Neha BK

Health Insurance
Chapter 1
Introduction
Vivekanand Education Society of Arts, Science & Commerce.

Health Insurance
Health insurance
Health insurance (sometimes called health coverage) pays for some or all of the cost of the
health services you receive, like doctors’ visits, hospital stays, and visits to the emergency
room. It helps keep your health care costs predictable and affordable. You may have to pay
several different amounts for health insurance:
1. You will generally pay a premium, a monthly fixed payment to the insurance company.
2. You may have to pay a deductible. This is a fixed amount that you pay out of pocket
before your health insurance begins to pay for your health services.
3. After you have met the deductible, you and your insurance company typically share the
cost of covered health services. Your insurance pays most of the cost first, and then you
pay the remaining cost. The amount that you pay is either a copayment (a fixed amount)
or a coinsurance (a percentage of the cost of the service).
What is Health insurance
Health insurance is a financial tool that provides financial coverage for medical expenses. A
health insurance policy is a contract between the insurance company and an individual. The
individual pays a premium to the insurer and the insurer offers financial protection against
healthcare expenses to the individual in return.
Health insurance covers wide-ranging medical expenses like the cost of medicines, surgery,
doctor's consultations, room rent, ambulance charges and more.

Health Insurance
Benefits of Health Insurance
Below are some benefits of health insurance plans:
Helps Deal With Rising Medical Costs
Medical inflation can make it challenging for you to cover healthcare expenses out of your
pocket. Health insurance offers you access to necessary medical care without the financial
burden of rising costs. You can rely on health insurance for pre and post-hospitalisation
expenses, surgery, doctor's fees, diagnostic tests, prescription medications and more.
Critical Illness Cover
Apart from basic healthcare expenses, health insurance also covers critical illnesses, such as
cancer, health diseases, kidney ailments and more. These illnesses can require long-term
medical care and burden you with high costs. Health insurance can be suitable to deal with
these expenses so you can focus on your treatment and recovery.
Easy Cashless Claims
Health insurance is a convenient tool that prioritises your well-being in your hour of need.
You can avail of cashless claims without having to go through any lengthy claim procedures.
The insurance company settles the bills with the hospital on your behalf. This streamlined
process ensures you do not have to pay upfront and seek reimbursement later.
Added Protection
Health insurance offers additional financial protection with benefits like maternity and
newborn baby cover, preventative health check-ups and more. It provides you with a sense of
security and peace of mind with overall protection against multiple health expenses.
Tax Saving

Health Insurance
If you invest in health insurance, you can get deduction up to ₹ 25,000 under
Section 80D for yourself and your family (₹ 50,000 if the age of the insured is
60 years or above) and up to ₹ 25,000 (₹ 50,000 if the age of the insured is 60
years or above) for your parents.

Health Insurance

Health Insurance
About Insurance
Health insurance is different from other segments of the insurance business is more
intricate as serious conflicts arise out of adverse selection, moral hazard, and information gap
problems. For example, experiences from other countries suggest that the entry of private
firms into the health insurance sector, if not properly regulated, does have adverse
consequences for the costs of care, equity, consumer satisfaction, fraud, and ethical
standards.The IRDA would have a significant role in the regulation of this sector and
the responsibility to minimize the unintended consequences of this change. Health sector
policy
formulation, assessment, and implementation are extremely complex task especially in
a changing epidemiological, institutional, technological, and political scenario. Further, given
the institutional complexity of our health sector programmes and the pluralistic character of
health care providers, health sector reform strategies in the context of health insurance that
has evolved elsewhere may have very little suitability to our country's situation. Proper
understanding of the Indian health situation and application of the principles of insurance
keeping in view the social realities and national objectives are important. These words of
John F. Kennedy offer a ray of hope when we look at the health care system in a developing
country like India. Considerable progress has been made in improving the health of the
Indian population. This is ironic considering that India spends a huge share of its gross
domestic product on health and despite the ever-newsworthy growth of private health care
providers. India’s policy towards health has traditionally identities the provision of primary
health care as a government responsibility. This is mentioned in the report of the government
of India committee report of 1946 that in which says, “No individual should fail to
secure adequate medical care because of the inability to pay for it”. This is the responsibility
of the government to provide primary health care is a part of a large goal to create equity
society and also this provision stilted in the preamble and outlive principles of the
constitution of India. The Role of the central government has been limited to family welfare
and health care control programs. The policy has traditionally remained silent on the role of
the private sector in the provision of medical care. Health insurance has become a necessity
in today’s world. In this way, there are several reasons for an individual to have the
protection of health insurance of all the risks which an individual household faces, healthy
risk probably poses the greatest threat to lives and livelihoods. Everyone heeds medical care
sometimes and health falls with age.

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Objectives of the Study
The present study titled “Health Insurance in India – Opportunities and Challenges” has been
taken up with the following objectives:
1. To know the opportunities and challenges for health insurance in India.
2. To offer pertinent suggestions in the form of a conclusion for the growth of health
insurance in India.
Importance of Health Insurance
In the present corporate environment, where people are worried about achieving the targets,
they don’t get the time to look upon their health. Increasing work hours is also one of the
common reasons that lead to an increase in health issues. According to research, 46 percent
of the workforce in an organization is suffering from stress. It is also found that 43 percent of
the workforce with abnormal Body Mass Index is suffering from hypertension and diabetes.
Going for treatment will add-up the cost and have to bear and it thus becomes essential to buy
a health plan that can cover all the medical costs.
1. It gives medical security, such as an insured person gets quality treatment without any
financial anxiety and it makes medical treatment affordable and accessible.
2. It gives financial assistance at the time of medical emergency offers peace of mind
which helps insured individuals and their family members live their lives to a greater
extent.
3. A person gets access to several medical facilities on buying these products. One such
facility is cashless hospitalization, which permits the insured to seek quality

Health Insurance
healthcare in-network hospitals on a cashless basis. The other facility that has helped a
lot of people is a helpline.
4. It gives the insured access to medical experts on the phone call, to discuss any health
issues that they might be facing.
5. It makes medical checkup easy, as many plans that offer routine check-up to help the
insured stay healthy and get the disease if any diagnosed at the earliest. It has been
proven that the person who has health insurance is much healthier than a person who
does not have one.
It is observed from Table No.1.1 that India's health expenditure is increased only 14 percent
from the year 1995 to 2014 and compare to the other neighbor countries it is very nominal. It
shows the poor government vision on the health care sector.
Table No.1.1
Percentage of health expenditure in total GDP in the comparison between India and its
neighbor countries
Country Name 1995 2014

Afghanistan - 8.2
Bangladesh 3.2 2.8

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China 3.5 5.5
India 4.0 4.7
Bhutan 4.0 3.6
Nepal 5.3 5.8
Maldives 6.0 13.7
Role of Insurance Regulatory and Development Authority
The government has established the Insurance Regulatory and Development Authority
(IRDA) which is the statutory body for regulation of the whole insurance industry. They
would be granting licenses to private companies and will regulate the insurance business.
As health insurance is in its very early phase, the role of IRDA will be very crucial. They
have to ensure that the sector develops rapidly and the benefit of the insurance goes to the
consumers. But it has to guard against the ill effects of private insurance. Thus, checking
an increase in the costs of medical care will be a very important role of the IRDA.
Secondly, IRDA will need to evolve mechanisms by which it puts some kind of statue in
place that private insurance companies do not skim the market by focusing on rich and
upper- class clients and in the process neglect a major section of India's population. They
must ensure that companies develop products for such poorer segments of the community
and possibly build an element of cross-subsidy for them. Government companies can take the
lead in this matter and catalyze new products for the poor and lower middle class as they
have
done in the past.
Thirdly the regulators should also encourage NGOs, Co-operatives and other collectives to
enter into the health insurance business and develop products for the poor as well as for the
middle class employed in the services sector such as education, transportation, retailing, etc

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and the self-employed. This could be run as a no-profit-no loss basis similar to the scheme
pioneered by Indian Medical Association for its members. Special licenses will have to be
given to NGOs for this purpose without insisting on the minimum capital norms, which are
for commercial insurance companies.
Mediclaim scheme
The government insurance companies started first health insurance in 1986, under the
name Mediclaim. Mediclaim is a reimbursement base insurance for hospitalization. It does
not cover outpatient treatments. First, there is used to be category-wise ceilings on items
such as
medicine, room charges, operation charges, etc and later when the policies have revised these
ceilings were removed and total reimbursements were allowed within the limit of the policy
amount. The total limit for policy coverage was also increased. Now a person between 3
months to 80 years of age can be granted Mediclaim policy up to maximum coverage of
Rs. 5 lakh against accidental and sickness hospitalizations during the policy period as per the
latest guidelines of General Insurance Corporation of India. The current statistics on health
insurance indicate that out of 1 billion populations only about 2 million of population is
covered by Mediclaim scheme. The reason for lack of popularity of this scheme could be
several. It is also reported that in the number of cases the applicants of older ages have been
refused to become a member of Mediclaim scheme due to unnecessary conservatism of the
companies. Mediclaim is the lack of appropriate marketing efforts in selling these products.
To make the scheme more acceptable government has exempted the premium paid by
individuals from their taxable income. This provides 20-40 per cent subsidy on the premium
to taxpayers.
Mediclaim has provided a model for health insurance for the middle class and the rich. It

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covers hospitalization costs, which could be catastrophic. But given the premium is on the
higher side it has remained limited to the middle class, urban taxpayers segment of the
population. There are also problems and negative unintended consequences of this scheme.
There are reported fraud and manipulation by clients and providers, which have implications
for the growth and development of this sector. The monitoring systems are weak and there
are chances that if the doctor and patient collude with each other, they can do more harm to
the system. All these effects will tend to increase the prices of private health care thus hurting
the uninsured.
Employee State Insurance (ESI) Scheme
Under the ESI Act, 1948 ESI Scheme provides protection to employees against loss of
wages due to inability to work due to sickness, maternity, disability and death due to
employment injury. It also provides medical care to employees and their family members
without fee for service. When implemented for the first time in India at two centers namely
Delhi and Kanpur simultaneously in February 1952, it covered about 1.2 lakh employees.
Presently the scheme is spread over 22 states and Union territories across India covering
91lakh employees and more than 350 lakh beneficiaries. The Act compulsorily covers: (a)
all power using non-seasonal factories employing 10 or more persons; (b) all non-power
using factories employing 20 or more employees and (c) service establishments like shops,
hotels restaurants, cinema, road transport, and newspapers are covered. ESIC is a corporate
semi-government body headed by Union Minister of Labour as Chairman and the
Director-General as chief executive. Its members are representatives of central and state
governments, employers, employees, the medical profession and parliament.
Reasons for poor penetration of Health Insurance

Health Insurance
Some reasons that explain for the slow expansion of health insurance in India are as follows:
1. Lack of regulations and control to promote health insurance products in society.
2. Lack of trained agents to aware and circulate the concept of health insurance in
society.
3. No availability of affordable premiums and high claim settlement.
4. The insurance agencies in the face of poor information also tend to overestimate
the risk and fix the high premium.
5. Patients also experience problems in getting their reimbursements including long
delays to partial reimbursement.
6. It is observed that lack of innovative products and enthusiasm in promoting health
insurance products in the society by health insurance companies in India.
7. In India, an insurance company does not have sill non-life as well as life insurance
products against fire or natural disaster or theft is for more profitable, insurance
companies tend to compete by adding low incentive such as premium health insurance
products to important clients, cross-subsidizing the resultant losses, to get the non-life
accounts, insurance companies tend to provide health insurance cover at unviable
premiums. Thus there is a total lack of any effort to promote health insurance through
campaigns regarding the benefits of health insurance and lack of innovation to market
the policies suitable to the needs of the people.
8. High prevalence levels of risks that could affect a majority of the people at the same
time could make the enterprise unviable as there would be no gains in forming large
pools. The result could be a higher premium.
History

Health Insurance
Health insurance or medical insurance (also known as medical aid in South Africa) is a type
of insurance that covers the whole or a part of the risk of a person incurring medical
expenses. As with other types of insurance, risk is shared among many individuals. By
estimating the overall risk of health risk and health system expenses over the risk pool, an
insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to
provide the money to pay for the health care benefits specified in the insurance agreement.[1]
The benefit is administered by a central organization, such as a government agency, private
business, or not-for-profit entity.
According to the Health Insurance Association of America, health insurance is defined as

"coverage that provides for the payments of benefits as a result of sickness or injury. It
includes insurance for losses from accident, medical expense, disability, or accidental death
and dismemberment
Background
A health insurance policy is:
1. A contract between an insurance provider (e.g. an insurance company or a government) and

an individual or his/her sponsor (that is an employer or a community organization). The
contract can be renewable (annually, monthly) or lifelong in the case of private insurance. It
can also be mandatory for all citizens in the case of national plans. The type and amount of
health care costs that will be covered by the health insurance provider are specified in
writing, in a member contract or "Evidence of Coverage" booklet for private insurance, or in
a national [health policy] for public insurance.
2. (US specific) In the U.S., there are two types of health insurance – tax payer-funded and
private-funded.[3] A private-funded insurance plan example includes an employer-sponsored
self-funded ERISA (Employee Retirement Income Security Act of 1974) plan. Typically,
these companies promote themselves as having ties to major insurance providers. However,
in the context of an ERISA plan, these insurance companies do not actively participate in
insurance practices; instead, they handle administrative tasks. Consequently, ERISA plans are
exempt from state regulations and fall under federal jurisdiction, overseen by the US
Department of Labor (USDOL). Specific details about benefits or coverage can be found in

Health Insurance
the Summary Plan Description (SPD). Should there be a need for an appeal, the process
typically involves initiating it through the insurance company and then reaching out to the
Employer's Plan Fiduciary. If a resolution is still not achieved, the decision can be escalated
to the USDOL for review to ensure compliance with ERISA regulations, and, if necessary,
legal action can be taken by filing a lawsuit in federal court.
The individual insured person's obligations may take several forms:[citation needed]
 Premium: The amount the policy-holder or their sponsor (e.g. an employer) pays to the health
plan to purchase health coverage. (US specific) According to the healthcare law, a premium
is calculated using 5 specific factors regarding the insured person. These factors are age,
location, tobacco use, individual vs. family enrollment, and which plan category the insured
chooses.[4] Under the Affordable Care Act, the government pays a tax credit to cover part of
the premium for persons who purchase private insurance through the Insurance Marketplace.
[5]: TS 4:03
 Deductible: The amount that the insured must pay out-of-pocket before the health insurer
pays its share. For example, policy-holders might have to pay a $7500 deductible per year,
before any of their health care is covered by the health insurer. It may take several doctor's
visits or prescription refills before the insured person reaches the deductible and the insurance
company starts to pay for care. Furthermore, most policies do not apply co-pays for doctor's
visits or prescriptions against your deductible.
 Co-payment: The amount that the insured person must pay out of pocket before the health
insurer pays for a particular visit or service. For example, an insured person might pay a $45
co-payment for a doctor's visit, or to obtain a prescription. A co-payment must be paid each
time a particular service is obtained.
 Coinsurance: Instead of, or in addition to, paying a fixed amount up front (a co-payment), the
co-insurance is a percentage of the total cost that an insured person may also pay. For
example, the member might have to pay 20% of the cost of a surgery over and above a co-
payment, while the insurance company pays the other 80%. If there is an upper limit on
coinsurance, the policy-holder could end up owing very little, or a great deal, depending on
the actual costs of the services they obtain.
 Exclusions: Not all services are covered. Billed items like use-and-throw, taxes, etc. are
excluded from admissible claim. The insured are generally expected to pay the full cost of
non-covered services out of their own pockets.

Health Insurance
 Coverage limits: Some health insurance policies only pay for health care up to a certain dollar
amount. The insured person may be expected to pay any charges in excess of the health plan's
maximum payment for a specific service. In addition, some insurance company schemes have
annual or lifetime coverage maxima. In these cases, the health plan will stop payment when
they reach the benefit maximum, and the policy-holder must pay all remaining costs.
 Out-of-pocket maximum: Similar to coverage limits, except that in this case, the insured
person's payment obligation ends when they reach the out-of-pocket maximum, and health
insurance pays all further covered costs. Out-of-pocket maximum can be limited to a specific
benefit category (such as prescription drugs) or can apply to all coverage provided during a
specific benefit year.
 Capitation: An amount paid by an insurer to a health care provider, for which the provider
agrees to treat all members of the insurer.
 In-Network Provider: (U.S. term) A health care provider on a list of providers preselected by
the insurer. The insurer will offer discounted coinsurance or co-payments, or additional
benefits, to a plan member to see an in-network provider. Generally, providers in network are
providers who have a contract with the insurer to accept rates further discounted from the
"usual and customary" charges the insurer pays to out-of-network providers.
 Out-of-Network Provider: A health care provider that has not contracted with the plan. If
using an out-of-network provider, the patient may have to pay full cost of the benefits and
services received from that provider. Even for emergency services, out-of-network providers
may bill patients for some additional costs associated.
 Prior Authorization: A certification or authorization that an insurer provides prior to medical

service occurring. Obtaining an authorization means that the insurer is obligated to pay for
the service, assuming it matches what was authorized. [disputed – discuss] Many smaller,
routine services do not require authorization.[6]
 Formulary: the list of drugs that an insurance plan agrees to cover.[7]
 Explanation of Benefits: A document that may be sent by an insurer to a patient explaining
what was covered for a medical service, and how payment amount and patient responsibility
amount were determined.[6] In the case of emergency room billing, patients are notified
within 30 days post service. Patients are rarely notified of the cost of emergency room
services in-person due to patient conditions and other logistics until receipt of this letter.[8]

Health Insurance
Prescription drug plans are a form of insurance offered through some health insurance plans.
In the U.S., the patient usually pays a copayment and the prescription drug insurance part or
all of the balance for drugs covered in the formulary of the plan.[5]: TS 2:21 Such plans are
routinely part of national health insurance programs. For example, in the province of Quebec,
Canada, prescription drug insurance is universally required as part of the public health
insurance plan, but may be purchased and administered either through private or group plans,
or through the public plan.[9]
Some, if not most, health care providers in the United States will agree to bill the insurance
company if patients are willing to sign an agreement that they will be responsible for the
amount that the insurance company does not pay. The insurance company pays out of
network providers according to "reasonable and customary" charges, which may be less than
the provider's usual fee. The provider may also have a separate contract with the insurer to
accept what amounts to a discounted rate or capitation to the provider's standard charges. It
generally costs the patient less to use an in-network provider.
Comparisons
The Commonwealth Fund, in its annual survey, "Mirror, Mirror on the Wall", compares the
performance of the health care systems in Australia, New Zealand, the United Kingdom,
Germany, Canada and the U.S. Its 2007 study found that, although the U.S. system is the
most expensive, it consistently under-performs compared to the other countries.[11] One
difference between the U.S. and the other countries in the study is that the U.S. is the only
country without universal health insurance coverage.

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Health Expenditure per capita

in PPP-(adjusted US$) among several OECD member nations
The Commonwealth Fund completed its thirteenth annual health policy survey in 2010.[13]
A study of the survey "found significant differences in access, cost burdens, and problems
with health insurance that are associated with insurance design".[13] Of the countries
surveyed, the results indicated that people in the United States had more out-of-pocket
expenses, more disputes with insurance companies than other countries, and more insurance
payments denied; paperwork was also higher although Germany had similarly high levels of
paperwork.[13]
Life Expectancy of the total

population at birth among several OECD member nations. Data source: OECD's iLibrary[12]
India

Health Insurance
In India, provision of health care services varies state-wise. Public health services are
prominent in most of the states, but due to inadequate resources and management, major
population opts for private health services.[citation needed]
To improve the awareness and better health care facilities, Insurance Regulatory and
Development Authority of India and The General Corporation of India runs health care
campaigns for the whole population. IN 2018, for under privileged citizens, Prime Minister
Narendra Modi announced the launch of a new public health insurance fund called
Ayushman Bharat Yojana and the government claims that the new system will try to reach
more than 500 million people.[citation needed]
In India, Health insurance is offered mainly in two Types:
Indemnity Plan basically covers the hospitalisation expenses and has subtypes like Individual
Insurance, Family Floater Insurance, Senior Citizen Insurance, Maternity Insurance, Group
Medical Insurance.
Fixed Benefit Plan pays a fixed amount for pre-decided diseases like critical illness, cancer,
heart disease, etc. It has also its sub types like Preventive Insurance, Critical illness and
Personal Accident.
Depending on the type of insurance and the company providing health insurance, coverage
includes pre-and post-hospitalisation charges, ambulance charges, day care charges, Health
Checkups, etc.
It is pivotal to know about the exclusions which are not covered under insurance schemes:
Treatment related to dental disease or surgeries
All kind of STD's and AIDS
Non-Allopathic Treatment

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Few of the companies do provide insurance against such diseases or conditions, but that
depends on the type and the insured amount.
Some important aspects to be considered before choosing the health insurance in India are
Claim Settlement ratio, Insurance limits and Caps, Coverage and network hospitals.
Japan
There are three major types of insurance programs available in Japan: Employee Health
Insurance (健康保険 Kenkō-Hoken), National Health Insurance (国民健康保険 Kokumin-
Kenkō-Hoken), and the Late-stage Elderly Medical System ( 後期高齢医療制度 Kouki-
Kourei-Iryouseido).[39] Although private health insurance is available, all Japanese citizens,
permanent residents, and non-Japanese with a visa lasting one year or longer are required to
be enrolled in either National Health Insurance or Employee Health Insurance. National
Health Insurance is designed for those who are not eligible for any employment-based health
insurance program. The Late-stage Elderly Medical System is designed for people who are
age 75 and older.[[[Health insurance#Japan#{{{section}}}|contradictory]]][40]
National Health Insurance is organised on a household basis. Once a household has applied,
the entire family is covered. Applicants receive a health insurance card, which must be used
when receiving treatment at a hospital. There is a required monthly premium, but co-
payments are standardized so payers are only expected to cover ten to thirty percent of the
cost, depending on age.[41][non-primary source needed] If out-of-pocket costs exceed pre-
determined limits, payers may apply for a rebate from the National Health Insurance
program.[39]
Employee Health Insurance covers diseases, injuries, and death regardless of whether an
incident occurred at a workplace. Employee Health Insurance covers a maximum of 180 days
of medical care per year for work-related diseases or injuries and 180 days per year for other
diseases or injuries. Employers and employees must contribute evenly to be covered by
Employee Health Insurance.[42]

Health Insurance
The Late-stage Elderly Medical System began in 1983 following the Health Care for the
Aged Law of 1982. It allowed many health insurance systems to offer financial assistance to
elderly people. There is a medical coverage fee. To be eligible, those insured must be either:
older than 70, or older than 65 with a recognized disability.[[[Health
insurance#Japan#{{{section}}}|contradictory]]] The Late-stage Elderly Medical System
includes preventive and standard medical care.[42]
Issues of the healthcare system
Due to Japan's aging population, the Late-stage Elderly Medical System represents one third
of the country's total healthcare cost. When retiring employees shift from Employee Health
Insurance to the Late-stage Elderly Medical System, the national cost of health insurance is
expected to increase since individual healthcare costs tend to increase with age.[43]
healthcare expenditure in Japan by age group
United States
Short Term Health Insurance
On the 1st of August, 2018 the DHHS issued a final rule which made federal changes to
Short-Term, Limited-Duration Health Insurance (STLDI) which lengthened the maximum
contract term to 364 days and renewal for up to 36 months.[64][65] This new rule, in
combination with the expiration of the penalty for the Individual Mandate of the Affordable
Care Act,[66] has been the subject of independent analysis.[67][68][69][70][71][72][73][74]

Health Insurance
The United States health care system relies heavily on private health insurance, which is the
primary source of coverage for most Americans. As of 2018, 68.9% of American adults had
private health insurance, according to The Center for Disease Control and Prevention.[75]
The Agency for Healthcare Research and Quality (AHRQ) found that in 2011, private
insurance was billed for 12.2 million U.S. inpatient hospital stays and incurred approximately
$112.5 billion in aggregate inpatient hospital costs (29% of the total national aggregate
costs).[76] Public programs provide the primary source of coverage for most senior citizens
and for low-income children and families who meet certain eligibility requirements. The
primary public programs are Medicare, a federal social insurance program for seniors and
certain disabled individuals; and Medicaid, funded jointly by the federal government and
states but administered at the state level, which covers certain very low income children and
their families. Together, Medicare and Medicaid accounted for approximately 63 percent of
the national inpatient hospital costs in 2011.[76] SCHIP is a federal-state partnership that
serves certain children and families who do not qualify for Medicaid but who cannot afford
private coverage. Other public programs include military health benefits provided through
TRICARE and the Veterans Health Administration and benefits provided through the Indian
Health Service. Some states have additional programs for low-income individuals.[77]
In the late 1990s and early 2000s, health advocacy companies began to appear to help
patients deal with the complexities of the healthcare system. The complexity of the healthcare
system has resulted in a variety of problems for the American public. A study found that 62
percent of persons declaring bankruptcy in 2007 had unpaid medical expenses of $1000 or
more, and in 92% of these cases the medical debts exceeded $5000. Nearly 80 percent who
filed for bankruptcy had health insurance.[78] The Medicare and Medicaid programs were
estimated to soon account for 50 percent of all national health spending.[79] These factors
and many others fueled interest in an overhaul of the health care system in the United States.
In 2010 President Obama signed into law the Patient Protection and Affordable Care Act.
This Act includes an 'individual mandate' that every American must have medical insurance
(or pay a fine). Health policy experts such as David Cutler and Jonathan Gruber, as well as
the American medical insurance lobby group America's Health Insurance Plans, argued this
provision was required in order to provide "guaranteed issue" and a "community rating,"

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which address unpopular features of America's health insurance system such as premium
weightings, exclusions for pre-existing conditions, and the pre-screening of insurance
applicants. During 26–28 March, the Supreme Court heard arguments regarding the validity
of the Act. The Patient Protection and Affordable Care Act was determined to be
constitutional on 28 June 2012. The Supreme Court determined that Congress had the
authority to apply the individual mandate within its taxing powers.[80]
History and evolution
In the late 19th century, "accident insurance" began to be available, which operated much like
modern disability insurance.[81][82] 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.[83]
Accident insurance was first offered in the United States by the Franklin Health Assurance
Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries
arising from railroad and steamboat accidents. Sixty organizations were offering accident
insurance in the U.S. by 1866, but the industry consolidated rapidly soon thereafter. While
there were earlier experiments, the origins of sickness coverage in the U.S. effectively date
from 1890. The first employer-sponsored group disability policy was issued in 1911.[84]
Before the development of medical expense insurance, patients were expected to pay health
care costs out of their own pockets, 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 programs. One major obstacle to this development was that early
forms of comprehensive health insurance were enjoined by courts for violating the traditional
ban on corporate practice of the professions by for-profit corporations.[85] State legislatures
had to intervene and expressly legalize health insurance as an exception to that traditional
rule. Today, most comprehensive private health insurance programs cover the cost of routine,
preventive, and emergency health care procedures. They also cover or partially cover the cost
of certain prescription and over-the-counter drugs. Insurance companies determine what
drugs are covered based on price, availability, and therapeutic equivalents. The list of drugs
that an insurance program agrees to cover is called a formulary.[7] Additionally, some

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prescriptions drugs may require a prior authorization[86] before an insurance program agrees
to cover its cost.
Hospital and medical expense policies were introduced during the first half of the 20th
century. During the 1920s, individual hospitals began offering services to individuals on a
pre-paid basis, eventually leading to the development of Blue Cross organizations.[84] The
predecessors of today's Health Maintenance Organizations (HMOs) originated beginning in
1929, through the 1930s and on during World War II.[87][88]
The Employee Retirement Income Security Act of 1974 (ERISA) regulated the operation of a
health benefit plan if an employer chooses to establish one, which is not required. The
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) gives an ex-employee
the right to continue coverage under an employer-sponsored group health benefit plan.
Through the 1990s, managed care insurance schemes including health maintenance
organizations (HMO), preferred provider organizations, or point of service plans grew from
about 25% US employees with employer-sponsored coverage to the vast majority.[89] With
managed care, insurers use various techniques to address costs and improve quality, including
negotiation of prices ("in-network" providers), utilization management, and requirements for
quality assurance such as being accredited by accreditation schemes such as the Joint
Commission and the American Accreditation Healthcare Commission.[90]
Employers and employees may have some choice in the details of plans, including health
savings accounts, deductible, and coinsurance. As of 2015, a trend has emerged for
employers to offer high-deductible plans, called consumer-driven healthcare plans which
place more costs on employees, while employees benefit by paying lower monthly premiums.
Additionally, having a high-deductible plan allows employees to open a health savings
account, which allows them to contribute pre-tax savings towards future medical needs. Some
employers will offer multiple plans to their employees.[91]

Health Insurance
The numbers of Americans lacking

health insurance and the uninsured rate from 1987 to 2008
Chapter 2

Health Insurance
Research Methodology
Objectives
There is objective in Health insurance
 To increase the access to health care

 To protect the employees from high medical expenses at the time of illness
 Changing lifestyle
 Quality coverage
Scope of the study
The purpose of the study is to know the survey on awareness of health insurance and claim
settlement with reference to people
Limitations
There was certain limitation in undertaking this research work .as it its understood that the
limitation are a part of the project, they have been overshadowed by the benefits of the study.

Health Insurance
 The survey conducted may not be considered as comprehensive as only

limited respondents could be contacted because of the time constraint.
 Objectives, the purpose of the study and the questions had to be explained to
the respondents and in this context their responses may be biased.

Health Insurance
After opening up of the insurance industry health insurance sector has become significant
both from economic and social point of view and researchers have explored and probed these
aspects. Since health insurance is a very essential part in one person’s life so it becomes
essential and beneficial to make a study on the growth of health insurance so that in our
country the lot of people can take benefit from it and India can also get high ranking in the
matter of health safety
The researcher has reviewed many studies related to Health Insurance and its related issues.
Some of them, which are more significant in respect to the proposed study, are highlighted
here as follows

Health Insurance
Ellis et al. (2000) reviewed a variety of health insurance systems in India. It was revealed that
there is a need for a competitive environment which can only happen with the opening up of
the insurance sector. Aubu (2014) conducted a comparative study on public and private
companies towards marketing of health insurance policies. Study revealed that private sector
services evoked better response than that of public sector because of new strategies and
technologies adopted by them. Nair (2019) has made a comparative study of the satisfaction
level of health insurance claimants of public and private sector general insurance companies.
It was revealed that majority of the respondents had claim of reimbursement nature through
third party administrator. Satisfaction with respect to settlement of claim was found relatively
higher for public sector than private sector. Devadasan et al. (2004) studied community
health insurance to be an important intermediate step in the evolution of an equitable health
financing mechanism in Europe and Japan. It was concluded that community health insurance
programmes in India offer valuable lessons for its policy makers. Kumar (2009) examined the
role of insurance in financing health care in India. It was found that insurance can be an
important means of mobilizing resources, providing risk protection and health insurance
facilities. But for this to happen, it will require systemic reforms of this sector from the end of
the Government of India. Dror et al. (2006) studied about willingness among rural and poor
persons in India to pay for their health insurance. Study revealed that insured persons were
more willing to pay for their insurance than the uninsured persons. Jayaprakash
(2007) examined to understand the hurdles preventing the people to purchase health
insurance policies in the country and methods to reduce claims ratio in this sector. Yadav and
Sudhakar (2017) studied personal factors influencing purchase decision of health insurance
policies in India. It was found that factors such as awareness, tax benefit, financial security
and risk coverage has significant influence on purchase decision of health insurance policy
holders. Thomas (2017) examined health insurance in India from the perspective of consumer
insights. It was found that consumers consider various aspects before choosing a health
insurer like presence of a good hospital network, policy coverage and firm with wide product
choice and responsive employees. Savita (2014) studied the reason for the decline of
membership of micro health insurance in Karnataka. Major reason for this decline was lack
of money, lack of clarity on the scheme and intra house-hold factors. However designing the
scheme according to the need of the customer is the main challenge of the micro insurance
sector. Shah (2017) analysed health insurance sector post liberalization in India. It was found
that significant relationship exists between premiums collected and claims paid and

Health Insurance
demographic variables impacted policy holding status of the respondents. Binny and Gupta
(2017) examined opportunities and challenges of health insurance in India. These
opportunities are facilitating market players to expand their business and competitiveness in
the market. But there are some structural problems faced by the companies such as high claim
ratio and changing need of the customers which entails companies to innovate products for
the satisfaction of the customers. Chatterjee et al. (2018) have studied health insurance sector
in India. The premise of this paper was to study the current situation of the health-care
insurance industry in India. It was observed that India is focusing more on short-term care of
its citizens and must move from short-term to long-term care. Gambhir et al. (2019) studied
out-patient coverage of private sector insurance in India. It was revealed that the share of the
private health insurance companies has increased considerably, despite of the fact that health
insurance is not a good deal. Chauhan (2019) examined medical underwriting and rating
modalities in health insurance sector. It was revealed that while underwriting a health policy
one has to keep in mind the various aspects of insured including lifestyle, occupation, health
condition and habits. There have been substantial studies on health insurance done in India
and abroad. But there has not been any work on performance of health insurance sector based
on underwriting profit or loss.
Ramesh Bhat and Falan Reuben (2001) in their article, “Analysis of claim and
reimbursements made under mediclaim policy of general insurance corporation of India”
analyses 621 claims and reimbursements data pertaining to policy initiation year 1997-98 and
1998-99 of Ahmedabad. They found that number of policies and premium collected have
grown 30% during 1998- 00 and 50% during 1999-2000. It was found that the number of
claims increased by about 93% during 1998-99 1/3rd of reimbursement is made towards
doctors’ fees. Diagnostic charges are 30%. Insurance company took on an average 121 days
to settle the claim. IRDA’s proposal to ensure payment settlement within 7 days is highly
ambitious. Ajay Mahal(2002) assessed that the entry of private health insurance could have
adverse implications for some of goal of health policy, particularly for equity. However an
informed consumer and well defined and implemented insurance regulation regime could
potentially address many of bad outcomes. There are areas where regulation with regard to
health insurance would be clearly useful in instituting benefits packages, restrictions on risk-
selection procedure and addressing aspects of consumer protection. Bhat at el (2005) in their
paper “Third party administrator and health insurance in India: perception of policyholders
and providers” found that there is low level of awareness among policyholders about

Health Insurance
existence of TPAs and empanelled hospitals. They rely on their insurance agents. TPAs insist
on standardisation of fee structure of medical services. Healthcare providers experience
substantial delay in setting of their claim by TPAs. Provider Perceive significant burden in
terms of effort and expenditure after introduction of TPAs. There is no substantial increase in
patient’s turnover after empanelling with TPAs. Carlos Pestana Barros et al (2005) in their
paper “Evaluating the Efficiency and Productivity of Insurance Companies with a Malmquist
Index: A Case Study for Portugal” estimates changes in total productivity, breaking this down
into technically efficient change and technological change by means of data envelopment
analysis applied to a representative sample of insurance companies operating in the
Portuguese market. The aim of this procedure is to seek out those best practices that will lead
to improved performance in the market. We rank the companies according to their change in
total productivity for the period 1995– 2001, concluding that some companies experienced
productivity growth while others experienced a decrease in productivity. The implications
arising from the study are considered in terms of managerial policy. B.Hidayat et al (2009) in
their paper “The selection of an appropriate count data model for modelling health insurance
and health care demand:case of Indonesia” apply several estimators to Indonesian household
data to estimate the relationship between health insurance and the number of outpatient visits
to public and private providers. Once endogeneity of insurance is taken into account, there is
a 63 percent increase in the average number of public visits by the beneficiaries of mandatory
insurance for civil servants. However, insurance status does not make any difference for the
number of future outpatient visit. P. Jain et al., (2010) in their paper, “Problems faced by the
Health Insurance Policyholders of Different Public and Private Health Insurance Companies
for Settlements of their Claims” measure the problem faced by customers. The objectives
were to study reason for rejection of claim, satisfaction level of customer and difficulties
faced by insured in getting their claim. Main reason for claim rejection was pre-existing
disease and incomplete document. From public sector Undertaking (P.S.U.) out of 56, 48
respondents were satisfied with their insurer. From private sector undertaking, out of 44, 16
are satisfied and 20 are highly satisfied with their insurer.
Ravikant Sharma (2011) in his paper, “A Comparison of Health Insurance Segment- India vs.
China” seeks to compare the health insurance aspects of both the economies India and China.
Both economies have vast potential of health insurance and 45% of world’s population lives
in this area. Secondary data are used for study. In China health care expenditure per capita –
278$ PPP. In India health care expenditure per capita – 82$ PPP. BHI and NCMS in China

Health Insurance
and CGHS (central government health scheme) and ESIS (employee’s state insurance
scheme) in India are state sponsored Health insurance scheme. The China insurance
regulatory commission (CIRC) had establish as industry regulator in 1998 while IRDA has in
1999, supervise Indian insurance industry. China regulators sets a limit of 50% and India put
26% for joint venture for foreign direct investment. Al-Amri et al. (2012) in their paper
“Analyzing the technical efficiency of insurance companies in GCC” analyze the
performances of the insurance sector in Gulf Cooperation Council (GCC) countries and carry
out a comparative analysis for its different units. The authors analyse the technical efficiency
of insurances in the GCC countries using DEA methodology and Malmquist Productivity
Index (MPI). The study considers 39 insurance firms in the region, with a panel data covering
the period 2005-2007. The authors found that the insurance industry in the GCC is
moderately efficient and there is large room for improvement. T.N.R.Kavitha et al.(2012) in
their article, “Customer attitude towards general insurance- A Factor Analysis Approach”
make an attempt at Erode district with the sample of 750 respondents to find out the
influencing factor of the policyholder in the study areas. For this, respondent’s opinion on the
various related statements were collected with a 5 point scaling. Factor analysis, an important
multivariate technique has used. 25 factors are considered. Respondents are highly satisfied
for factors like product price, officers/agents location etc. Respondents are neutral towards
factor like product type, office appearance, and guidance/ help at time of purchasing the
policy. Ruchita Verma(2012) in her article, “A study of perspective and productivity of
health insurance Business in India with reference to key determinants” examine productivity
as well as change in productivity of health insurance business and to identify the various
derives behind such changes. A period of 8 years from 2002-03 to 2009-10 is considered and
public sector companies are mainly taken as key area of investigation. Data Envelopment
Analysis (DEA) and two key determinants of input and one determinants of output is
considered the result of DEA provides that TEPC, which comprises of EC, TC, PTEC and
SEC followed diverse path during the period under consideration. In almost all the year the
TFPC lies between first two categories i.e. either less than 1 or 1-2, except for the year 2004-
05 to 2005-06 as during this year TFPC lies in 3rd category i.e. it was even more than 2. J.
Jaypradha (2012) in the article, “Problems and prospects of health insurance in India”
highlighted that the health insurance sector has registered 30% growth rate in 2008-09. The
penetration health insurance in India had risen to 4.8%, in 2008 as compared to 1.2% in
1999-2000. The average medical expenditure of an Indian household is 6.7% of the annual
income. There are many factors for low penetration, some are- a. non availability of attractive

Health Insurance
health insurance products, b. lack of awareness, c. absence of stringent rules by IRDA, e.

monopoly of health insurance market prior to 1999. Market size of health insurance business
in India in 2008 is 5125 Rs. Crore. In 2008-09, gross premium of all health insurance
companies was 30601 Rs. Crore Beest et al (2012) in their paper “Health insurance and
switching behaviour: Evidence from the Netherlands.” Tell about the introduction of the
Health Insurance Act in the Netherlands in 2006 and evaluates the switching behaviour of
Dutch consumers. Three surveys were conducted: from 2005- 2006 (n = 478), 2008-2009 (n
= 389), and 2010- 2011 (n = 191). In 2005-2006, almost 20 percent of the Dutch consumers
switched their insurance company. In between 2006 and 2012, however, the percentage of
switchers decreased to less than four percent. The main cause of this decrease is that
consumers no longer perceive sufficient differences between insurance companies in terms of
premium and service. In addition, consumers have difficulties finding the proper
information making the right decision and believe they may not be accepted for the
supplementary insurance. R. Amsaveni and S. Gomathi (2013) made an attempt to find out
medi-claim policy holder satisfaction, to identify the reason for preferring medi-claim policy
to safe guard themselves and avoid future risk, majority of the respondents have taken
personal scheme to employees. The major problems faced by the respondents are lack of
timely communication and limited list of hospitals covered by the insurance companies.
Primary data were collected from 300 respondents for a period of 6 months from Jan. 2012 to
June 2012. Secondary data have been collected from various books, journals, magazines and
internet. Tools that are applied percentage, chi-square, ANOVA, factor analysis and weighted
average ranks score. Among 300 respondents, 90 are facing problems with regard to
mediclaim policy. Majority of respondents are satisfied. Age, education and income of
respondents are influenced by reason for preferring mediclaim. K. Selva Kumar and Dr. S.
Vijay Kumar (2013) in their article, “Attitude of policy holders towards administration of
general insurance companies with reference to Madurai region” The study reveals that 23%
policy holders belongs to low level of attitude, 46% to medium level of attitude and 31% to
high level of attitude. There is significant relationship between ages, sex, education, and
marital status, type of family, community and level of their attitude towards Administration
of services of public sector general insurance companies holds good. Out of nine factors eight
factors are significant; only one factor i.e. social group of policyholder is not significant.
Poursamad et al (2013) in their paper determine the method of providing health insurance
service. The present research is a descriptive plan in which 502 insured individuals, 316 of
service providers and 8 managers of insurance organization took part. Obtained results from

Health Insurance
testing quality to show that 82.66% insured as average, 83.54% employees knew the quality
as well and 62.5% managers declared it as average. Since most insured people, employees
and managers evaluated insurance services in an average rate and there is considerable
difference between views of managers and employees about the quality Thus, Health
insurance is one of the growing segments of non life insurance industry. It holds 22.24% of
non life insurance business (IRDA Annual Reports 2012-13).This is one of the recent origins
in India and still it is an embryonic stage. This sector have both opportunities and challenges
which should be IJSR - INTERNATIONAL JOURNAL OF 49 Volume : 4 | Issue : 1 |
January 2015 • ISSN No 2277 - 8179 Research Paper kept into mind by all insurance
companies dealing in health insurance in order to maximum their market share.

Health Insurance
Chapter 4
DATA ANALYSIS

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Chapter 5
CONCLUSIONS AND SUGGESTIONS

Neha BK

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Health Insurance

Vivekanand Education Society of Arts, Science & Commerce.

What is Health insurance

Vivekanand Education Society of Arts, Science & Commerce.

Benefits of Health Insurance

Below are some benefits of health insurance plans:

Helps Deal With Rising Medical Costs

Critical Illness Cover

Easy Cashless Claims

Vivekanand Education Society of Arts, Science & Commerce.

Vivekanand Education Society of Arts, Science & Commerce.

Vivekanand Education Society of Arts, Science & Commerce.

Vivekanand Education Society of Arts, Science & Commerce.

Objectives of the Study

1. To know the opportunities and challenges for health insurance in India.

Importance of Health Insurance

a health plan that can cover all the medical costs.

financial anxiety and it makes medical treatment affordable and accessible.

facility is cashless hospitalization, which permits the insured to seek quality

Vivekanand Education Society of Arts, Science & Commerce.

lot of people is a helpline.

issues that they might be facing.

does not have one.

shows the poor government vision on the health care sector.

Country Name 1995 2014

Vivekanand Education Society of Arts, Science & Commerce.

China 3.5 5.5

India 4.0 4.7

Bhutan 4.0 3.6

Nepal 5.3 5.8

Maldives 6.0 13.7

Role of Insurance Regulatory and Development Authority

done in the past.

Vivekanand Education Society of Arts, Science & Commerce.

for commercial insurance companies.

months to 80 years of age can be granted Mediclaim policy up to maximum coverage of

refused to become a member of Mediclaim scheme due to unnecessary conservatism of the

Vivekanand Education Society of Arts, Science & Commerce.

Employee State Insurance (ESI) Scheme

semi-government body headed by Union Minister of Labour as Chairman and the

governments, employers, employees, the medical profession and parliament.

Reasons for poor penetration of Health Insurance

Vivekanand Education Society of Arts, Science & Commerce.

1. Lack of regulations and control to promote health insurance products in society.

3. No availability of affordable premiums and high claim settlement.

the risk and fix the high premium.

5. Patients also experience problems in getting their reimbursements including long

delays to partial reimbursement.

6. It is observed that lack of innovative products and enthusiasm in promoting health

insurance products in the society by health insurance companies in India.

accounts, insurance companies tend to provide health insurance cover at unviable

the policies suitable to the needs of the people.

pools. The result could be a higher premium.

Vivekanand Education Society of Arts, Science & Commerce.

According to the Health Insurance Association of America, health insurance is defined as

A health insurance policy is:

1. A contract between an insurance provider (e.g. an insurance company or a government) and

Vivekanand Education Society of Arts, Science & Commerce.

Vivekanand Education Society of Arts, Science & Commerce.

 Prior Authorization: A certification or authorization that an insurer provides prior to medical

Vivekanand Education Society of Arts, Science & Commerce.

Vivekanand Education Society of Arts, Science & Commerce.

Health Expenditure per capita

Life Expectancy of the total