Health insurance in India

Health insurance in India is a growing segment of India's economy. The Indian health system is one of the largest in the world, with the number of people it concerns: nearly 1.3 billion potential beneficiaries. The health industry in India has rapidly become one of the most important sectors in the country in terms of income and job creation. In 2018, one hundred million Indian households (500 million people) do not benefit from health coverage. In 2011, 3.9%[1] of India's gross domestic product was spent in the health sector. According to the World Health Organization (WHO), this is among the lowest of the BRICS (Brazil, Russia, India, China, South Africa) economies. Policies are available that offer both individual and family cover. Out of this 3.9%, health insurance accounts for 5-10% of expenditure, employers account for around 9% while personal expenditure amounts to an astounding 82%.[2] In the year 2016, the NSSO released the report “Key Indicators of Social Consumption in India: Health” based on its 71st round of surveys. The survey carried out in the year 2014 found out that, more than 80% of Indians are not covered under any health insurance plan, and only 18% (government funded 12%) of the urban population and 14% (government funded 13%) of the rural population was covered under any form of health insurance.[3]

For the financial year 2014-15, Health Insurance premium was ₹20,440.

Health Insurance Coverage in India:Stats from NSSO survey

Presentation

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

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

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

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

This financial burden has been one of the main reasons for the introduction of health insurance covering the hospital costs of the poorest.

History

Launched in 1986,[6] the health insurance industry has grown significantly mainly due to liberalization of economy and general awareness. According to the World Bank, by 2010, more than 25%[7] of India's population had access to some form of health insurance. There are standalone health insurers along with government sponsored health insurance providers. Until recently, to improve the awareness and reduce the procrastination for buying health insurance, the General Insurance Corporation of India and the Insurance Regulatory and Development Authority (IRDA) had launched[8] an awareness campaign for all segments of the population.

Launched in 2007, the National Health Insurance Program (Rashtriya Swasthya Bima Yojana- RSBY) is led by the Ministry of Health and was adopted by 29 states in 2014. It is funded 75% by the government and 25% by the states. The worker and 4 of his dependents benefit from health insurance if they are not covered by any system and live below the poverty line. RSBY beneficiaries are required to pay an annual registration fee of INR 30 for hospital coverage up to INR 30,000 per year per family.

September 25, 2018, the Indian government announced the launch of a new health insurance for the poorest citizens. Indian Prime Minister, Narendra Modi announced that the new system is expected to reach more than 500 million people and is called "Modicare". The reform is still in progress and aims to install universal social security in the country.

Structure and organisation

The Indian social protection scheme covers insured persons against risks related to old age, invalidity, death, but also sickness and maternity, unemployment and finally accident at work and occupational diseases

This social protection scheme is not universal and provides only limited coverage, targeting mainly organized sector's workers constituting less than 10% of the population in India. All risks are placed under the supervision of the Ministry of Labour and Employment.

Social security and health insurance is defined by 5 main texts in India:

The Employees' State Insurance Act, 1948;

Employees' Provident Funds & Miscellaneous Provisions Act, 1952;

The Employees (Workmen's) Compensation Act, 1923;

The Maternity Benefit Act, 1961;

The Payment of Gratuity Act, 1972;

Social security benefits are mainly managed by: Employees' State Insurance Corporation (ESIC) and Employees' Provident Fund Organisation (EPFO)

Types of policies

Health insurance in India typically pays for only inpatient hospitalization and for treatment at hospitals in India. Outpatient services were not payable under health policies in India. The first health policies in India were Mediclaim Policies. In Year 2000, Government of India liberalized insurance and allowed private players into the insurance sector. The advent of private insurers in India saw the introduction of many innovative products like family floater plans, top-up plans, critical illness plans, hospital cash and top up policies.

The health insurance sector hovers around 10% in density calculations. One of the main reasons for the low penetration and coverage of health insurance is the lack of competition in the sector. IRDA which is responsible for insurance policies in India can create health circles, similar to telecom circles to promote competition.[9]

In principle, government health services are available to all citizens under the tax-financed public system. In practice, bottlenecks in accessing such services compel households to seek private care, resulting in high out-of-pocket payments.

Health insurance plans in India today can be broadly classified into these categories:

  • Hospitalization
Hospitalization plans are indemnity plans that pay cost of hospitalization and medical costs of the insured subject to the sum insured. The sum insured can be applied on a per member basis in case of individual health policies or on a floater basis in case of family floater policies. In case of floater policies the sum insured can be utilized by any of the members insured under the plan. These policies do not normally pay any cash benefit. In addition to hospitalization benefits, specific policies may offer a number of additional benefits like maternity and newborn coverage, day care procedures for specific procedures, pre- and post-hospitalization care, domiciliary benefits where patients cannot be moved to a hospital, daily cash, and convalescence.
There is another type of hospitalization policy called a top-up policy. Top up policies have a high deductible typically set a level of existing cover. This policy is targeted at people who have some amount of insurance from their employer. If the employer provided cover is not enough people can supplement their cover with the top-up policy. However, this is subject to deduction on every claim reported for every member on the final amount payable.
  • Family Floater Health Insurance:
Family health insurance plan covers entire family in one health insurance plan. It works under assumption that not all member of a family will suffer from illness in one time. It covers hospital expense which can be pre and post. Most of health insurance companies in India offering family insurance have good network of hospitals to benefit the insurer in time of emergency.
  • Pre-Existing Disease Cover Plans:
It offers covers against disease that policyholder had before buying health policy. Pre-Existing Disease Cover Plans offers cover against pre-existing disease e.g. diabetes, kidney failure and many more. After Waiting period of 2 to 4 years it gives all covers to insurer.
  • Senior Citizen Health Insurance:
As name suggest These kind of health insurance plans are for older people in the family. It provide covers and protection from health issues during old age. According to IRDA guidelines, each insurer should provide cover up to the age of 65 years.
  • Maternity Health Insurance:
Maternity health insurance ensures coverage for maternity and other additional expenses. It takes care of both pre and post natal care, baby delivery (either normal or caesarean). Like other insurance, the maternity insurance provider have wide range of network hospitals and takes care of ambulance expense.
These services are supervised by the Maternity Benefit Act. The Maternity Benefit Act applies to women who do not work in an establishment covered by the ESI but who are employed in factories, mines, circuses, plantations, shops or other establishments employing at least 10 persons. Also covered are women working in an establishment covered by the ESI, but whose salary exceeds the ceiling of subjection.
Since 2010, the Indira Gandhi Matritva Sahyog Yojana (IGMSY) program, run by the Ministry of Women and Child Development, has been set up in some districts (52 in 2017). This program is intended for pregnant women aged 19 or over, during their first 2 completed pregnancies (viable child). The benefit consists of a total amount of 6000 INR paid in 3 installments, subject to having performed the obligatory medical examinations for the mother and the child:
  • at the end of the 2nd trimester of pregnancy
  • at birth
  • to 6 months of the child
  • Hospital daily cash benefit plans:
Daily cash benefits is a defined benefit policy that pays a defined sum of money for every day of hospitalization. The payments for a defined number of days in the policy year and may be subject to a deductible of few days.
  • Critical illness plans:
These are benefit based policies which pay a lumpsum (fixed) benefit amount on diagnosis of covered critical illness and medical procedures. These illness are generally specific and high severity and low frequency in nature that cost high when compared to day to day medical / treatment need. e.g. heart attack, cancer, stroke etc. Now some insurers have come up with option of staggered payment of claims in combination to upfront lumpsum payment.
  • Pro active plans:
Some companies offer Pro active living programs. These are designed keeping in mind the Indian market and provide assistance based on medical, behavioural and lifestyle factors associated with chronic conditions. These services aim to help customers understand and manage their health better.
  • Disease specific special plans:
Some companies offer specially designed disease specific plans like Dengue Care. These are designed keeping in mind the growing occurrence of viral diseases like Dengue in India which has become a cause of concern and thus provide assistance based on medical needs, behavioural and lifestyle factors associated with such conditions. These plans aim to help customers manage their unexpected health expenses better and at a very minimal cost.

The main publicly funded health insurance schemes

Plans funded by central government
  • ESI scheme: This scheme covers organized private sector workers, which is about 55 million people.
  • Central Government Insurance Scheme: This scheme covers central government agents and retirees, i.e. about 3 million people.
  • RSBY: this scheme covers families below the poverty line of about 40 million families.

State funded schemes
  • Andhra Pradesh: This scheme covers families below the poverty line or with annual income below INR 75,000. It represents 70 million beneficiaries.
  • Tamil Nadu: This scheme finances families below the poverty line or with annual income below INR 72,000, which represents about 40 million beneficiaries.
  • Karnataka: this scheme covers members of rural cooperatives, more than 3 million people.

Key aspects of health insurance

Payment options
  • Direct Payment or Cashless Facility: Under this facility, the person does not need to pay the hospital as the insurer pays directly to the hospital. Under the cashless scheme, the policyholder and all those who are mentioned in the policy can undertake treatment from those hospitals approved by the insurer.
  • Reimbursement at the end of the hospital stay: After staying for the duration of the treatment, the patient can take a reimbursement from the insurer for the treatment that is covered under the policy undertaken.

Cost and duration
  • Policy price range: Insurance companies offer health insurance from a sum insured of ₹5000/-[10] for micro-insurance policies to a higher sum insured of ₹50 lacs and above. The common insurance policies for health insurance are usually available from ₹1 lac to ₹5 lacs.
  • Duration: Health insurance policies offered by non-life insurance companies usually last for a period of one year. Life insurance companies offer policies for a period of several years.

Tax benefits

Under Section 80D of the Income-tax Act the insured person who takes out the policy can claim for tax deductions.[11]

₹25,000 for self, spouse and dependent children.

₹50,000/- for parents.

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References
  1. "WHO South-East Asia Region: India statistics summary (2002 - present)". World Health Organization. Retrieved 13 January 2014.
  2. http://www.cppr.in/article/health-insurance-and-telecom-markets-a-comparative-study/
  3. Ambrish Singh . Current Situation of Health Care Coverage in India, ISPOR, News Across Asia, Volume 5 Number 1 April–July 2016. Available at: https://www.ispor.org/consortiums/asia/NewsAcrossAsia_Spring2016.pdf
  4. "Études économiques de l'OCDE : Inde 2007". Études économiques de l'OCDE : Inde. 2008-11-26. doi:10.1787/eco_surveys-ind-2007-fr. ISBN 9789264033535. ISSN 2223-5108.
  5. Ladusingh, Laishram; Pandey, Anamika (2013-05-23). "High inpatient care cost of dying in India". Journal of Public Health. 21 (5): 435–443. doi:10.1007/s10389-013-0572-9. ISSN 0943-1853.
  6. "4 factors that impacted health insurance industry in 2013". Financial Express. 30 December 2013. Retrieved 13 January 2014.
  7. "Government-Sponsored Health Insurance in India: Are You Covered?". World Bank. Retrieved 13 January 2014.
  8. "4 factors that impacted health insurance industry in 2013". Financial Express. 30 December 2013. Retrieved 13 January 2014.
  9. http://www.cppr.in/article/health-insurance-and-telecom-markets-a-comparative-study/
  10. "Handbook on Health Insurance" (PDF). Insurance Regulatory and Development Authority. Retrieved 13 January 2014.
  11. "Section 80D provides tax benefits for mediclaim premium". Live Mint. 24 June 2013. Retrieved 13 January 2014.
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