Last, but certainly not the least, I must thank Garima and Meyher, for being soconsiderate with me as I worked through weekends and late nights in making mysmall contribution to this very noble cause- much of the time I devoted waslegitimately theirs. Belonging to a family which has been genetically passionateabout insurance for three generations now, I hope they would understand.
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Dr Nagpal is a well recognised face in the health insurance industry inIndia. He is currently Health Specialist with the World Bank (South Asia Region),based at New Delhi. Prior to this, he was serving the Insurance Regulatory andDevelopment Authority, India, and was responsible for setting up thespecialized health insurance unit in the Authority and looking after theregulatory and developmental initiatives for the health insurance sector of thecountry from 2007 to 2009. In the recent past, he has also served the IndianMinistry of Health, the National Commission on Macroeconomics and Health,India, and the WHO. He has been associated with several government,regulatory and industry committees and working groups in the realm of HealthInsurance in India including several multi-stakeholder industry groups under CIIand FICCI. He has also been a Board member of the National AccreditationBoard for Hospitals (NABH) in India and is visiting faculty to Public HealthFoundation of India, Institute of Public Health and several other academicinstitutions. He is a medical doctor, a postgraduate in health management, anMBA in Finance and is a Fellow of the Insurance Institute of India.
Mr Aggarwal is an MBA (Insurance and Finance) from National InsuranceAcademy School of Management, Pune and is currently working at Milliman Indiaoffice as Health Insurance Data Analyst. He has been involved in various dataanalysis and product pricing projects for Indian insurers offering healthproducts.
Ms N. Gautam is Associate Vice President in a large media corporatebased in New Delhi. She has an MBA in Hospital administration and has beenassociated with the health insurance industry from its early days in India, havingbeen the country head of a product vertical in the TPA industry. She has alsoserved a life insurer managing its Bancassurance relationship channel and hasalso been the hospital administrator for a medical college in North India. Shehas written extensively on health insurance, and has contributed to variousjournals and periodicals on the subject.
Vidya Hariharan has spent the last 9 years with Swiss Re - in Zurich and India -in the area of designing reinsurance covers for the Life and Health Reinsurancebusiness for the Indian and Middle East markets. She is currently part of a start-up team, based out of Bangalore, India, working to set up an integrated healthmanagement play in India.
This definition explains how the health insurance system works. The healthinsurance insures an individual from expenses incurred due to any variation intheir health. It collects an upfront contribution from an individual (commonlyknown as premium in the market) and pools it over many people. Thus it worksvery similar to all the other types of insurance in the market, the onlydifference being that it primarily covers health expenses of an individual.
The health insurance which is offered by insurance companies is commonlyknown as Private Health Insurance or Commercial Health Insurance. Commercialhealth insurance term is used to avoid confusion between public insurancecompanies which are owned by the government and the private insurancecompanies. Therefore, it will be used interchangeably throughout this studytext.
Commercial health insurance basically provides coverage to an individualtowards all or some of the health services defined under a contractualagreement, health insurance policy made between both of them. For this riskcoverage, the individual, i. insured will have to make the payments in theform of a premium to the insurer. The insurer, a non-governmental entity, willin turn take up all or most of the risk associated for paying all such healthservices which are defined under the policy.
However, in case of health insurance, there is one more party, the healthcareprovider in the absence of which it loses its meaning. It plays a major role inthe health insurance as it is the one who decides and provides:
He had taken a health insurance policy earlier. So, when he received the heavymedical bills from his hospital at the time of discharge, he was not worried atall. When he submitted his claim to his insurer, they told him that it will takesome time for them to get all the details from his healthcare provider beforeprocessing his claim.
The healthcare provider, i. Gandhi Hospital in this case is the third partyother than Ravi (insured) and the insurance company (insurer). Gandhi Hospitalwill provide all the details to the insurance company about the services used byRavi and the cost of those services which will become a basis for the insurer toclear the claim filed by Ravi.
ii. Supply side moral hazard: It works at the end of Health providers. They start suggesting and providing more health services as well to more expensive treatment to the person having health insurance.
One day he had some food in a party which resulted in stomach disorder forhim. Usually in such cases, he will take some medicines at home and will takesome routine care to recover. But as he was having an insurance policy thistime, he thought of using it by going to an expensive hospital for check-up.
He went there and the doctor there suggested him to undergo some expensivetests and hospitalise him for a couple of days for full recovery. Taking intoconsideration his insurance policy coverage, he opted for the best room to stayin the hospital. He ended up with a heavy amount of bill in the hospital whichhis insurance company had to reimburse.
Hence, this example clearly indicates that an insurance coverage had madeMahesh behave differently, with less consideration towards his medical billswhich he otherwise would have not incurred if he did not have any insurancecoverage to pay for his bills.
At the demand side, Mahesh incurred more expenses towards health servicesthan required. Similarly at the supply side, doctor also recommended more testsand expensive treatment than required due to health insurance coverage of hispatient.
Hence, people realise that the planning for their health needs and taking anappropriate step to cover that risk is required. This resulted in millions ofpeople opting for health insurance policy to cover against such health risks.
Health insurance products available in the Indian market are primarilydominated by hospitalisation products , which mean that these cover the highexpenses incurred by an individual during hospitalisation. These expenses arerelatively high due to increasing cost of healthcare, surgical procedures, newand more expensive technology coming in the market and cost of newergeneration of pharmaceuticals. With these increasing costs, it is really becomingvery difficult for an individual even if he is financially sound to bear such highexpenses without any health insurance.
1 Mahal A, Sakthivel S, Nagpal S. National Health Accounts for India. In: Rao Sujatha, editor. Financingand delivery of health care services in India. New Delhi: Ministry of Health and Family welfare, 2005:256-2 Ministry of Health & Family Welfare. National Health Accounts, India. New Delhi: Government of India,20093 Peters D, Yazbeck A, Sharma R, Ramana G, Pritchett L, Wagstaff A. Better Health Systems for India'spoor. Washington: World Bank, 20024 van Doorslaer E, O'Donnell O, Rannan-Eliya RP, Samanathan A, Adhikari SR, Garg CC et al. Effect ofpayments for health care on poverty estimates in 11 countries in Asia: an analysis of household surveydata. Lancet 2006
The earliest mention of the insurance system in India can be found in theresearch and writings of treatise such as Manu (Manusmrithi), Yagnavalkya(Dharmasastra) and Kautilya (Arthasastra). They refer about the pooling ofresources that could be re-distributed during the period of calamities such asfire, floods, epidemics and famine.
The Indian Life Assurance Companies Act, 1912 was the first act introduced toregulate the insurance companies in India. Later on in 1938, a new insuranceact was passed to bring both life and non-life insurance companies under asingle Act. This act has been revised from time to time, but does remain at thecore of insurance laws for the country 5.
The regulatory structure, as well as the constituents of the industry, underwentseveral changes over the next 7 decades, characterized particularly by thefollowing sets of events which shaped the course of the Indian insuranceindustry:
The commercial health insurance was offered by some of the non-lifeinsurers before as well as after nationalisation of insurance industry. It waslargely available for the groups in the beginning and that too for a limitedextent.
In 1986, the first standardised health insurance product for individuals andtheir families was launched in the Indian market by all the four nationalizednon-life insurance companies (these were then the subsidiaries of theGeneral Insurance Corporation of India). This product, Mediclaim wasintroduced to provide coverage for the hospitalisation expenses up to a pre-defined annual limit of indemnity with certain exclusions such as maternity,pre-existing diseases etc. It underwent several rounds of revisions as themarket evolved, the last being in 2007.
As per the Constitution of India, the areas of Public health, hospitals,sanitation, etc. fall in the State list. Thus, the States are largely independent inmatters related to the delivery of health care to the people in their area. Eachstate has developed its own system of health care delivery and created thenecessary infrastructure. At the same time, some items having widerconsequences like population control and family welfare, medical education,prevention of food adulteration, quality control in manufacture of drugs etc.have been included in the Concurrent list, where both centre and the states canissue legislation. In addition, the Centre also supports key health sectorinitiatives through National Health Programmes, particularly the National RuralHealth Mission, which are funded by the Centre and generally implementedthrough the State machinery. 2ff7e9595c
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