facilities & specialized programmes. Much of the
funding for health facilities originates from the Union Ministry & family Welfare & is
channeled to the state governments, which retain considerable authority for the spending
decisions. Virtually all decisions are made by the central & state government-including
the staffing & supply decisions, with little & autonomy for providers of health care at
lower levels. Over the years, the central government has 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 returning hospitals. This system has added to
overall inefficiency of public health facilities.

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Central Government Health Scheme:

The Central Government Health Scheme (CGHS) was introduced in 1954 as
contributory health scheme to provide comprehensive medical care to the central
government employees & their families. It was basically designed to replace the
cumbersome & expensive system of reimbursements (Ministry of Health & 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 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 & some other facilities.
The list of beneficiaries includes all categories of current as well as former
government employees, members of parliament & so on. Since the large central but
bureaucracy India definitely belongs to the middle-income & high –income categories,
they are likely to make above-average use of health services. The CGHS has been in the
recent past, widely criticized from the point of view of quality & accessibility.
Employees State Insurance Scheme:
Established in 1948, the Employees State Insurance Scheme (ESIS), an insurance
system which provides both the cash & the medical benefits. It is managed by the
Employees State Insurance Scheme (ESIS), a wholly government-owned enterprise it
was conceived as a compulsory social security benefit for workers in the formal sector.
The original legislation creating the scheme allows it to cover only factories which have
been “using power” & employing ten or more workers. However, since 1989 the scheme
has been expended, & it knows includes all such factories which are “not using power” &
employing 20or more persons. Mines are explicit excluded from coverage under the ESIS
act.

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Types of Health Care Insurance Available:

 Medical Insurance
 Critical Illness Insurance
Leading insurance companies are coming out with new plans to meet the
requirements of their customers; health care insurance plans especially target customers
in the higher age group. It is necessary for younger people to start planning for their
future after they retire, at an early age, so as to lead a financially stable life in later years

Medical Insurance
Medical insurance in India is gaining such a high trend that policies are out even
for infants. It is the buffer against medical emergencies. These covers is a hospitalisation
cover and reimburse the medical expenses incurred in respect of covered disease /surgery
while the insured was admitted in the hospital as an in patient
Different types of Medical Insurance are available here:
 Individual Medical Insurance
 Group Medical Insurance
 Overseas Medical Insurance
Calculation of Medical Insurance Amount/Premium:
The amount of premium depends on the sum insured (amount of coverage) age of
the member and also if one is taking an individual or a group Insurance. Premium can be
paid on a monthly/quarterly/half yearly/ yearly basis. Amount also depends on the
company policies of the insured.

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Medical Insurance Claim Procedure:

 An individual has a fill and submit the claim form to the insurer
 A claim representative, so appointed, analyses the expenses incurred
 After submission of the medical expenses report, the claim is cleared within 7-15
days. The number of days may vary from company to company

Documents Required for Medical Insurance Claim:

1. Hospital/doctor report
2. Memo of expenses incurred
3. Salary Slip

Critical Illness Insurance

Critical Illness Insurance provides for payment of amount equal to sum assured, if
illness strikes, irrespective of expenses incurred on treatment. Most insurance companies
are providing this insurance as an addition to the life insurance; additional premium
payable for critical illness. It is introduced as a value addition to meet the demands and
also as marketing strategy. The insurance covers surgery cost, critical illness cover and
post-hospitalisation. The insurance is different in paying only for prolonged
hospitalisation. One of the unique features of this insurance is that a lump sum allowance
is paid irrespective of the actual medical expenses.

Calculation of Critical Illness Insurance Amount/Premium:

The amount of premium depends on the insurance of the insurance company.

Sometimes life insurance companies charge extra premium for the insurance, which is an
add on to the LIP. Premium is generally paid on a yearly basis.

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Critical Illness Insurance Claim Procedure:

Insurance holders can make multiple claims till their lifetime cover is exhausted.
The company pays a lumpsum amount as claims irrespective of the actual expenses, as
against a medical insurance, which is only reimbursement insurance. The claim should be
reported to the insurers, who in turn will appoint a surveyor. Surveyor will check the
necessary documents and analyse the extent of damage. The claim process takes
anywhere from 7-21 days.

Documents Required for Critical Illness Insurance Claim:

1. Copy of FIR (If any)
2. Medical Certificate & details of medical expenses & disability certificate
3. Leave certificate from employer
4. Duly filled Claim Form
5. Salary Certificate from employer.

Medicare
Medicare is the Federal health insurance program for Americans age 65 and older
and for certain disabled Americans. If you are eligible for Social Security or Railroad
Retirement benefits and are age 65, you and your spouse automatically qualify for
Medicare.
Medicare has two parts: hospital insurance, known as Part A, and supplementary
medical insurance, known as Part B, which provides payments for doctors and related
services and supplies ordered by the doctor. If you are eligible for Medicare, Part A is
free, but you must pay a premium for Part B.
Medicare will pay for many of your health care expenses, but not all of them. In
particular, Medicare does not cover most nursing home care, long-term care services in
the home, or prescription drugs. There are also special rules on when Medicare pays your
bills that apply if you have employer group health insurance coverage through your own
job or the employment of a spouse.

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Some people who are covered by Medicare buy private insurance, called
"Medigap" policies, to pay the medical bills that Medicare doesn't cover. Some Medigap
policies cover Medicare's deductibles; most pay the coinsurance amount. Some also pay
for health services not covered by Medicare. There are 10 standard plans from which you
can choose. (Some States may have fewer than 10.) If you buy a Medigap policy, make
sure you do not purchase more than one.
Medicaid
Medicaid provides health care coverage for some low-income people who cannot
afford it. This includes people who are eligible because they are aged, blind, or disabled
or certain people in families with dependent children. Medicaid is a Federal program that
is operated by the States, and each State decides who is eligible and the scope of health
services offered.
Disability Insurance
Disability insurance replaces income you lose if you have a long-term illness or
injury and cannot work. This is an important type of coverage for working-age people to
consider. Disability insurance does not cover the cost of rehabilitation if you are injured.
Check your major medical insurance to see if it is covered there.
Hospital Indemnity Insurance
This insurance offers limited coverage. It pays a fixed amount for each day, up to
a maximum number of days. You may use it for medical or other expenses. Usually, the
amount you receive will be less than the cost of a hospital stay.
Some hospital indemnity policies will pay the specified daily amount even if you have
other health insurance. Others may coordinate benefits, so that the money you receive
does not equal more than 100 percent of the hospital bill.
Long-Term Care Insurance
Long-term care insurance is designed to cover the costs of nursing home care,
which can be several thousand dollars each month. Long-term care is usually not covered
by health insurance except in a very limited way. Medicare covers very few long-term
care expenses. There are many plans and they vary in costs and services covered, each
with its own limits.

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Individual Insurance

If your employer does not offer group insurance, or if the insurance offered is
very limited, you can buy an individual policy. You can get fee-for-service, HMO, or
PPO protection. But you should compare your options and shop carefully because
coverage and costs vary from company to company. Individual plans may not offer
benefits as broad as those in group plans.

Before you buy any health insurance policy, make sure you know what it will pay
for...and what it won't. To find out about individual health insurance plans, you can call
insurance companies, HMOs, and PPOs in your community, or speak to the agent who
handles your car or house insurance.

Tips when shopping for individual insurance:

 Shop carefully. Policies differ widely in coverage and cost. Contact different
insurance companies, or ask your agent to show you policies from several insurers
so you can compare them.
 Make sure the policy protects you from large medical costs.
 Read and understand the policy. Make sure it provides the kind of coverage that's
right for you. You don't want unpleasant surprises when you're sick or in the
hospital.
 Check to see that the policy states: the date that the policy will begin paying
(some have a waiting period before coverage begins), and what is covered or
excluded from coverage.
 Make sure there is a "free look" clause. Most companies give you at least 10 days
to look over your policy after you receive it. If you decide it is not for you, you
can return it and have your premium refunded.
 Beware of single disease insurance policies. There are some polices that offer
protection for only one disease, such as cancer. If you already have health
insurance, your regular plan probably already provides all the coverage you need.
Check to see what protection you have before buying any more insurance.

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Group Insurance
Most Americans get health insurance through their jobs or are covered because a
family member has insurance at work. This is called group insurance. Group insurance is
generally the least expensive kind. In many cases, the employer pays part or all of the
cost.
Some employers offer only one health insurance plan. Some offer a choice of
plans: a fee-for-service plan, a health maintenance organization (HMO), or a preferred
provider organization (PPO), for example. Explanations of fee-for-service plans, HMOs,
and PPOs are provided in the section called Types of Insurance.
What happens if you or your family member leaves the job? You will lose your
employer-supported group coverage. It may be possible to keep the same policy, but you
will have to pay for it yourself. This will certainly cost you more than group coverage for
the same, or less, protection.
A Federal law makes it possible for most people to continue their group health
coverage for a period of time. Called COBRA (for the Consolidated Omnibus Budget
Reconciliation Act of 1985), the law requires that if you work for a business of 20 or
more employees and leave your job or are laid off, you can continue to get health
coverage for at least 18 months. You will be charged a higher premium than when you
were working.
You also will be able to get insurance under COBRA if your spouse was covered
but now you are widowed or divorced. If you were covered under your parents' group
plan while you were in school, you also can continue in the plan for up to 18 months
under COBRA until you find a job that offers you your own health insurance.
Not all employers offer health insurance. You might find this to be the case with
your job, especially if you work for a small business or work part-time. If your employer
does not offer health insurance, you might be able to get group insurance through
membership in a labor union, professional association, club, or other organization. Many
organizations offer health insurance plans to members.

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What types of group health insurance plans are available?

Group health insurance plans are categorized as either indemnity plans (also
known as "traditional indemnity," "fee-for-service," or "FFS" plans) or managed care
plans. Indemnity and managed care plans differ in their basic approach. Put broadly, the
major differences concern choice of providers, out-of-pocket costs for covered services,
and how bills are paid. You will typically have a broader choice of doctors (including
specialists, such as cardiologists and surgeons), hospitals, and other health care providers
with an indemnity plan while you will typically have less out-of-pocket costs and
paperwork with a managed care plan.
 

Indemnity plans once dominated the American health insurance market, but are
no longer as popular as they used to be. They are most common on the east coast.
Managed care plans now take up a much larger share of the general health insurance
market and are especially dominant in the western parts of the country. There are three
basic types of managed care plans: PPOs, HMOs, and POS plans

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HEALTH FINANCING
Health care financing in India:
 The share of public financing in total health care is just about 1% of GDP
compared to 2.8% in other developing countries.
 Beneficiaries are both poor as well as well-fed section of society.
 Over 80% of total health financing is private financing, much of which is out-of-
pocket payments (i.e. User charges) & not any prepayment schemes.
 Access to health care service providers and availability of physicians is one part
of the issue
 Financing for health care is the
 other aspect of the issue
 Public spending in health care is very low at 17% and the National Health Policy
has recognized this
 More than 86% of healthcare financing is through unplanned for, non-
contributory spending.
Health care spend in India is considerably lower than that in other countries
2004 US UK MEXICO BRAZIL CHINA INDIA
Life expectancy 77.4 78.3 72.6 71.4 72.5 64.0
(Avg of years)
Of Physicians 2.7 1.9 1.7 1.2 1.7 0.4
Per 1,000people
Health care spend 5,365 3,036 336 236 62 32
(USD per capita)
Health care spend 13.2 8.4 5.5 7.5 5.0 5.3
(% of GDP)
The experience of different countries suggests that private insurance has important role to
play in overall health care.
 Private health insurance has increased service capacity & supply by injecting
financial resources up front E.g.: In US, private health insurance has financed
health insurance in terms of doctor facilities through the HMO set-up
 Private health insurance increases choice (provider, benefits, cost-sharing) for the
individual E.g.: In Australia, private insurance offer the option to access to spare
capacity & elective care in non-public institutions.

The proportion of insurance in health care financing in India is extremely low

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Health care financing in India 2002 %

100%

83%
from
private 86%
sector from
spendin out-of-
g pocket
expense
s

0%
Sources of finance Means of finance

The key issue related to financing of health care in India revolves around the lack of
adequate insurance
 Limited Coverage
 Only around 10% of the population is covered through health financing
schemes.
 Geographic spread in terms of health care facilities & financing awareness
is limited.
 Selection criteria by suppliers often restricts the poor (& more likely to be
ill) from affordable pre-payment scheme.

 Moral hazard & Adverse selection

 Claims ratios for mediclaim 7 Jan Arogya policies has been in the range of
120-130%

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Social Security:
The Social Security Disability (SSD) program is one of our government’s best
kept secrets. Social Security is an involuntary national insurance policy. A certain amount
of money is taken out of your pay check every week (your FICA taxes) to cover benefit
payments and Medicare when you reach retirement age, or if you become disabled.
Almost everyone knows about the retirement function, and it’s one of the better run
government programs. Almost nobody knows about the disability function of Social
Security. And the government isn’t doing anything to tell you about its secret.
Let’s make this clear right now: If you work long enough at a job which is covered by
Social Security and you become disabled you are probably eligible for Social Security
Disability (SSD) benefits.

According to the Social Security Administration, a “Disability” can be physical or

emotional, or some combination of both. In order to win benefits you must have a
disability severe enough to keep you from working in any regular paying job for at least
12 consecutive months.

Advantages of social security

1) Increased Monthly Income

2) Increased Retirement and Survivors Benefits

3) Tax-Free Income

4) Medicare Coverage

5) Vocational Rehabilitation and Return-To-Work Incentives

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Current Policies Available In Market and the Major Players

When talking of health insurance in India, the first name that comes to mind is
mediclaim, which is GIC’s health insurance policy and has been the only policy of any
real note in the country even though it may seem unattractive to any person who has been
used to a comprehensive health insurance policy. As of now there are only two players in
this field, Life Insurance Corporation and the General Insurance Corporation (with its
four subsidiaries.) Mediclaim is the health insurance scheme offered by GIC and Jeevan
Asha is the health insurance scheme offered by LIC.
The General Insurance Corporation (GIC) was formed by a Legislative Act; it is a
merger of more than a hundred private companies. It was then regrouped into the 4
subsidiaries of GIC: National Insurance Company, New India Assurance Company,
Oriental Insurance Company, and United India Insurance Company. The opening up of
the sector has, however, brought in a lot of new players: With the markets of Developed
countries nearing saturation, insurers are looking at the world’s emerging markets. These
developing economies comprise 84% of world population and 22% of global GDP but
only 9% of world insurance. On the other hand is the global insurance market,
concentrated mainly in North America, Western Europe, Japan and Oceania- containing
91% of world’s annual premium collection? Since the gestation period of the typical
insurance business is around ten years, it is high time for foreign insurers to make their
presence felt in India.
The new players will have to prove their creditworthiness. It will be a tedious and
difficult task to woo customers away from LIC and gain their trust. Their previous track
record and brand value in overseas market will not help them much in getting immediate
brand recognition in India. Though they may piggyback on the brand names of their local
partner, in the long run, it is their persistent track record and creditworthiness, which will
matter. So, being among the first will be a major deciding factor to achieve success in this
business. Already several companies have entered into the market and a dozen companies
have joined with foreign partners. The real growth in the twenty-first century will come
from countries like India and China. Delay may doom future efforts to stake a claim in
these high potential markets.

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The Current Scenario:

Most of the foreign Companies entering India have decided to focus on life
insurance rather than health insurance per se. Though there are companies like Bajaj
Alliance, which has launched a mediclaim policy with cashless claim facility. The
insured under this policy can avail of cashless treatment from 41 hospitals across the
country to the extent of sum insured and for ailments that are covered.
The major advantage is that under such plans, the policyholder is not required to
settle his hospital bills upfront and then make a claim with the insurer. Instead, the
insurer settles the hospital bills on behalf of the policyholder, who can leave for home
without paying. It's a precursor to the formal transition to a third-party administrator
regime, which provides hassle-free health insurance and also standardizes medical
diagnostic procedures and hospitalization expenses.
This is something that is missing in the present day Mediclaim policy of GIC,
which requires you to make the payments for hospital expenses and then submit the bill
to the insurance company and wait to get reimbursed which itself may take time due to
the bureaucratic procedures involved.
0% 5% 10% 15% 20% 25% 30% 35%
USA Japan UK Germany France
The 5 Biggest Insurance Markets In 1999, In Percent. Composition Of The Global
Insurance Market In 1999
Life 61%
Non-Life 39%

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Health Insurance Is Necessary; But Who Will Develop It For The Poor?

Like you, we are aware of the huge need to bolster health insurance in India. A
growing number of private health insurers sell insurance to wealthy individuals. And the
government of India is motivated to look for solutions to encourage health insurance for
the poor, in pursuit of breaking the vicious cycle of poverty -> ill health -> poverty.
For the time being, most poor Indians are unable to pay the cost of healthcare to
heal their illnesses, and they must rely on themselves alone when paying the direct and
indirect cost of illness. In some cases, individuals can get limited help from their
community, as some groups have started “micro health insurance” units, which offer
rudimentary pre-payment solutions. Can micro health insurance units serve as an
effective instrument in insuring the poor? The project “Strengthening Micro Health
Insurance Units for the Poor in India” intends to provide new evidence-based reasoning
how the stability and efficiency of schemes in place can be increased, and pave the way
for the establishment of new schemes.
Health Insurance for the Rural Poor?
For most people living in developing countries “health insurance” is an unknown
word. It is generally assumed that, with the exception of the upper classes, people cannot
afford such type of social protection. This is a pity as also poor people demand protection
against the financial consequences of illnesses. For most people living in poor developing
countries illness still represents a permanent threat to their income earning capacity.
Beside the direct costs for treatment and drugs, indirect costs for the missing labor force
of the ill and the occupying person have to be shouldered by the household.
Health insurance schemes are an increasingly recognized factor as a tool to
finance health care provision in low income countries. Given the high latent demand from
people for health care services of a good quality and the extreme under-utilization of
health services in several countries, it has been argued that social health insurance may
improve the access to health care of acceptable quality. Whereas alternative forms of
health care financing and cost recovery strategies like user fees have been heavily
criticized, the option of insurance seems to be a promising alternative as it is a possibility
to pool risk transferring, unforeseeable health care costs to fixed premiums. Recently,

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mainly in Sub-Saharan Africa but also in a variety of other countries, non-profit, mutual,
community-based health insurance schemes have emerged. These schemes are
characterized by an ethic of mutual aid, solidarity and the collective pooling of health
risks. In several countries these schemes operate in conjunction with health care
providers, mainly hospitals in the area.
Against this background the Center for Development Research (ZEF-Bonn)
analyses within his research program on social security systems in rural areas the
prospects and limitations of innovative health insurance schemes. In close collaboration
with national research institutes empirical studies are currently being carried out in
Ethiopia, China, Ghana, India, Senegal and Tanzania. The aim of these projects is to
estimate demand for health care and health insurance, quantify economic and social
impacts, as well as identifying factors of success and failure. The studies focus on rural
areas because here the need for insurance is especially, but private insurance markets do
not exist and public measures often fail to reach their target population.
Impact on the Poor
Developments on the health insurance front will not leave the poor unaffected.
Even though private for-profit insurance companies are not expected to voluntarily
provide health insurance cover to the poor, the poor may still be affected on account of
the influence that development of health insurance will have on the supply of such
services. Furthermore, the poor may also directly benefit if insurance regulations are
specifically designed to achieve redistribution and equity objectives. At the minimum the
government must ensure that (i) the liberalisation of insurance market provides value for
money for the direct beneficiaries (ii) the poor are not adversely affected by the
liberalisation (Peters et al. 2000). However, the government can definitely aim higher by
ensuring that the poor too benefit from the developments in health insurance.
The likely impact of developing voluntary insurance on the poor is far from clear. There
are both potential benefits and risks associated with it. Development of health insurance
would influence supply of health services both in terms of its quality and price. It would
also influence the extent of public funds available for subsidising the poor. The potential
benefits and risks are formally listed below:

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Potential Benefits:
 If the introduction of evidence-based medicine trickles down to other providers
that are used more often by the poor, the poor could benefit from the

improvement in quality in the private sector.

 If public subsidy to the non-poor who join health insurance decreases, greater
public resources may be available for providing subsidy to the poor

Potential Risks:
This section is based on the findings and recommendation made during the World
Bank organized national seminar on private health insurance in November 1999. These
are reported in Ferreiro (2000), Peters, D. et al. [a] and Peters, D. et al. [b].
 The gap between the poor access at present and the required access may increase
with cost escalation;
 As the non-poor make a switchover from public to private hospitals there is a risk
of political support for public financing getting reduced which would impact the
poor by excluding them quality care from private market or by deteriorating
quality and weakening support for public services (Peters et al. 2002)
The poor might benefit from the expansion of private providers if the supply of health
care expands due to increase in affordability resulting from health insurance. However, if
prices grow faster than delivery capacity, cost escalation may even expand the existing
gap between the poor and the required access to health care. All this is unpredictable,
since it depends on the supply response of health care and the model of health insurance
implemented in the country. Regarding the latter, it is clear that an Indemnity/fee-for-
service system will unavoidably result in a severe cost escalation whereas a managed care
which coordinates financing and delivery of healthcare would probably be capable of
maintaining costs under control. Managed care by containing of unnecessary treatment
helps in containment of costs and thereby makes health insurance more affordable to
larger number of people; provides incentives for improving healthcare delivery; promotes
preventive care such as medical check ups, immunisation and so on. Since fee-for-service
approach to payment of health providers tends to escalate costs the government should
encourage managed care models.

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Health Sector Financing in Context of Women’s Health

In the last decade or so the health of women has been receiving special attention
the world over. From the Nairobi UN Conference, through the Cairo ICPD and to the
recently concluded Beijing Conference, health and health care of women has been an
important agenda item which has taken a growing share of attention, and especially so
reproductive health. And it is here where the catch lies. While recognising the importance
of reproductive health, especially in a country like India which still has relatively high
fertility, overwhelming proportion of deliveries being conducted at homes, often under
unhygienic conditions, a supposed unconcern for gynecological morbidities and an
embarrassingly high proportion of abortions being done illegally, it is even more
important to emphasis the need for making available comprehensive health services to
all, and especially to women as a group for their special needs. The danger of beginning
with reproductive health is narrowing down the focus to the uterus, precisely what the
women's health movements want to avoid. And pushing for making reproductive health a
special program under the State's primary health care program would end up the same
way in which earlier versions of health programs of women like the MCH program or
safe-motherhood have ended - targets for population control programs, and especially
hazardous contraceptives like injectables and implants.
Thus the demand must begin with provision of easily accessible and free of
cost comprehensive health care for all, with a clear recognition and provision for the
special needs of women, as well as for other vulnerable groups like children, senior
citizens, tribals etc. Natural and social justice demands that society must provide for a
basic decent human life. This becomes even more imminent in countries where poverty is
rampant but it is precisely in such countries where social provisions, like health,
education, housing, public transportation and other public utilities, are not available to a
large majority of the population.

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SUGGESTIONS AND RECCOMENDATIONS

Health insurance is like a knife. In the surgeon’s hand it can save the patient, while in the
hands of the quack, it can kill. Health insurance is going to develop rapidly in future. The
main challenge is to see that it benefits the poor and the weak in terms of better coverage
and health services at lower costs without negative aspects of cost increase and overuse
of procedures and technology in provision of health care.

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

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CONCLUSION:
Health insurance is a emerging important financial tool in meeting health care needs of
the people in India.

Exponential rise in the cost of delivery of healthcare services, price competition, market
realignment are the major factors that are forcing hospitals to scrutinize their business
processes and to redesign them in a manner that would not only help to keep the prices
competitive but also help in delivering quality care to the patients.

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BIBLIOGRAPHY

Gumber A., Kulkarni V. 2000. Health Insurance for Informal Sector: Case Study of
Gujarat. Economic and Political Weekly, Sep. 30.
Dholakia R. Economic reforms: Implications for Health Insurance. Presentation at
One day workshop on 'Health Insurance in India'. Indian Institute of
Management, Ahmedabad. Oct. 30, 1999.
Ellis RP., Alam M, Gupta I. 1996 Health Insurance in India: Prognosis and
Prospectus. Boston University: Boston and Institute of Economic
Growth: Delhi. December 18.
IIMA 1999. Indian Institute of Management, Ahmedabad. Report of the one day
workshop on 'Health Insurance in India'. Oct. 30, 1999.
WHO statistics
IRDA journals
Directorate General of Health services
Health Policy Challenges for India: Private Health Insurance and Lessons from the
international Experience by Ajay Mahal
Health Insurance in India by Sujatha Rao

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