Health Insurance

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 What is Health Insurance?
Health insurance, like other forms of insurance, is a form of
collectivism by means of which people collectively pool their risk, in
this case the risk of incurring medical expenses.

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 Importance of Health Insurance

• Rising medical costs

• Sharing of health related risk

• uncertain hospital bills

• Expensive/quality health care services

• Money value – Sick Vs Healthy

• Family health insurance

• Tax benefit

• Productivity of workforce

• Removes some of the burden from the state

• Keeping pace with the customer needs while achieving profitability

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 How to Improve Health Insurance Penetration?

• Regulator/Government
– Enhance customer awareness
– Enhance client confidence - real value benefits in the event of a claim
– Effective supervision
– Compulsory percentage of total business towards health
– Compulsory savings towards health
– Tax incentives to employers for promoting group health coverage

• Insurer
– Clients confidence - warrantable claim will be paid out in a reasonable
time frame
– New clients have to be reached
– Value for money
– Design products as per clients needs
– Product transparency
– Cost efficiency
– affordability
– Wellness programmes
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 Initiatives of IRDA

• Committee to formulate regulations

• Pure health insurance products

• Allowing the formation of an stand alone health insurance

company

• Standalone health insurance companies

• Renewability

• Senior citizens

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 Impediments in Health Insurance
• Lack of Data

• Moral Hazard/Adverse Selection

• Complex nature of the product

• Medical Inflation

• New treatments

• Unnecessary treatments

• Difficulty in pricing

• Government provision of health care

• Long term nature

• Changing life style

• Mis-selling/fraud
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 Mitigation of Impediments

• Insurer
– Designing a less complex products
– Transparency in the product features
– Clarity in policy terms, conditions & exclusions
– Efficient back-office support for underwriting and claims
processing
– Higher Reinsurance
– Need for quicker services. E.g. Toll free numbers, cashless,
quick response
– Expense analysis on a regular basis
– Product innovation
– Efficient training of sales force

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 Mitigation of Impediments

• Policyholder
– Pay attention to policy conditions
– Read the exclusions and limitations very carefully
– Compare premium costs, deductibles, co-payments
– Take an informed decision

– TPA
– Proper infrastructure
– Speedy claim settlement process
– Less paper work

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 Mitigation of Impediments

• Regulator/Government
– Come out with health insurance regulations
– Centralized data base for health insurance experience
statistics
– Provider rating
– Cap on renewal premiums
– Ensure that a decent portfolio of health coverage represent
the rural sector
– Guard against ill effects of privatization
– Further tax incentives
– Compulsory savings towards health care

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 Types of Health Insurance Plans
• Individual health plan

• Family floater plan

• Senior Citizens’ plan

• Critical illness plan

• Daily hospital cash and

• Unit-linked health plan (ULHP).

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 Individual Health Plans
• Largely, an individual health insurance plan (IHIP), or ‘mediclaim’,
would cover expenses if you are hospitalised for at least 24 hours.

• These plans are indemnity policies, that is, they reimburse the
actual expenses incurred up to the amount of the cover that you
buy.

• Some of the expenses that are covered are room rent, doctor’s
fees, anaesthetist’s fees, cost of blood and oxygen, and operation
theatre charges.

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 Family Floater Plans
• This is a fairly new entrant in the health insurance firmament.

• It takes advantage of the fact that the possibility of all members of a

family falling ill at the same time or within the same year is low.

• Under a family floater (FF) health plan, the entire sum insured can be
availed by any or all members and is not restricted to one individual
only as is the case in an individual health plan.

•  Let’s look at an example. Say, a family of four has individual covers of Rs

1 lakh each. If the cost of treating one person crosses Rs 1 lakh, then the
rest has to be borne by the family out of its own money. If, however, the
entire family is insured for Rs 4 lakh through a floater policy, then any of
the members will be covered for that amount in any year. To the extent
of the annual cover, any number of members can avail the money.
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 Senior Citizens’ Plans
• Insurance is considered a form of long-term savings for senior
citizens. This money provides financial stability and also helps
them in times of need. Medical insurance enables senior citizens
to pay for health checkups, emergency medical costs and long-
term treatment. The income tax benefit on insurance premiums is
up to Rs. 15,000 under Section 80 D of the Income Tax Act, as on
March 31, 2016. Medical insurance is provided through several
private insurance companies and four public sector general
insurance companies. These are:
– National Insurance Company
– Oriental Insurance Company
– New India Assurance
– United India Insurance Company

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 Senior Citizens’ Plans
• The National Insurance Company offers the Varistha Mediclaim Policy
for senior citizens. This policy covers hospitalization and domiciliary
hospitalization expenses under Section I as well as expenses for
treatment of critical illnesses, if opted for, under Section II. Diseases
covered under critical illnesses are coronary artery surgery, cancer,
renal failure, stroke, multiple sclerosis and major organ transplants.
Paralysis and blindness are covered at extra premium.

• Oriental Insurance Company provides a Comprehensive Health

Insurance Scheme, a Group Insurance and an Individual Mediclaim
Policy. These policies pay for hospitalization or domiciliary
hospitalization of the insured in case of a sudden illness, an accident
or surgery. These conditions should have arisen during the policy
period.
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 Critical Illness Plans
• A Critical Illness plan means to insure against the risk of serious
illness. It will give the same security of knowing that a guaranteed
cash sum will be paid if the unexpected happens and one is
diagnosed with a critical illness.

• The purpose of a critical illness plan is to let you put aside a small
regular amount now, as an insurance against all this happening.

• Bajaj Allianz, in its efforts to provide a customer centric solution is

offering an insurance policy to cover to some of these critical
illnesses like Cancer Coronary Artery bypass surgery First Heart
attack Kidney Failure Multiple sclerosis Major organ transplant
Stroke Arota graft surgery Paralysis Primary Pulmonary Arterial
Hypertension.

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 Daily Hospital Cash
• Expense benefit is paid on per day basis after hospitalization (most
plans mandate at least 48 hours of hospitalization).

• The pre-decided daily benefit amount is paid in full, irrespective of

the actual expenses.

• For example, a person buys a DHC plan with a limit of Rs 2,000

per day. He gets hospitalised for 7 days and the total bill is Rs
35,000. He would be reimbursed Rs 14,000 (2,000x7). If the bill is
Rs 8,000, he would still be reimbursed Rs 14,000.

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 Unit-linked health plan (ULHP)
• All ULHPs offer one or more combination of the other benefits (for
which risk premium is deducted from fund value).
Also, charges such as premium allocation charge and policy
administration charge are deducted from the fund value.

• LIC has launched Health Plus plan, a unique long term health
insurance plan that combines health insurance covers for the
entire family (husband, wife and the children) – Hospital Cash
Benefit (HCB) and Major Surgical Benefit (MSB) along with a ULIP
component (investment in the form of Units) that is specifically
designed to meet domiciliary treatment (DTB) related expenses
for the insured members.

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 Health Insurance in India
The health insurance market in India is very limited covering about
10% of the total population. The existing schemes can be categorized
as:
– Voluntary health insurance schemes or private-for-profit schemes;

– Mandatory health insurance schemes or government run schemes

(namely ESIS, CGHS).

– Insurance offered by NGOs / community based health insurance,

and

– Employer-based schemes

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 Voluntary health insurance schemes
• In private insurance, buyers are willing to pay premium to an
insurance company that pools similar risks and insures them for
health related expenses.

• The main distinction is that the premiums are set at a level, which
are based on assessment of risk status of the consumer (or of the
group of employees) and the level of benefits provided, rather
than as a proportion of consumer’s income.

• In the public sector, the General Insurance Corporation (GIC) and

its four subsidiary companies (National Insurance Corporation,
New India Assurance Company, Oriental Insurance Company and
United Insurance Company) provide voluntary insurance schemes.

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 Voluntary health insurance schemes
• The most popular health insurance cover offered by GIC is
Mediclaim policy.

• Mediclaim policy: It was introduced in 1986. It reimburses the

hospitalization expenses owing to illness or injury suffered by the
insured, whether the hospitalization is domiciliary or otherwise.

• Some of the various other voluntary health insurance schemes

available in the market are :- Asha deep plan II , Jeevan Asha plan
II, Jan Arogya policy, Raja Rajeswari policy, Overseas Mediclaim
policy, Cancer Insurance policy, Bhavishya Arogya policy, Dreaded
disease policy, Health Guard, Critical illness policy, Group Health
insurance policy, Shakti Shield etc.

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 Mandatory health insurance schemes
Employer State Insurance Scheme (ESI)
• Enacted in 1948, the employers’ state insurance (ESI) Act was the
first major legislation on social security in India.

• The scheme applies to power using factories employing 10

persons or more and non-power & other specified establishments
employing 20 persons or more.

• It covers employees and the dependents against loss of wages due

to sickness, maternity, disability and death due to employment
injury. It also covers funeral expenses and rehabilitation
allowance. Medical care comprises outpatient care,
hospitalization, medicines and specialist care.

• These services are provided through network of ESIS facilities,

public care centers, non-governmental organizations (NGOs) and
empanelled private practitioners.
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 Mandatory health insurance schemes
Central Government Health Insurance Scheme (CGHS)
• Established in 1954, the CGHS covers employees and retirees of
the central government and certain autonomous and semi
autonomous and semi-government organizations.
• It also covers Members of Parliament, Governors, accredited
journalists and members of general public in some specified areas.
• Benefits under the scheme include medical care, home visits/care,
free medicines and diagnostic services.
• These services are provided through public facilities with some
specialized treatment (with reimbursement ceilings) being
permissible at private facilities.
• Most of the expenditure is met by the central government as only
12% is the share of contribution.

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 Mandatory health insurance schemes
Universal Health Insurance Scheme (UHIS)
• For providing financial risk protection to the poor, the government
announced UHIS in 2003.
• Under this scheme, for a premium of Rs. 165 per year per person,
Rs.248 for a family of five and Rs.330 for a family of seven , health
care for sum assured of Rs. 30000/- was provided.
• This scheme has been made eligible for below poverty line
families only.
• To make the scheme more saleable, the insurance companies
provided for a floater clause that made any member of family
eligible as against mediclaim policy which is for an individual
member.

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 Insurance offered by NGOs
• Insurance offered by NGOs/Community based schemes are typically
targeted at poorer population living in communities. Such schemes are
generally run by charitable trusts or non-governmental organizations
(NGOs).
• In these schemes the members prepay a set amount each year for
specified services. The premia are usually flat rate (not income related)
and therefore not progressive.
• The benefits offered are mainly in terms of preventive care, though
ambulatory and inpatient care is also covered.
• Such schemes tend to be financed through patient collection,
government grants and donations.
• Some of the popular Community Based Health Insurance schemes are: -
Self-Employed Women’s Association (SEWA), Tribuvandas Foundation
(TF), The Mullur Milk Co-operative, Sewagram, Action for Community
Organization, Rehabilitation and Development (ACCORD), Voluntary
Health Services (VHS) etc.
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 Employer based schemes
• Employers in both public and private sector offers employer based
insurance schemes through their own employer.

• These facilities are by way of lump sum payments, reimbursement

of employees’ health expenditure for out patient care and
hospitalization, fixed medical allowance or covering them under
the group health insurance schemes.

• The Railways, Defense and Security forces, Plantation sector and

Mining sector run their own health services for employees and
their families.

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