Increasing penetration of Health Insurance: an important way to improve affordability and access to healthcare

While India is making rapid strides in its economic growth, the country is increasingly facing constraints in providing healthcare benefits to a vast majority of its population. This is mainly because of the following reasons:1. Inadequate healthcare infrastructure and delivery system2. Lack of proper healthcare financing/insurance system for all strata of society

3. Difficulty in managing costs of healthcare even when the country is producing drugs for the world market

In this article I shall touch upon only on the healthcare financing/insurance part of the problem.

Sporadic initiatives:

We find some sporadic initiatives for population below the poverty line (BPL) with Rashtriya Swasthya Bima Yojana (RSBY) and other health insurance schemes through micro health insurance units, especially in rural India. It has been reported that currently around 40 such schemes are active in the country. Most of the existing micro health insurance units run their own independent insurance schemes.

Some initiatives by the State Governments:

Following initiatives are being taken by the state governments:

1. The Government of Andhra Pradesh is planning to offer health insurance cover under ‘Arogya Sri Health Insurance Scheme’ to 18 million families who are below the poverty line (BPL).

2. The Government of Karnataka has partnered with the private sector to provide low cost health insurance coverage to the farmers who previously had no access to insurance under “Yeshaswini Insurance scheme”. This scheme covers insurance cover towards major surgery, including pre-existing conditions.

3. Some other state governments have also started offering public health insurance facilities to the rural poor. In fact, some private health insurers like Reliance General Insurance and ICICI Lombard General Insurance were reported to have won some projects on health insurance from various state governments.

Cost of healthcare is rising but the penetration of health insurance is still very poor:

All over India costs of all types of healthcare be it primary, secondary or tertiary, are going beyond the reach of common man. Even in rural India penetration of such schemes is almost as poor as the organized health insurance schemes available in urban India. In a situation like this one will need to ponder why the penetration of health insurance and micro health insurance is so low in our country covering just around 35 to 40 million of the population.

Government spend on health is too low:

Even today the Government spends just 1.2% of GDP on health. When both public and private sectors expenditures are put together this number works out to not more than 5%.

It has been reported that in 2005-06 the total private expenditure towards healthcare was around Rs 1, 35,000 crore. This number is expected to grow at a 5-year CAGR of around 16%.

High ‘out of pocket’ expenditure towards healthcare:

Currently around 78% of healthcare expenditure is ‘out of pocket’ and without any health insurance cover. A recent survey of the National Survey Organization has reported that around 40% of the people who get admitted to hospitals for treatment go through extreme financial hardship and many a times are compelled to abandon the treatment or need to sell of their property to meet such unavoidable expenditure towards health.

Disease pattern undergoing a shift increasing healthcare expenditure:

As the disease pattern is undergoing a shift from acute to non-infectious chronic illness, the cost of treatment is becoming even more. In a situation like this there is an urgent need to have a robust healthcare financing system within the country.

Covering domiciliary treatment through health insurance is important:

Currently heath insurance schemes only cover expenses towards hospitalization. However, medical insurance schemes should also cover domiciliary treatment costs and loss of income along with hospitalization costs.

Government policy reforms towards health insurance are essential:

Currently Indian health insurance segment is growing at 50% and according to PHD Chamber of Commerce and Industry the segment is estimated to grow to US$ 5.75 billion by 2010. Even this number appears to be much less than adequate for a country like India.

It is high time that the Government creates a conducive environment for increased penetration of health insurance within the country through some innovative policy measures. One such measure could be to make it mandatory for all employers, who are required to provide provident fund facilities to their employees to also offer health insurance facilities to all of them.

It is a pity that the concept of health insurance has not taken off in our country, as yet, though has immense growth potential in the years to come. Innovative policy measures of the government towards this direction along with increasing the cap on Foreign Direct Investment (FDI) for health insurance will encourage many competent and successful global players to enter into this market. With the entry of efficient successful global players in health insurance segment, one can expect to see many innovative insurance products to satisfy the need of a large number of Indian population in the healthcare space. Such measures will also help increasing their retail distribution network with a wide geographic reach, significantly improving the affordability and access to healthcare of a large number of population of the country.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

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