INDEXPAGE NO

T.Y.B.B.I 1

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

Contextual Framework 1.1 Introductory 1.2 Origin 1.3 Meaning & Definition1.4 Why Health Insurance Is Must1.5 Indian Scenario

Issues And Concerns 2.1 What Are The Issues And Concerns 2.2 Licensing Of Health Insurance In India2.3 Health Sector Financing

Challenges3.1 What Are The Opportunities And Challenges3.2 Need For Priorities

Health Insurance System4.1 Government Based System(CGHS) & (ESIS)4.2 Employer Managed System4.3 NGO System4.4 Market Based System

i) GIC Mediclaim Coverage ii) LIC Coverage

Mediclaim At Glance

5.1 Mediclaim 5.2 Overseas Mediclaim

6.1 MICRO Health Insurance6.2 Health Insurance For The Poor

7.1 Healthcare Products7.2 Third Party Administrators7.3 Future Issues Relating to Health Insurance7.4 FAQ 7.5 News Related To Health Insurance

12468

101212

1415

161818

1924

2729

3844

5052535768

76

77

T.Y.B.B.I 2

Conclusion

Recommendation

SHRI CHINAI COLLEGE OF COMMERCE & ECO

NAME:___________________________________________________ AGE:___

DESIGNATION: ________________________________ INCOME:______________

SURVEY FOR PROJECT ON HEALTH INSURANCE

1) Are you aware of Health Insurance Scheme? Yes No

2) Do you have Health Insurance Policy? Yes No

If Yes then which one ___________________________________________________

_____________________________________________________________________

If No then Why? ________________________________________________________

3) Which type of Company do you prefer? Yes No

T.Y.B.B.I 3

4) What age would like to take or have taken health insurance? 20-40 40-60

5) How much is the Premium Paid _________________________________________

Which Company? _______________________________________________________

6) How much is the medical cost annually?

40,000-60,000 60,000-80,000 1,00,000 & Above

7) Your Views on Health Insurance Scheme

A) Level of satisfaction of the scheme __________________________________

B) Quality service provided ___________________________________________

C) Agent & Customer Relationship ______________________________________

INTRODUCTION

India is the first largest country in terms of purchasing power parity and is

considered one of the fastest emerging economics in the world. However, its

health status remains a major concern. Infant mortality rate of India is as high

as 54.6 while it is around 23 for China. Similarly life expectancy at birth for India

is around 64.7 while it is in the range of 77.80 for many countries. Insurance

generally comprises of life and non-life (general) insurance. Health Insurance in

India comes under general insurance. The development of health insurance in

India therefore, has to be seen in the backdrop of the development of insurance

in general. Healthcare, with global revenue of over Rs. 2.75 trillion is the

largest industry in the world. The nation of India with a population of 1000

million experiences a vast inequity that exists sin the healthcare industry with

barely 3 percent of the population covered by some form of health insurance,

either social or private. Health insurance schemes are increasingly recognized

as preferable mechanisms to finance health care provision. The option of

insurance seems to be promising alternatives as its pools and transfers risk of

T.Y.B.B.I 4

unforeseeable health care costs for a pre-determined fixed premium. We do not

social security system, appropriate Health Insurance Schemes for different

sections of the society particularly underprivileged and the poor is an urgent

need of the hour. Insurance penetration being very low and health insurance’s

share being minimal in the existing situation, the vast majority of the

populations are outside the existing Health Insurance System. With the opening

up of the insurance market for private entry and the accompanying hype it is

being hoped that in the days to come, the teeming population of India can look

for health coverage from an array of insurance providers that too at an

affordable price. The present series on health and group insurance therefore

attempts to trace the significance of health insurance and its basic tenets in

preserving the economic value of the lives of the citizens.

ORIGIN OF HEALTH INSURANCE

The concept of health insurance was proposed in 1964 by Hugh the Elder

chamberlen form the Peter Chamberlen family. In the late 19th century, early

health insurance was actually disability insurance, in the sense that it covered

only the cost of emergency care for injuries that could led to a disability. 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. Patients were expected to pay all other healthcare costs

out of their own packets, 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. It is not an easy task to regulated health

insurance. Some countries including the US had to launch war-like operation to

unearth large scale frauds. Malpractices in health Insurance range from

excessive billing to exaggerating severity of hospital patient conditions.

T.Y.B.B.I 5

In India, “Health Insurance is not of recent origin. Concern for loss resulting

from accident and illness can be traced to ancient civilizations. In fact, one of

the earliest forms of health insurance may have been based on the ancient

custom of paying the doctor while in good health and discontinuing payment

during periods of illness. This custom existed in South East Asian countries

including India. The development of health insurance in existing form in India is

based on pattern followed in Europe and America. Health Insurance or medical

insurance schemes had developed in India due to industrial relations problems

between the employer and the employees. The Corporate Houses used to

offer core and non-core benefits to the employees. The insurance policies

were granted to large Corporate Houses purely on an accommodation basis.

The cover usually offered to the employees was in the nature of hospitalization

and domiciliary treatment for dental and non-surgical eye treatment. The

benefits used to be for very small amount. There was no scheme for

individuals and families.

In 1981, the Apex Body of Public Sector Insurance Companies i.e. GIC

designed a limited cover for individuals and families for covering their

hospitalization needs. This was replaced by a mediclaim policy in the year

1986 under a market agreement to provide insurance benefits to individuals

and groups under a group mediclaim policy. The scheme so introduced was

modified in 1991 and 1996 in the light of experience and suggestions received

from the insuring public and medical fraternity. The benefit provided under the

policy was on reimbursement basis on occurrence of a major calamity in the

form of accident/sickness to an insured person.

The first Mediclaim Insurance Scheme was introduced by GIC in 1986 for

people not covered under the above scheme. Prior to 1986, cover against

sickness and diseases were provided by extension of Personal Accident

Policy. It is interesting to note that even after nearly two decades of health

T.Y.B.B.I 6

insurance, the population covered by health insurance is only 1% of the total

population. The following table demonstrates the progress of health insurance

in India:

:

Year People Covered(lacs)% increase

Premiums (Rs. In Crs.)

Per Capita Premium (Rs.)

1999-00 48.94 380 777

2000-01 56.23 519 923

2001-02 77.84 742 953

2002-03 88.02 895 994

2003-04 109.95 1024 931

MEANING AND DEFINITION

Health insurance insures you and your family against sudden medical

expenses. A medical emergency can arise due to sudden illness or injury. With

medical expenses rising, a health insurance policy would help you sail through

a bad patch. Your medical expenses will be taken care of by the Insurance

company provided you pay your premium regularly.

World health organization defines health as complete physical, mental and

social well being and not merely the absence of disease and injury. As per

WHO, a country’s Health Systems comprise of all the organizations,

institutions and resources that are devoted to produce health actions

New India Assurance Company Limited, stressing on the social security aspect

of health insurance, in their written note, stated; “Basically the philosophy

behind the concept of Health Insurance is to provide protection against

uncertainty of illness /accident by spreading the risk based on the principle that

T.Y.B.B.I 7

“what is highly unpredictable for an individual is predictable for a group of

individuals. Thus, insurance is a system by which Healthcare expenditure of

few unfortunate individuals, who suffer from illness/injury, is shared by many

fortunate ones who are insured and exposed to the same risk but remain

healthy.”

Oriental Insurance Company, emphasizing the financial security aspects of

health insurance, in their written note, stated; “Health insurance is a financial

mechanism that exists to provide protection to individuals and households from

hospitalization expenses incurred as a result of unexpected illness or injury.

Under the mechanism, the insurer agrees to compensate or guarantees the

insured person against loss by specified contingent event and provide financial

coverage for which the insured party pays a premium. The case for health

insurance rests on three grounds: a) Illness can not be predicted; b) Financial

burden of hospitalization is high and cannot be planned; c) The proportion of

people requiring hospitalization due to illness or injury in any large population

is small thus enabling risk pooling. Pooling of risks, resources, and benefits is

the hall mark of any insurance system.

Form Scheme Beneficiar

ies in lacs

Social

/Mandatory

Schemes

The Employees State Insurance Scheme

Central Government Health Scheme

State Sponsored Schemes

(This figure may be enhanced with the recent

coverage extended by Assam Government to its

undeserving population)

253.

43.

5.

Employer Railways Health Scheme 80.

T.Y.B.B.I 8

based

Schemes

Defense employees

Ex-Serviceman

Mining & Plantations (Public Sector)

Employers run facilities/reimbursement schemes

of private sector/public sector.

66.

75.

40.

60/80.

Commercial

Schemes

Pubic Sector Non-Life Companies

Private Sector non-life Companies

Health Segment of Life Insurance companies

100.

8.

2.3

Community

Schemes

Community health schemes by NGOs and others 30.

WHY HEALTH INSURANCE IS A MUST?

Health insurance has become a necessity today because it plays a major role

in health care. This is because one never knows when illnesses may strike.

And in such cases hospitalization and medication expenses can be

unaffordable. Health insurance can prove to be a source of support by taking

care of the financial burden of your family may have to go through.

Advancement in science and technology has brought about a revolutionary

change in mans life. It has reduced mortality rates and increased his life span

but at the same time has given rise to a number of other ills. Increasing

pollution levels especially in metros, stress and strain at workplace, cut throat

competition taking its toll are some of the harsh realities.

Pollution levels in certain areas are unimaginably high and the areas are

nothing short of gas chambers. An individual going to his place of work has to

spend long hours in queues, inhaling the vehicular emissions of poisonous

T.Y.B.B.I 9

carbon monoxide gases affecting his health in the long run. Besides accidents

on roads are common features.

In such instances timely affordable medical help is the need of the hour. But

this may be easier said than done. Treatment for major illnesses or accidents

can be unaffordable and may leave you poorer by thousands of rupees.

It is especially worse when the patient needs specialized care. Expenses are

exorbitant and the situation leaves you mentally devastated also burning a

deep hole in your pocket. The family balance is affected, all those comforts of

life have to be given up and your family has to make up with bare minimum

necessities only.

Health insurance takes care of you in such circumstances. It will help you tackle

such situations with ease by providing you with timely and adequate medical

care. The financial burden of footing huge medical bills is taken care of by

health insurance. Besides if the accident causes life long disability to the

patient, the earning member of the family, the insurance company will come to

the rescue.

Primary health care - a basic necessity and right of every individual, is today

only a distant dream. The government has done precious little in this regard for

the masses and hence the private sector has taken up the challenge to exploit

the potential of the 92,400 crore healthcare industry.

With educational levels going up people are becoming increasingly aware of

the need of timely healthcare facilities. But at the same time the high costs of

private health care is a major deterrent. The need of the hour is affordable

health care for all in order that even the people in remote villages can have

access to it.

Insurer 2003-2004 2004-2005

Fire Marine Motor Health Fire Marine Motor Health

T.Y.B.B.I 10

Public sect -33.3 -13.32 13.46 28.89 -1.46 2.85 9.30 17.79

New India -10.9 -21.90 8.06 54.92 2.54 -2.31 8.33 27.23

National -1.63 -13.14 29.73 42.36 3.05 34.93 19.02 26.28

United India 4.67 -11.32 3.87 10.85 -6.69 -18.57 -7.79 5.24

Oriental -1.62 -4.01 12.28 7.78 -5.61 10.0 14.80 6.58

Pvt. Sector 63.5 120.85 86.67 130.3 28.7 48.56 70.39 114.21

Total 6.57 -3.92 18.66 35.13 5.39 10.22 16.13 27.91

INDIAN SCENARIO

In India, presently the health insurance exists primarily in the form of Mediclaim

policy offered to the individual or to any group, association or corporate bodies.

The government spending is less than 25 percent against the average spending

of 30-40 percent in other developing countries. There is need for regulation for

the self-funded health plans by major employers who may not find insurance as a

cost effective alternative. According to WHO figures (2002), total health

expenditures represent 6.1% of India’s GDP, but most of this amount,

representing 4.8% of GDP is the share of private expenditures and only 1.3% of

GDP is public expenditure. Of the 4.8% private expenditure, 98.5% are out-of-

pocket spending of users. In other words, 77.5% of total expenditure for health

care costs is paid by individuals or households (WHO, 2005) and this huge

expenditure does not pass through any pooling mechanism. Access to health

T.Y.B.B.I 11

care in India is still low and with only less than 1% of GDP allotted to public

health, there is lack of adequate health infrastructure.

.Penetration of Mediclaim is currently done by state-owned insurance companies,

covering only about 2.5 million people i.e. less than 0.50 percent of the country’s

population. There are some health insurance schemes issued by four public

sector general insurance companies, namely, National Insurance Company

Limited (NICL), New India Assurance Company Limited (NIACL), Oriental

Insurance Company Limited (OICL) and United India Insurance Company

Limited (UIICL). Besides these four companies, Life Insurance Corporation

(LIC) of India also offers a few health covers in a limited manner. At present,

82.44% of the entire commercial health insurance business in the country is

shared between public companies, while private firms manage the rest 17.56%.

The number of beneficiaries under the various forms of health insurance in India

is given in the table below

InsurerHealth premium (in Rs Crore)2005

Health premium as a % age of total non-life business 2004-2005

Growth of health

premium (2004-

2005)%

ICICI Lombard 118.78 13.4 257.0Bajaj Allianz 70.39 8.3 242.2Royal Sundaram 30.02 9.1 88.8IFFCO Tokio 28.37 5.6 73.3Tata AIG 26.64 5.7 35.3Cholamdalam 20.12 11.8Reliance 7.98 4.9 2.4HDFC Chubb 1.97 1.1Private Sector 304.27 8.6 148.0New India 504.28 11.9 43.9National 364.29 9.5 26.3United India 294.19 10.0 5.2Oriental 265.14 8.7 13.9

T.Y.B.B.I 12

Public Sector 1427.9 9.8 24.0Total 1732.17 9.6 36.0

Paradoxically, the medical professionals are resisting standardization in

treatment coding known as ICD and cost cutting measures for making the

medical treatment affordable to the ailing. They tend to forget that that future

growth of healthcare in a country like India would depend upon the

development of health insurance model. The need for support from the health

domain members/players and the ministry of health both at the centre and the

state cannot be overemphasized. However given the state of affairs of

regulations in the healthcare sector in India, it is doubtful whether full fledged

insurance companies would like to take healthcare risks manageable so that

insurers may find it worthwhile to move into the sector in a big way.

ISSUES AND CONCERNS

All over the world, insurance coverage is being extended through 3 basic

models: i) public financing and public delivery as practiced in the UK until its

recent reforms, ii) private financing and public delivery as the model practiced in

the US, Singapore, and Taiwan and iii) public financing and private delivery as

the Bismarck model, idealized national (public or social) health insurance

scheme practiced in Canada, Germany, France, Japan and China.

Health care insurance is one such alternative that covers the risk of payment for

health care. William C Hsiao (1992) of the Harvard University undertook a

comparative study of the three models and concluded that "public financing and

private delivery" of health care as practiced in Canada is the best among the 3

models in terms of performance, health outcome, public satisfaction and access

T.Y.B.B.I 13

to health. There is however, a school of thought that doubts the suitability of

this model to Indian conditions on the grounds that:

i. The size of the population is far more than any of the countries where it is

being currently practiced efficiently.

ii. The level of the per capita income is far lower than in other countries.

iii. The type of federal set up India has is different from the rest.

True, these apprehensions cannot simply be shunned off but one redeeming

feature of the Indian system is that it has the necessary infrastructure - sizeable

public hospitals, not-for-profit voluntary organizations plus highly skilled

professionals in different kinds of medical services and decades of experience

in managing insurance business. What is therefore needed is a better link-up of

these available resources with the ordinary consumer at an affordable price.

With the opening up of the insurance market for private entry and the

accompanying hype it is being hoped that in the days to come, the teeming

population of India can look for health coverage from an array of insurance

providers that too at an affordable price. The common negative factors which

evolve after looking at various health coverage phase are

1. Quality of service when facilities are owned by the plan giver. ESIS, CGHS is

grossly inferior Reimbursement delays – in case out of pocket spending and or

rejections of claims

2. Limitations of services –Either monetary restriction on the amount available per

year or non-comprehensive care of certain pre-existing & chronic ailments.

3. Inadequate information regarding health, ailment, procedures & treatments,

cost and outcome

4. Provider malpractices

5. Coatings for comprehensive total care

T.Y.B.B.I 14

6. The Low Level of Medical Penetration in India

Health care spend in India is considerably lower than that in other countries..

US UK Mexico Brazil China India Access to health

care service

providers and

availability of

physicians is one

part of the issue

Financing for

health care is the

other aspect of

the issue

Life expectancy

(avg. # of years)

77.4 78.3 72.6 71.4 72.5 64.0

# of Physicians

per 1,000 people

2.7 1.9 1.7 1.2 1.7 0.4

Healthcare spend

(USD per capital

5365 3036 336 236 62 32

Healthcare spend

(% of GDP)

13.2 8.4 5.5 7.5 5.0 5.3

LICENSING HEALTH INSURANCE IN INDIA

Health insurance is one of the most regulated forms of insurance business in

those countries where it plays a dominant role in financing of health

expenditures. Spiraling healthcare costs and rapid technological advances in

the medical field have triggered the need for cost-containment by the health

insurers without sacrificing the interest of the policyholders or claimants. The

nature of loss in health insurance might result in differences of opinion. All

these call for intervention by regulatory authorities to protect the consumers

However, under the Insurance Regulatory Development Authority (IRDA) in

India, the powers of licensing and regulatory insurance, including health

insurance, has been mandated under an act parliament.

T.Y.B.B.I 15

Despite such a regulatory authority, very little has been done by IRDA to lay

down ground rules for hospitals which run health plans and may be required to

register themselves as insurers or hospital managed organizations (HMO). It

may be pertinent to note that in similar situation, the US federal and state

health insurance regulation prescribe elaborate legal framework to ensure

quality standards for rate regulation, cost containment, etc.

HEALTH SECTOR FINANCING

One of the major goals for the future health system in India is to ensure good

health for the population through access to high quality services. To achieve

this goal, there is a need to enlarge coverage and rationalize the current

mechanisms for collective health financing. There are at least six dimensions of

the choice of health financing policies:

Identification of beneficiaries

Benefits covered by insurance source(s) of financing

Methods for provider payment institutions that pay providers

Role of public and private sectors in the delivery of service

T.Y.B.B.I 16

The world Health Organization has defined possible approach to financing of health

expenditure…

HEALTH INSURANCE AS A HEALTH FINANCING TOOL

Attracting additional money for health additional resources may be available

through insurance because firstly, consumers are more enthusiastic about

paying for health insurance than paying general taxations, the benefits are

specific and viable and secondly, consumers are more able and prefer, to pay

regular, affordable premiums rather than paying fees for treatment when they

are ill. Getting better value for money (or increasing efficiency)

T.Y.B.B.I

♠Using central/state

revenue for health

♠Compulsory premium

contributors to health

♠Channeling loans, grants

etc. to healthcare

♠Payments to health are

providers for service

♠Premium contributions

towards health support

♦Tax-based and

out-of-pocket

expenses are direct

expenses related

outlays

♦Health Ins.

Involves a fund

pool for future

healthcare

Tax funded

SocialSecurity

Externally funded

Public

Total healthExpenditure

Out-of-Pocket

PrivateHealth Ins

Externally sourced

Private

17

Improving the quality and targeting of healthcare (increasing effectiveness)

1. A greater explicitness and viability of spending on health services occurs as a

result of insurance.

2. The third party institution can specify in contracts the kinds of healthcare that to

be provided and can therefore concentrate on providing cost effectiveness

3. Consumers, and their representatives, will demand better quality care because

they can see a definite link between their payments and services

OPPORTUNITIES AND CHALLENGES

The total percentage of population covered under any sort of medical coverage

is in single digits which is woefully inadequate. Further, most of these covered

persons belong to the organized sector mainly in sectors like Railways,

Defence, Central Government, etc. Within this, only a negligible percentage of

the persons are covered under private health insurance. If we are seriously

looking at a problem is by resorting to alternative avenues like private health

insurance. It is usually mentioned that it is difficult to bring the rural, illiterate

folk under the umbrella of insurance. When it comes to health insurance, this

argument would not hold any credence as many of the so-called educated

people themselves do not understand the importance of having such protection.

Thus, there is a monumental task of convincing different classes of the society

about insurance in general and health insurance in particular.

Let us take a look at how health, as a class, has been performing in the Indian

insurance market. A commercial health insurance policy has been introduced in

the market in the late 1980s; and thus it remains one of the youngest classes to

be introduced in the industry. In spite of that, it is third largest class in terms

of gross premium(Rs.78,831 lakh) earned for the quarter-ended June

2006, after Motor (2,39,117) and Fire (Rs. 1,63,286). Further, even if one

considers the growth percentage of any class, health has grown by about 44%

T.Y.B.B.I 18

for the one-year period (June 05 to June 06). In absolute terms, it has

registered a growth of Rs.25, 303 lakh from Rs. 53,528 lakh. This compares

very favorably with the overall performance of the industry which registered a

growth of Rs.1,24,906 lakh, from Rs.5,38,084.32 to Rs.6,62,900.78; which is

around 23%. In the process, it has overtaken more conventional classes of

insurance like marine and engineering. Looking at in isolation, it has a

commendable performance.

But when one looks at the percentage of the population who actually go for

commercial health insurance, particularly in the rural areas; one could easily

realize that something grossly wrong with the way private health insurance is

being accessed in the country.

On the contrary, it is commonplace to observe some member or the other in

many families to be hospitalized in a nearby town and in most of these cases;

they end up paying huge amounts of hospital hills. Going further, the funding for

such casualties is provided by the ubiquitous moneylender; and thus they

become unfortunate victims of a debt trap. Looking at the importance of

providing healthcare for the masses, any amount of hard work should not be

deterrent. In accomplishing this huge task, there is a role for everyone to

contribute in whatever manner they can.

NEED FOR PRIORITIES

Further, there is a huge emphasis on curative care- both in the case of

healthcare management of the country as also when it comes to providing

commercial health insurance. Over a period of time, we have managed to

eradicate some of the killer diseases like smallpox. Further, we have also been

able to spread awareness about the maladies of afflictions like polio; and

T.Y.B.B.I 19

promote the administration of vaccinations against such invalidating conditions

by promoting strong campaigns. This augurs well for the health of the country,

at least on the area of preventing such diseases. But when compared to some

of the other third world countries, we are way behind in tackling diseases like

malaria, water-borne infections etc. there is a certain need to achieve better

progress in this area; and given the means, it is not impossible altogether; it is

just that the right focus and direction is to be targeted.

HEALTH CARE PRODUCTS

The following are brief descriptions of some of the major health care products

available in world markets today.

Capital Disability Policies

Disability benefits cover the financial risk to the insured of his/her becoming

disabled and are expressed either as occupational disability or the inability to

pursue any activity for a living. Benefits are payable in the form of a lump sum

or as an income.

Permanent Health Insurance Policies

Disability income benefits pay a regular income should the insured experience

a loss of income upon becoming fully or partially unable to follow their own or

similar occupation. The benefit usually pays an income either until the insured

has recovered sufficiently from the temporary disability to return to work, or has

died or until normal retirement age. A waiting period is usually imposed prior to

the commencement of the benefit payment.

Dread Disease (or Critical Illness Policies)

A Dread disease benefit offers a payment (sometimes an accelerated death

payment) on a confirmed diagnosis of a dread disease. This benefit is usually

T.Y.B.B.I 20

valid in the case of a limited number of listed diseases, which often include the

following diseases: Heart attack, Stroke, Coronary artery disease requiring

surgery, Cancer, Kidney failure, Surgery for a disease of the aorta,

Replacement of a heart value, Organ transplant, Coma

Other diseases can also be included and the percentage of the sum assured

paid for each disease may be related to the severity of the disease.

Long Term Care Policies

This policy provides financial security against the risk of needing either home

or nursing-home care as an elderly person. Premiums will be paid regularly

and will cease either when benefit payments commence or earlier (e.g. at a

given age). A group version of this product would enable an employer to

provide long term care to retiring employees and their spouses.

Hospital Cash Policies

Hospital Cash policies usually provide the insured with a daily cash amount for

the duration of an insured’s stay in the hospital. Further benefits are often

added in order to cover the additional costs associated with any visit to the

hospital. These would often be in the form of a major medical expense policy

Major Medical Expense Policies

Major Medical Expense’s policies often complement a hospital cash policy.

The policy would cover the costs associated with specified medical

procedures. These would include the cost of any surgery or follow-up visits to a

Doctor. The actual benefit would normally be based on a pre-determined fee

scale for various different procedures.

T.Y.B.B.I 21

GOVERNMENT/STATE BASED SYSTEMS

The best documented and largest system of health care delivery in India is the

diverse network of hospitals, primary health Centres, community health centres,

dispensaries and speciality facilities financed and managed by the Central and

State local Governments. These facilities are officially available to the entire

population either free or for nominal charges. Along with some other networks

of village health workers, maternal and child health programmes and speciality

disease prevention programmes these public facilities carry out a central role in

India’s primary health care system short of durgs and essential supplies and

that they sometimes suffer from low morale and inadequate motivation.

The health facilities made available to the public are managed and operated

under the authority of central and state agencies. The state governments

mostly own and mange the public sector delivery system and have to bear the

costs of operation. But the Central Government plays a major role on the

planning, financing and transfer for resources that determine new investment in

health facilities and specialized programmes. Much of the funding for health

facilities originates from the Union Ministry of Health and Family Welfare and is

channeled to the state governments, which retain considerable authority for the

spending decisions. Over the years, the Central Government have been the

T.Y.B.B.I 22

main source of funds for the primary health care facilities, whereas the states

bear the major responsibility of recurrent costs, especially the costs of running

hospitals. This system has added to the overall inefficiency of public heath

facilities.

CENTRAL GOVERNMENT HEALTH SCHEME

The Central Government Health Scheme (CGHS) was

introduced in 1954 as a contributory health scheme to provide comprehensive

medical care to the central government employees and their families. It was

basically designed to replace the cumbersome and expensive system of

reimbursements (Ministry of Health and Family Welfare, Annual Report 1993-

94). Separate dispensaries are maintained for the exclusive use of the central

government employees covered by the scheme. Over the years, the coverage

has grown substantially with provision for the non-allopathic system of

medicines as well as for allopathic. In addition, the CGHS reimburses patients

for part of their out of pocket costs on treatment at the government hospitals

and some other facilities. The list of beneficiaries includes all categories of

current as well as former government employees, members of parliament and

so on. The CGHS has been in the recent past, widely criticized from the point of

view of quality and accessibility.

EMPLOYEES STATE INSURANCE SCHEME

Established in 1948, the Employees State Insurance Scheme

(ESIS) is an insurance system which provides both the cash and the medical

benefits. It is managed by the Employees State Insurance Corporation (ESIC),

T.Y.B.B.I 23

a wholly government-owned enterprise. It was conceived as a compulsory

social security benefit for workers in the formal sector. It benefits 33.4 million

workers with income less than Rs.6500/- a month along with their families.

Since 1989 the schemes has been expanded, and it now includes all such

factories which are ‘not using power’ and employing 20 or more persons. Mines

and plantations are explicitly excluded form coverage under the ESIS Act.

EMPLOYER-MANAGED SYSTEMS

“Employer-managed health facilities” and the “reimbursement of health

expenses by employers” are the other means of health insurance in India.

Generally, the public sector undertakings and big industrial houses have their

own dispensary and hospitals and provide medicines, etc, across the counter,

usually within the company premises township. These include defence

services, educational institutions, particularly universities also provides medical

services to their employees.

In addition, there are various medical reimbursement plains offered by

employees for private medical expenses in the private sector including

commercial banks and autonomous institutions. Also, in some organization we

may find a self-insurance system known as medical benefit or medical

allowance scheme. Under this scheme, employees incurring medical expenses

are required to submit their claims to their employees for reimbursement, and

reimbursements are not linked to their individual contribution. Such coverage’s

generally vary according to the employee’s salary or designation. Overall, the

performance of these systems in India has been satisfactory.

NGO SYSTEMS

T.Y.B.B.I 24

Health facilities are also provided by voluntary and charitable or Non-

government organizations (NGOs). Some of the important NGOs are Child In

Need Institute (CINI),

Self-employed Women’s Association (SEWA), Streehitkarni and Parivar Seva

Sanstha. The health care facilities offered by these organizations are a part of

their main objectives. Though, these are not exactly health insurance

programmes, yet they have potential to generate awareness and associate

themselves with the major health insurance.

MARKET BASED SYSTEMS

A. GIC

Mediclaim Coverage’s

The GIC holds a major share in the market-based health insurance segment. It

introduced the standard “Mediclaim” health insurance scheme in 1986, and

become operational in 1987. This product was later on modified in 1997 to

allow for premium differentials for various age group meant for both individuals

and groups. As on date, the GIC and its subsidiaries offer the following

products:

A.1 Mediclaim or Hospitalization Benefit Insurance Policy

Suitability

Anyone in the age group of 5 to 80 years can take the policy. Children in the

age group below the age of 5 years can also be covered from the age of 3

months onwards provided one or both of the parents are covered concurrently.

Higher limits are permitted of the policy is in renewal for the preceding three

years. Suitable for persons of any nationality but treatment should be availed of

within the country and the claim is paid in Indian currency/foreign currency.

T.Y.B.B.I 25

Salient Features

Provides cover, which takes care of medical expenses following hospitalization

from sudden illness or accident

Cover extends to pre-hospitalization and post-hospitalization for periods of 30

days and 60 days respectively.

Domiciliary hospitalization is also covered

Benefits

Reimbursement of medical expenses

Discount in insurance premium is allowed on family package, cumulative bonus

and health check. In case of family package cover, a single member can avail

of the entire policy limits.

The premium paid by a cheque upto a maximum of Rs. 10,000 is totally exempt

from income tax.

Domiciliary Hospitalization

The term means that a patient can be treated at home when he is not in a fit

condition to be moved to the hospital or where is no accommodation in the

specialist hospital provided

The treatment was for a period not less than 3 days.

The sub-limits of sum insured towards domiciliary hospitalization are furnished

in the sum insured and premium schedules.

Exclusions

T.Y.B.B.I 26

The facility is not available if any illness is contracted within 30 days from the

commencement of risk except in case of an accident.

Any pre-existing diseases

Treatment for contracts, benign prostatic hypertrophy, hydrocele, congenital

internal diseases, fistula in anus, piles sinusitis and related disorders for 1st

year of policy

AIDS or conditions of similar kind

Requirements

A completed proposal form. If the prosper is a ‘Diabetic’, a separate

questionnaire completed by the family physician.

A.2 BHAVISHYA AROGYA INSURANCE POLICY

Suitability

Bhavishya Arogya is a life term policy where medical benefits are made

available after retirement of the insured. Therefore, by paying premiums during

the earning period, one can make a provision for medical benefits after

retirement. Persons in the age group- of 25 to 55 years are eligible for this

policy.

Salient Features

The policy provides hospitalization benefits for lifetime after retirement’s age of

the insured.

Premiums can be paid in equated annual installments up to the age of

retirement

Premiums can also be remitted in lumpsum on one time basis. Discount is

offered for one time payment

T.Y.B.B.I 27

Benefits

The policy comes into force after retirement and provides for hospitalization and

domiciliary hospitalization benefits, following an accident or sickness.

Other conditions

The minimum sum to be insured is Rs. 50,000 and can be increased in

multiples of Rs.10, 000 as a unit, thereafter.

For every Rs. 10,000 increase of sum insured, the premium is loaded by 20%

Maximum sum insured is Rs. 2 lakh.

After commencement of the risk (i.e. after retirement) cumulative bonus @ 5%

for every successive claim free year is added upto a maximum of 50%.

In case of death of insured before retirement, refund of premium will be at a

pre-determined scale and it is payable to nominee/assignee.

In the event of voluntary cancellation of the policy, the refunds will be75% of the

set scales applicable for death claims, provided there is no claim under the

policy.

Requirements

A completed proposal form

Proof of age is necessary as the payment of premium depends on the age

A.3 JAN AROGYA BIMA POLICY

This policy was introduced in the year-1998. It is designed to provide

hospitalization insurance to poorer sections of the society.

The coverage is along the lines of the individual mediclaim policy except that

cumulative bonus and medical check up benefits are not included.

T.Y.B.B.I 28

The sum insured per insured person is restricted to Rs. 5000/-. Premium up to

Rs. 10000/- qualifies for tax benefit under Section 80D of the Income Tax Act.

Service tax is not applicable to the policy. The premium payable as per the

following table

Age of the person Up to 45

years

46-55 56-65 66-70

Head of the family 70 100 120 140

Spouse 70 100 120 140

Dependent child up to 25 years 190 250 290 330

For family of 2+1 dependent children 190 250 290 330

For family of 2+2 dependent children 240 300 340 380

The policy is available to individuals and family members by duly completing

the proposal form. The age limit is 5 to 70 years.

Children between the age of 3 months and 5 years can be covered provided

one or both parents are covered concurrently. Past two years business

performance of the insurance com under the sche Jan Arogya Bima Policy

Year Company Target

Rs. Crore

Premium

In Rs. Crore

Claim

Incurred

Claim

Ratio

2004-05

NICL 1.66 1.54 88.20

OICL 0.98 0.70 70.70

UIICL 0.54 0.86 159.00

NIACL 1.00 0.75 1.03 137.33

TOTAL 3.93 4.13 105.08

2003-04

NICL 0.23 0.33 102.03

OICL 0.57 0.17 29.40

UIICL 0.55 0.87 158.00

NIACL 0.75 0.52 0.68 131.40

T.Y.B.B.I 29

TOTAL 1.87 2.05 58.74

Past two year’s business performance of the Bhavishya Arogya Policy

Year Company Target

Rs. Crore

Premium

In Rs. Crore

Claim

Incurred

Claim

Ratio

OICL 0.12 0.01 14

UIICL

TOTAL 0.12 0.01 14

OICL 0.08

UIICL 0.021 0.018 87

TOTAL 0.101 0.018 87

B. LIC COVERAGE’S

The Life Insurance Cooperation of India introduced a special insurance

programme in 1983 which covered medical expenses for only four dreaded

diseases. It was withdrawn and introduced subsequently in 1995. At present

the modified versions are available in the form of two products viz. Jeevan

Asha and Asha Deep

I. Jeevan Asha

Features

Open ended scheme

Covers many surgical procedure

Fixed benefits for surgical treatment can be availed twice (subject to

conditions)

Exclusive Double/Triple accident benefit.

Option to switch over from existing Jeevan Asha plan

Suitable for

T.Y.B.B.I 30

The Jeevan Asha II plan is apt for people who whose family history tends to

show hereditary lineage of maladies and afflictions that have required major or

minor surgery from time to time.

Special Features

Under the Jeevan Asha plan, the major surgical procedures covered for are:

Nervous system (non-malignant causes)

Respiratory system

Cardiovascular system

Haemic and lymphatic system

Endocrine & Ocular system

II. Asha Deep

Features

Cover the risk of four major ailments namely, Cancer (malignant), Paralytic

stroke resulting in permanent disability, renal failure of either kidneys or

Coronary artery diseases where by-pass surgery has been done.

Suitable for:

The Asha Deep II (with profits) policy is best suited for people if they anticipant

or have a family history of serious diseases like Cancer, Paralysis, Renal failure

and Coronary disease.

Special Features

During the term of the policy, if the life assured is afflicted by any of the major

ailments listed above and the same is established as per rules (in case of

Coronary artery disease, the life assured must have undergone the by-pass

surgery), the policyholder will be eligible for the following benefits, the policy is

T.Y.B.B.I 31

in force for the full sum assured. Immediate payment of 50% of the sum

assured

Payment of an amount equal to 10% of the sum assured, every year

commencing from the policy anniversary falling on or after the date of affliction

and ending with the policy anniversary preceding the date of maturity or the

date of death of the life assured whichever is earlier.

Payment of balance 50% of the sum assured and vested bonuses on the date

of maturity or on death of life assured, whichever is earlier. The bonuses will be

calculated on the full sum assured even though 50% of the sum assured would

have been paid earlier

A lien for a period of one year will be imposed on all policies on all policies

under this plan. If the life assured does not get afflicted by any of the diseases

mentioned above, the full sum assured and vested bonuses will be paid on the

date of maturity or on death of the life assured, whichever is earlier.

Benefits

1. Survival Benefits

2. Sum Assured and vested Bonus on maturity.

Death Benefits

Natural: If the life assured is not afflicted by any of the specified ailments, the

legal heirs get the full Sum assured + accrued bonus

Accidental: Accidental benefits available to the life assured whether afflicted or

not afflicted by any of the specified ailments.

T.Y.B.B.I 32

MEDICLAIM - AT A GLANCE

The Policy basically covers reimbursement of expenses of hospitalization and

domiciliary hospitalization for illness, diseases or injuries sustained. This Policy

is available to persons between the age of 5 and 80 years (children between

the age group of 3 months to 5 years can be covered if one or both their

parents are also covered concurrently).

Basic Cover

Pre hospitalization Benefits

Post hospitalization Benefits

Sponsored Health Check Ups

Discount in Premium for family cover

Basic Cover

The insured person can claim reimbursement for the following expenditures,

provided they are reasonable and necessary incurred:

Room expenses

T.Y.B.B.I 33

 Nursing expenses

 Surgeon, anesthetist, consultants, specialists fees

 Artificial limbs, cost of organs, O.T charges, medicines and drugs and

similar expenses

Note: Under no circumstance will the reimbursement exceed the sum

insured. In case of a Family Mediclaim Policy, the claim cannot exceed the

sum insured specified against each person in the proposal form

Any relevant medical expense incurred within 30 days prior to

hospitalization will also be covered under this policy

Post Hospitalization Benefits

Any relevant medical expense incurred within 60 days after hospitalization will

be considered for reimbursement under this policy.

Sponsored Health Check Ups

A person insured under this scheme is eligible for reimbursement of the cost of

a complete medical check up (subject to 1% of average sum insured). This

benefit can be availed once at the end of a block of every four underwritten -

claim free years. To be eligible for this benefit you must ensure that the policy is

renewed within a week from its expiry.

Discount in Premium- for family cover

If you take a Mediclaim Policy to cover yourself and one or more of the

following persons in your family, you get a 10 % discount in the total premium

payable.

Spouse

Dependent children

Dependent parents

T.Y.B.B.I 34

OVERSEAS MEDICLAIM

At a glance you need Videsh Yatra Mitra Policy if you are going abroad on

business or holiday. The benefits under policy include:

I. General Insurance Plan

Personal Accident Cover

Medical Expenses and Repatriation

Cover Loss of Checked in Baggage

Cover Delay of Checked in Baggage

Cover Loss of Passport

Personal Liability Cover

II. Special Insurance Plans for:

Corporate Frequent Traveler’s

Overseas Journey – Business and holiday

What's more, while you pay the premium in Indian Rupees, the claims(while

abroad) are paid in foreign currency!

1. Personal Accident Cover

T.Y.B.B.I 35

If the insured person suffers any bodily injury during the overseas trip and such

injury, within 12 months of its occurrence, is the sole cause of death, loss of

sight or limbs of the insured, the Insurance Company will pay up to US$ 50,000

as compensation.

Note: No claim will be satisfied in excess of US$ 2000, on death of the insured

person, if he/she was less than 16 years of age at the time of affecting the

insurance.

2. Medical Expenses & Repatriation

The cover provided by the Insurance Company extends to US$ 500,000 (for

worldwide travel including USA & Canada) and US$ 250,000 (for worldwide

travel excluding USA & Canada). It is paid to the insured in respect of any

permissible and necessary medical expenses that are borne by him outside

India on account of any injury or sickness suffered during the period of

insurance.

If "Mercury" recommends that continued treatment in India is appropriate, then

(notwithstanding anything specified above), the insurance is extended to cover

medical expenses incurred in India also. These expenses will be paid only

towards treatment undergone within 90 days from the date on which the injury

or illness first manifested itself.

Medical Expenses Covered

Physician's services, hospital and medical services and local ambulance

services.

Up to US$ 225 per dental service taken only for immediate relief of

toothache. Dental care rendered necessary as a result of an accident that is

T.Y.B.B.I 36

covered, shall be reimbursed subject to the limit of cover under Personal

Accident.

Expenses incurred for emergency medical evacuation including

transportation and medical care en route.

If the insured person dies abroad, the expenses incurred for the preparation

and air transportation of the remains to India or an equivalent amount for

their local burial or cremation.

Specific Conditions

Claims will be reimbursed only to the extent they are reasonable and

customarily incurred whether in case of medical or dental attention or

transportation.

"Mercury" and their Medical Advisors must approve medical evacuation and

transportation in advance.

Medical expenses that could have been postponed till the insured returned

to India will not be reimbursed. The attending physician and the Medical

Advisors shall decide which expenses can be and which can't be delayed.

US$ 100 is the deductible amount and any expense below this amount will

have to be borne by the insured person. Further, it also means that from

every claim this amount will be deducted before making settlement.

Claims in respect of cosmetic surgery will not be paid unless it is rendered

necessary as a result of a covered accident.

Routine physical examinations and any other examinations that are not

undertaken as result of impairment of normal health shall not be covered.

Pregnancy and related complications are not covered under this policy.

Where the insured person is unable to present himself or herself for the

medical examination (where one is called for by the Insurance Company),

the limit of indemnity will be reduced to US$ 10,000. This limit will be utilized T.Y.B.B.I 37

only towards physician's services, hospital and medical services and local

emergency transportation. Further, the insurance cover will be restricted to

cover only illness or diseases contracted abroad and not cover accidents.

3. Covers Loss of Checked in Baggage

The insured will receive US$ 1,000 from the Insurance Company in the event of

total loss of baggage that has been checked in by an International Airline for an

international flight. The insurers however reserve the right to either replace or

pay the intrinsic value of the lost article.

Specific Conditions:

The Insurance Company will not reimburse partial loss or damage of baggage

No claim will be paid for items whose value exceeds US$ 100, unless the proof

of ownership is presented to “Mercury”, in the event of submission of claim.

Valuable items are not covered by the policy since they should at all times be

carried by the insured person and not be packet as part of checked in

baggage.

Any recovery from the airline under the terms of the Warsaw Convention shall

become the property of the insurers.

4. Covers Delay of Checked in Baggage

The Insurance Company will pay up to US$ 100 towards necessary purchases,

to replace items, in the event of more than 24 hours delay (from the scheduled

arrival time) in delivery of checked in baggage. The baggage should have be

checked into an International Airline on an international flight from India.

Specific Conditions:

T.Y.B.B.I 38

The proof of purchase must be provided for all items reimbursed under this

cover

Any payment made by the Insurance Company for delay of baggage will be

offset against a claim arising for loss of the same baggage.

5. Covers Loss of Passport

In the event of loss of passport, the Insurance Company will pay up to US$ 250

towards expenses reasonably and necessarily incurred by the insured person

in obtaining a fresh or duplicate passport.

US$ 30 is the deductible amount and any expense below this amount will have

to be borne by the insured person. Further, it also means that from every claim

this amount will be deducted before making settlement.

Specific Conditions:

Loss or damage to the passport due to confiscation or detention by

customs, police or other authority will not be covered under this policy.

Claims for loss of passport will not be entertained if the theft of passport

was not reported to any police authority within 24 hours of discovery. An official

report is also to be obtained from them.

No claim shall be paid for loss or theft of the passport if it was left

unattended by the insured person. However, if the passport was left in a locked

room or apartment and the insured person could not have stored it in a safety

deposit box, the claim will be satisfied.

6. Personal Liability Cover

T.Y.B.B.I 39

The Insurance Company will pay up to US$ 200,000 in case the insured

person, in his or her personal capacity, become legally liable to pay third parties

for accidental personal or property damage, arising from an incident during the

overseas journey.  

Specific Conditions:

US$ 200 is the deductible amount and any expense below this amount will

have to be borne by the insured person himself or herself. Further, it also

means that from every claim this amount will be deducted before making

settlement. This deductible applies only to third party property damage.

The Insurance Company shall meet no claims arising from Employers or

Contractual liability.

No claims arising from liability to any family members, traveling companion,

friend or colleague of the insured, shall be met.

Claims arising directly or indirectly from the following shall not be paid.

Animals belonging to the insured person or in their care, custody or control.

Any willful, malicious, or unlawful act.

Pursuit of a trade, business or profession, employment or occupation.

Ownership, possession, or use of vehicles, aircraft, watercraft, parachuting,

hand gliding, air ballooning or use of firearms.

Legal costs of any proceedings that result from any criminal or illegal act.

Insanity, use of alcohol, drugs (except as medically described) or drug

addiction.

Supply of goods or services.

T.Y.B.B.I 40

Any form of ownership or occupation of land or buildings (other than

occupation  only  of any temporary residence)

7. Hijack

The Insurance Company will pay up to a sum of US$ 300 (US$ 30 per day).

This sum will become payable by the Insurance Company, if the insured is held

hostage for more than 24 hours.

II. Special Insurance Pan

Insurance Plan for Corporate Frequent Traveler

This is a one-year cover issued to employees of companies who have to travel

abroad frequently

Features:

Each trip should not exceed 30 days. This period can be extended by 7 days

without any extra charge, if the delay is beyond the control of the insured perso

The Monetary Compensations offered in each case:

BENEFITLIMIT (in

US$)REMARKS

Medical Expenses 500,000 Deductible: US$ 100

Personal Accident 25,000 -

Loss of Checked in Baggage 1,000 -

Delay of Checked in Baggage 100 Delay > 12 hrs

Loss of Passport 250 Deductible: US$ 30

T.Y.B.B.I 41

Personal Liability 200,000 Deductible: US$ 200

The insured person can be between 18 and 70 years of age. The

age limit can be extended to 75 years at the option of the Insurance Company

and after such person undergoes a thorough medical check up. The Medical

Reports should be authorized by an M.D. in Cardiology and should include,

ECG Reading, fasting blood sugar/Urine sugar & Treadmill test in case of

medical history

Where the insured person is unable to present himself or herself for the medical

examination (when one is called for by the Insurance Company), the limit of

indemnity will be reduced to US$ 10,000. This limit will be utilized only towards

physician's services, hospital and medical services and local emergency

transportation. Further, the insurance cover will be restricted to cover only

illness or diseases contracted abroad and not cover accidents. The medical

certificate is a must for persons above 60 years.

Overseas Journey - Business or Holiday

This is the ideal Policy for persons traveling abroad on business or holiday.

There are two plans that are offered - (i) Worldwide Travel Excluding USA &

CANADA and (ii) Worldwide Travel Including USA & CANADA

Features:

Any individual between the age group of 6 months to 60 years can be

covered. The age limit can be extended to 75 years at the option of the

Insurance Company and after such person undergoes a thorough medical

check up. The Medical Reports should be authorized by an M.D. in Cardiology

T.Y.B.B.I 42

and should include, ECG Reading, Fasting blood sugar/Urine sugar, treadmill

test in case of medical history

The insurance cover for persons on holiday is a maximum of 30 days and on

business is a maximum of 180 days. ECG, urine test and fasting blood sugar

reports have to be submitted in case of persons above 40 years for overseas

travel including USA & Canada and persons above 60 years for overseas travel

excluding USA & Canada.

The Monetary Compensations offered in each case:

BENEFIT LIMIT (in US$) REMARKS

Medical ExpensesIncludes USA & CanadaExcludes USA & Canada

500,000250,000

Deductible: US$ 100

Personal Accident 25,000 -

Hospital BenefitUS$15 per dayMax of US$150

Hospitalized for not less than 24hrs

Loss of Checked in Baggage

1,000 -

Delay of Checked in Baggage

100 Delay> 12 hrs

Loss of Passport 250 US$ Deductible: 30 US$

Personal Liability 200,000 Deductible: US$ 200

HijackUS$30 per dayMax of US$300

Held hostage for not less than 24hrs

Past two year’s performance of National Insurance Co. & New India

Assurance Co. under Overseas Mediclaim Policy

T.Y.B.B.I 43

Year Company Target

Rs. Crore

Premium

In Rs. Crore

Claim

Incurred

Claim

Ratio

2004-05

NICL 15.68 7.32 46.68

NIACL 30.00 24.30 22.37 92.05

TOTAL 39.98 29.59 74.25

2003-04

NICL 15.93 8.97 56.25

NIACL 0.75 27.25 20.21 75.20

TOTAL 43.18 29.48 68.27

MICRO HEALTH INSURANCE IN INDIA

Health risks and resulting catastrophic financial losses are probably significant

threats to the people, particularly persons belonging to lower income groups as

these people will be excluded from private health insurance. A health shock leads

to direct expenditures for medicine, transport and treatment but also to indirect

costs related to loss of wages. Since studies have found a very strong link

between health and income poor are the most susceptible to a health shock.

Given the problem with public health delivery system, the access to and utilization

of these facilities remain problem. Strategy to improve the access by developing

insurance system to private providers has been one such area. For low-income

people in rural and informal sector market based insurance such as Mediclaim

can not meet the requirements because of its high cost. Insurance companies

and healthcare providers face high transaction costs and also they do not have

local information available with them. This makes their job of providing health

insurance to this segment very difficult and schemes which are of local origin

T.Y.B.B.I 44

have more chance of attracting more members because of high level of trust with

them.

Several community based organizations in India have focused on developing

community based insurance schemes during the last decade. Most of these

community based insurance schemes (CBHI) are also known as micro health

insurance schemes. Micro insurance is a form of health, life or property

insurance, which offers limited protection at a low contribution (hence “micro”). It

is aimed at poor sections of the population and designed to help them cover

themselves collectively against risks (hence “insurance”). More specifically micro

insurance and CBHI are different in term interchangeably.

In India, community health insurance started way back in Kolkata in 1952 which

was part of a student’s movement. This scheme, which is called the Student’s

Health Home (SHH), caters to the schools and universities students of West

Bengal. Currently there are more than 20 documented CBHI programmes, of

which five were initiated in the past three years community based health

insurance schemes is different from normal market based schemes like

Mediclaim. Though the basic principle of covering future risks by paying premium

in advance is same in all health insurance schemes, CBHI schemes are tailored

for local needs and provide health insurance at low cost. CBHI schemes in India

can be divided in three broad categories. Table 1 indicates that these three

categories are quite distinct from each other in terms of the function of the

agency. An agency here can be a NGO, Trust, Hospital or Cooperative etc. their

role can vary from performing as intermediary where both treatment and

insurance are provided by intermediary itself or where the treatment and

insurance are provided by third party.

Micro health insurance as mechanism of providing healthcare to the poor, the role

of these CBHI schemes will be very crucial. The success of many of these

T.Y.B.B.I 45

schemes though at a smaller level at present, provides important lessons for the

policy makers. One important point to remember here is that CBHI schemes have

their own problems which are non-availability of good providers, lack of

professional management, financial sustainability issues and non-recognition by

IRDA. These problems need to be taken into account while assessing their

benefits. Though at present CBHI schemes in India are serving a very small

population, it lessons learnt from each of these schemes can be used to design

more of such schemes in different parts and at much larger level they can be

beneficial.

TABLE 1: TYPES OF CBHI SCHEMES IN INDIA

Types of

CBHI

Healthcare

Intermediary

Health

Insurer

Healthcare

Provider

(Examples) SEWA, BAIF,

Karuna trust

Tribhuvandas Foundation,

DHAN, Yeshaswini

Sewagram,

MGIMS VHS,

RAHA

Role Plays role of agent

Purchase care from

providers

Purchase insurance

from Insurance

company

Plays role of insurer

Provide Insurance

Purchase care from

independent provider

Plays role of

both insured &

provider

Provide health

care

Running Ins.

Scheme

Transaction

Costs

Low-medium Low Low

Benefit on Negligible Low Significant

T.Y.B.B.I 46

provision side

Informational

Problems

Is an Issue May be an Issue Not an Issue

Payment

Mechanism

Mostly Fixed

Indemnity

Mostly Fixed Indemnity Cashless system

mostly

Nature of

Pool

Membership/

Geography Based

Membership/

Geography Based

Geography

Based

MICRO HEALTH INSURANCE SCHEMES

UNIVERSAL HEALTH INSURANCE

SCHEME (UHIS)

YESHAVINI CO-OPERATIVE

FARMERS HEALTH SCHEME

(KARNATAKA)

Marketed through public insurance

companies

Covers only Hospitalization

expenses (upto Rs. 15,000)

Premium

Individual: Rs 165/subsidy Rs. 200

Family upto 5 members:

Rs. 240/subsidy Rs. 300

Coverage (2005): 1,10,000

Targets people in the age Group (3

months to 65 years)

Marketed through the cooperative

movement

Covers only surgical procedures

upto Rs. 100,000 per year

Premium: Rs. 120 per/person/per

year(Rs.90 for children under 18)

Cashless services

Hospital network(169)

In-house model (No Insurance

company)

Coverage (2006); 1,830,000

TPA (Family health Plan)

T.Y.B.B.I 47

Exclusion: Pre-existing diseases,

delivery, pregnancy-related illness

Second largest in the world

INDORE MUNICIPAL CORPORATION

HEALTH INSURANCE SCHEME

(MADHYA PRADESH)

NAANI FOUNDATION SCHOOL

HEALTH PROGRAMME

(ANDHRA PRADESH)

Public Department (IMC)

Targets Senior Citizens (60 to 80

years old)

Covers Hospitalization costs upto

Rs.20,000

Premium: Rs. 475/Per Person/Per

year.

TPA (MD India):Partner-Agent Model

Hospital Network: 14 Private hospitals

Coverage (2006); 49,419

NGO/Private Trust

Targets young children (6 to 14

years-old) enlisted in public

schools (Hyderabad City)

Premium: Rs. 120 per child per

year

Services provided by nodal

health clinics + base hospital +

referrals

Coverage (2006); 60,000.

SCHEMES NO OF BENEFIC.

TYPE OF SCHEME

TYPE OFCOVERAGE

TYPE OF BENEFIT

TYPE OF SUBSIDY

YESHASVINI 1,83,000 IN- HOUSE TER CASHL. DIRECT

DHARAMST. 400,000 P. AGENT SEC. CASHL.

SEWA 174,000 P. AGENT SEC. REIMB. INDIRECT

T.Y.B.B.I 48

KARUNA 118,000 P. AGENT PER/SEC. REIMB. IND/DIRECT

PREM 108,000 In- House SEC. CASHL/

REIMB.

INDIRECT

NAANI 60,000 In- House PER+SEC

+TER

CASHL. IND/DIRECT

AROGYA 60,000 P. AGENT SEC. CASHL. INDIRECT

INDORE 49,000 P. AGENT SEC. CASHL. DIRECT

ASHWINI 12,000 P. AGENT PER/SEC. CASHL. IND/DIRECT

OVERALL PERFORMANCE

The spread of Health Insurance and the performance of individual Insurance

Companies can be best assessed through the total number of persons covered

under the various health insurance schemes. A table showing the total number

of persons covered under the various health policies of each of these

companies for the past two years is given below.

2003-04

NAME OF THE POLICY NICL OICL UIICL NAICL

Individual Mediclaim 602000 2317090

Group Mediclaim 589000 539585

Overseas Mediclaim 57076

Mediclaim 3122536 2223436

Jan Arogya 260230 58398 73000 75966

Bhavishya Arogya 955

Universal Health

Insurance Scheme

78140 298796 561264 236490

Total 3460905 2580630 1826219 3226207

Individual Mediclaim 626000 2705322

T.Y.B.B.I 49

2004-05

Group Mediclaim 593000 994460

Overseas Mediclaim 55890

Mediclaim 7560666 2864532

Jan Arogya 171603 101556 70000 67391

Bhavishya Arogya 1108

Universal Health

Insurance Scheme

27709 107858 280644 15641

Total 7759078 3073946 1570752 3838704

THIRD PARTY ADMINISTRATORS.

Its an institution which facilitate a system of cash-less settlement of medical

bills for the insured under health insurance has been introduced in India as

recently as 2001. The first set of companies was given licenses in March, 2002.

Today, there are 25 licensed Third Party Administrators (TPAs). Covered

medical expenses are paid by the TPAs directly to the hospital. Administrator It

acts a link between the insurer and the hospital. TPAs basically are

professional organizations servicing health insurance policies sold by insurance

companies by way of facilitating cash less treatment to insured individuals

through institutional arrangements with insurance companies and networked

service providers i.e. hospitals and nursing homes, etc. The TPAs are

registered with and licensed by the IRDA and regulated by IRDA regulations,

2001 as amended from time to time. They will provide quality health care and

services at affordable costs, which hitherto was unheard of. The role of TPAs

will particularly be beneficial to those sections of society for whom quality

healthcare has always remained a dream.

T.Y.B.B.I 50

By processing claims with due diligence, TPAs are expected to control claims

costs for the insurers. In the long run, TPAs are expected to bring in greater

professionalism in the health insurance industry, which would augure well for

the growth of this segment of insurance business. TPAs are licensed by the

Insurance Regulatory and Development Authority. The criteria for licensing are

Only a company with a share capital and registered under the Companies Act,

1956 can function as a TPA.

Company shall not engage itself in any other business.

The minimum paid up capital shall be Rupees One Crore in equity shares.

HEALTH INSURANCE FOR THE POOR.

Myths and Realties

Based on a survey is seven locations, we finds that most Indians are willing to pay 1.35

percent of income or more for health insurance and most people prefer a holistic

benefit package at basic coverage over high coverage of only rare events. The needs of

the poor, and their demand for health insurance, depend on local conditions.

In a country where only about 3 percent of the populations are affiliated to

health insurance, most Indians must pay the vast majority of their healthcare

costs out-of-pocket. This burden is particularly high for those who cumulate

both poverty and illness.

Health insurance could be one of the most suitable solutions for this negative

nexus. However, for the time being there is very little supply of health insurance

for the poor. The largest comparative household survey conducted in 2005 in

seven locations where micro health insurance units are in operations; the

survey included both insured and uninsured persons. The seven locations are:

Tamil Nadu (one urban and one rural location); Karnataka (one rural and one

T.Y.B.B.I 51

tribal rural location); Maharashtra (one rural and one urban location); and Bihar

(mostly rural location). The survey conducted focus group discussions (FGD),

key-informant-interviews, and special sessions in which persons applied a

decision-making simulation. The total size of the sample has been 4,931

households. The household survey, as well as the FGD and the analysis have

been conducted under the EU/ECCP project ‘Strengthening micro health

insurance units for the poor in India’. The survey offers the evidence to show

the commonly held opinions are in fact myths.

Myth No 1: the poor are unwilling to for health insurance and the lower their

income, the less

they are willing to

pay for health.

The reality: The

evidence shows

that most people

are willing the pay

more than 1

percent of their

income for health insurance. The study shows that the majority of the sampled

populations were willing to pay about Rs 559 per household per year. The

poorest are willing to pay a higher percentage of household income than less-

poor households. This confirms that the poor prioritize access to some

healthcare, and that this basic level is quite stable.

T.Y.B.B.I 52

The policy insight: The declared WTP levels are much higher than what has

been assumed as feasible

hitherto. Consequently,

the demand for pro-poor

and pro-rural health

insurance at realistic

premiums exceeds the

supply available at

present.

Myth No 2: High costs of hospitalization and surgery pose the greatest

financial risk for poor households.

The reality: Hospitalizations are rare and very expensive. Drug consumption

occurs much more frequently, and sometimes can cost as much as

hospitalization, while in other cases would be much cheaper. Indeed, there is

no significant difference between the aggregate costs of hospitalization.

Policy insight: Health

insurers and policy

makers that aim to grant

to poor households

effective financial

protection against the cost of illness would wish to ensure that the benefit

packages should include drugs, tests and consultations; in addition to

hospitalization.

T.Y.B.B.I 53

Myth No 3: The larger the poor household, the less attention to health and

therefore the more sickness to health and therefore the more sickness among

its members. So the large households pose a higher risk to the insurer.

The reality: Larger

households reported

fewer illness

episodes. As shown in

Figure 4, there is a

steep drop in illness

Episodes when household size increases from one to four persons, and is

stable thereafter. Therefore, larger households represent a lower risk to

insurers. (Sample size was 3;531 households, representing 17,323 persons;

conducted in five locations in Tamil Nadu, Maharashtra and Bihar. The

prevalence of illness in households for three months is 0.292.

Myth No 4:

Low income and low assets are indicators of higher risk of illness

The reality: Higher income is associated with more reported illness episodes.

The poorest-of-the-poor subgroup does not represent a higher risk for health

insurers than the more affluent subgroups. Females are more likely to be ill

than males, and the under five age-groups as well as +55 years; age-group is

very vulnerable

T.Y.B.B.I 54

Policy insight: Intra-household information sharing, resource-and-asset

shoring and demographic balancing within can lower prevalence of illness in

households. Additionally, en bloc affiliation of households can lower the risk of

adverse selection. Ignoring household features when calculating the premiums

could result in premiums that are unjustified by the insured risk.

Myth No 5: Poor

people, who are often

illiterate and

innumerate, are unable

to make judicious

rationing decisions

regarding the composition of a health insurance benefit packages.

The reality: A decision

tool called Choosing

Healthplans All

Together (CHAT) has

been used with 24

groups (composed of

302 individuals) in Karnataka and Maharashtra to elicit their choices of

healthcare benefits under severe budgetary rationing. Participants could

choose from among 10 benefits types, and for each benefit type they could

choose basic, medium or high coverage level. Participants chose first the

benefits that cost most; these included: outpatient (OP); inpatient (IP); tests and

imaging (T); and drugs (D); Table 1 lists the frequency of choices made. The

frequency of the choice stated by the participants reflects a clear preference for

a broad benefits package, even at basic level of coverage. Additionally,

T.Y.B.B.I 55

participants selected benefits that cost less, and interestingly these choices,

shown in Figure6, provide protection to the weaker segments of the group

(such as pregnant women or persons with disabilities).

Policy implications: The results of this analysis demonstrate that the poor can

participate actively in the design of the health insurance packages, and that

they make judicious choices. The CHAT tool enables us to identify clients’

perceived priorities.

Myth No 6: The poor are essentially quite similar to each other: with similar

needs a low ability to pay, low levels of education and a low demand for

insurance. Therefore,

uniform (“one size fits all”)

insurance products are

suitable for the poor.

The reality: The

healthcare needs of the

poor are strongly context-

dependant. This is

evidenced by the

difference in incidence of

illness episodes in

different locations and by

the different cost

associated with an illness

episode in different locations. The demand for health insurance, evidenced by

T.Y.B.B.I 56

willingness to pay for it, is also strongly location-dependent. The evidence in

figures 7, 8, and 9 show the difference in prevalence of illness in households;

the different levels of insurable cost of illness episodes.

Policy insight: Communication differs from each other significantly in their needs

and priorities. For an insurance product to be attractive to such diverse market, it

must respond to context-specific needs, costs, and willingness to pay levels. The

Optimal adjustment between

medical needs, their costs and

willingness to pay must also take

into account the perceived priorities

of the prospective clients and such

perceptions may also be location-

specific. Therefore, a “one-size-fits-

all” insurance product is unsuited to

the poor clientele and to the reality

of India.

FURTHER ISSUES RELATING TO HEALTH INSURANCE POLICIES

The Legislative Environment

A fine balance between government imposed regulation and self regulation by

the industry needs to be found. It a particular industry is “over” regulated it

stifles innovation and development. On the other hand “under” regulation can

result in unwanted practices and “fly by night” operations.

Socio-Economic Environment

T.Y.B.B.I 57

The socio-economic environment has a significant impact on the type of health

insurance policy that consumes will look to buy. If will also have an impact on

the claims patterns of consumers. For instance, in a relatively poor society,

product demand will be for products that cover day-to-day basic medical care.

This will tend to be products which have high frequency of claims where the

average claim sizes are relatively low.

Post Retirement Benefits

Another challenge for the insurance industry is how to deal with post retirement

medical benefits. One possible way of dealing with these is to use some form

of endowment product ( where premiums are paid during the working life of the

insured) to provide a lump sum at retirement date which can be used to pr-fund

medical expenses (or a future Medical Expense Policy).

IT Systems

The measurement and manipulation of data is of essential importance in

operating an effective health care management system. There is a vast

quantity of data that must be stored and manipulated for the various aspects of

health care management. In addition this data should be readily available and

easily updateable. In short the system should be robust!

Investment Strategy

T.Y.B.B.I 58

Due to the frequency and level of the contribution received for most health

insurance products, providers have large amounts of funds that need to be

invested in appropriate vehicles. Certain countries (e.g. South Africa) have

also introduced reserving requirements, which will result in significant reserves

building-up over time for health Insurance products. This has introduced the

additional complication of matching assets and liabilities. This is an area where

actuarial judgement is essential.

Cross Subsidies

The issue of cross-subsidies is another item which needs to be carefully

considered by any insurer. There often tends to be cross-subsidies in health

insurance policies and in particular in medical expenses policy. Even when

legislation does not force cross-subsidies, it is quite common for there to be

cross-subsidies in health Insurance products. The insurance company needs

to examine the level of the cross-subsidies and ensure that the style of their

products is such that anti-selection will not result in abuse of these cross-

subsidies.

Risk Management

The success of any health insurance policy is crucially dependent on

appropriate management of the underlying risks which can be best attained by

T.Y.B.B.I

Setting of appropriate premiums

Measurement and control of expenses

Appropriate use of reinsurance

avoidance of anti-selection

Investment strategy and subsequent

measurement

Effective underwriting

effective claim control

Appropriate reserving

Internal operational control

59

AIDS

The challenges that faces health insurers is how to deal with AIDS claims, and

what product can be designed that meet the needs of AIDS suffers. This is a

challenge that has not, in any market, to my knowledge, been fully addressed.

In some Southern African countries, insurance companies are offering certain

anti-retroviral treatments in order to extend the expected life span of their

policy holders. This is one area where health Care Management can be used

to delay the payment of insured benefits (normally Life Insurance) and also

add the expected life of the insured, thus benefiting all parities concerned.

Medical Savings Account:

One example of a new product introduced to relieve the risk of rising costs is

the introduction of medical Savings Account (MSA) as a component of a

Medical Expense Policy. The account holder, at each ill health incident, has to

take a conscious decision whether or not to draw on savings and deplete his

wealth. MSA’s can be encouraged fiscally by providing savers with tax breaks

not available to savers for other purposes. The funds in an MSA could be used

to pay health premiums, deductibles or other medical bills not covered by

insurance. An MSA minimizes moral hazard. There are two main kinds. One is

a short term scheme which can be used at the discretion of the account holder

for day-to-day expenses; the other is long term, where the savings are

T.Y.B.B.I 60

intended to build up to a substantial sum for either major expenditures or for

old age.

Capitated Arrangements:

A further innovation in some progressive markets, including the South African

market is the use of a capitation arrangement for Medical expense Policies. A

capitation arrangement involves identifying certain service providers usually

doctors who will provide given services to their patients. The services provided

are usually doctor’s consultations. The doctor is paid a fixed fee per

policyholder under its care. The doctor is then responsible for providing

whatever care is necessary to that patient. By linking up a provider network

through a capitation arrangement the risk of over servicing and hence higher

costs is placed in the hands of the doctors. It will then be up to the doctor to

ensure that members receive appropriate service which will costs the doctor

and not the insurer more.

Frequently Asked Question (FAQ)

1. What is a health insurance policy?

A health insurance policy is a contract between an insurer and an individual or

a group, in which the insurer agrees to provide specified health insurance at an

agreed-upon price the premium. Depending on the policy, the premium may be

payable either in a lump sum or in installments. Health insurance usually

provides either direct payment or reimbursement for expenses associated with

illnesses and injuries. The cost and range of protection provided by the health

insurance will depend on the insurance provider and the particular policy

purchased. These days, most companies give the benefit of health insurance to

T.Y.B.B.I 61

the employees. However, in case your employer does not offer a health

insurance plan, it is advisable to opt for a health insurance scheme.

2. Why do you need health insurance?

Health insurance has become a necessity in today’s world considering the rise

in the cost of medical care and treatment and the huge population of the

country. The escalating cost of medical treatment today is beyond the reach of

the common man. Even if an individual is healthy and has never had any major

problem, it is not possible to predict what may happen in the future. There is a

growing public awareness for better health care and desire to have better

health care from private medical providers. In case of a medical emergency,

cost of hospital room, doctor’s fees medicines and related health services all

add up to a huge sum. In such times, health insurance provides the much

needed financial relief.

3. What are the criteria for deciding on the best health cover?

Choosing a health cover for yourself must be done after careful analysis of your

needs. In case you need a wide cover as also Income tax benefits the

mediclaim policy with a family package cover could be a suitable option for you.

You may also decide on the major ailments policy with annual, five and ten year

cover options offering you a reasonable amount of premium savings.

Those going for a wide coverage as also long term cover about five or ten

years can opt for the term hospitalization policy. This gives benefits that are not

available under the normal mediclaim policy. Another convenience this policy

offers is the non-requirement of every year renewal of the policy. If you plan to

go for a less costly health cover with tax benefit and limited coverage for you

could choose the Jan Arogya cover. For those closer to the retirement age the

long-term retirement benefit plan would be the ideal cover.

T.Y.B.B.I 62

4. Who can avail this facility?

Health insurance can be availed by people aged between five and seventy five.

The health insurance scheme could either be a personal scheme or a group

scheme sponsored by your employer.

5. What does it cover?

In anticipation of unexpected events that create the need for medical goods

and services, the health insurance does not cover certain ailments. It does not

cover ailments in the first year after the policy is taken. It covers hospitalization

charges for:

Heart attacks

Strokes

Prolonged illnesses

Loss of limb, eye, or other parts of the body due to accident

Injuries

Maternity expenses

Medicines

6. What are the main health policies or schemes offered by Indian insurance

companies?

Some of the existing health insurance schemes currently available are

individual, family, group insurance schemes, and senior citizens insurance

schemes, long-term health care and insurance cover for specific diseases.

Choose the one that suits you best and insure your health.

The insurance policies offered by GIC are

Mediclaim Policy

Personal Accident-Individual

Personal Accident-Family/Group Accident Insurance J

T.Y.B.B.I 63

an Arogya Bima Policy

Bhavishya Arogya Policy( Insurance for senior citizens)

Traffic Accident Policy

Overseas Mediclaim Policy

The Life Insurance Corporation (LIC) offers:

The Asha Deep Plan: It provides covers for cancer, paralytic stroke, renal

failure and coronary artery disease.

Jeevan Asha: The Jeevan Asha policy is the other healthcare product

offered by LIC

7. What you need to know?

You should understand the policy, and become familiar with common health

insurance provisions, including limitations, exclusions, and riders. It is very

important to know what your policy covers and what you have to pay yourself.

Health Insurance policies generally cover boarding, nursing and diagnostic

expenses, which include room rent charged at the hospital or nursing home,

fees of the surgeon, anesthetist, doctor, etc. Some policies even offer fixed

cash amount for each day you stay at any hospital for treatment. If you have a

persistent health problem and then decide to take insurance, it might not be

covered. Expense on hospitalization, incurred in the first 30 days after taking a

policy is also not entitled, except in case of an injury from accident. Treatment

of certain diseases is not covered during the first year of your policy. The list of

diseases may vary form one health policy to another.

8. Why does Indian insurance need Foreign Players?

T.Y.B.B.I 64

Competition improves quality of service. In India, LIC and GIC are well-

established names. Only companies of equal strength and track record can

effectively compete with them. Foreign players will provide expertise.

Some foreign companies entering the Indian insurance sector and their Indian partners are as below:

Indian Partner Foreign Partner Specialization Present StatusAditya Birla

GroupSun life, Canada Life Received

LicenseKotak Mahindra

FinanceOld Mutual, South

AfricaLife Received

LicenseHDFC Standard Life, U.K. Life Received

LicenseReliance No foreign Alliance Non-Life,

HealthReceived

License for Non-Life

ICICI Prudential, U.K. Life, Health Received License

Max India New York Life, U.S.A Life Received License

Tata Group AIG, U.S.A Life and Non Life

Received License

9. What changes are likely to occur with privatization?

Currently, insurance for health care is tied up with only emergency situations.

With privatization it is hoped that health care will come within the reach of a

large proportion of the population. An insurance model must be created with the

‘Total Health’ perspective to not only give access to quality healthcare but also

incorporate preventive health care into the main system. Hospitals, different

service centres and diagnostic centres needs to be accredited.

In India, approximately 80% of the total health expenditure comes from self-

paid category as against government’s contribution of 20-30%. A majority of

private hospitals are expensive for a normal middle class family. The opening

up of the insurance sector to private players is expected to give a shot in the

arm of the healthcare industry.

T.Y.B.B.I 65

General Insurance Company has never aggressively marketed health

insurance. Moreover, GIC takes upto 6months to process a claim and

reimburses customers after they have paid for treatment out of their own

pockets.

10. What are the pros and cons of privatization of health insurance?

PROS CONS

Flexibility in health insurance products and prices

Supplier induced demand which would lead to increase in cost of care

Comprehensive and cost effective packages

Risk Selection practices where the disabled, poor, elderly would be ignored

Medical plans will be tailored as per the requirement of an individual based on pre-negotiated rates

Exclusion of pre-existing conditions and diseases

Fewer age, disease and benefits restrictions

Monopoly of profit oriented insurance cartel with poor quality products.

FAQ on Mediclaim

1. What is Mediclaim Insurance?

Mediclaim insurance consist of the reimbursement of hospitalization and/or

domiciliary hospitalization expenses for any illness/diseases or injury sustained

by the insured individual.

2. What is meant by ‘Hospitalization’?

Any instance when and where the insured individual is hospitalized for a

minimum period of 24 hours can be termed as ‘Hospitalization’.

T.Y.B.B.I 66

3. What is ‘Domiciliary Hospitalization?

“Domiciliary Hospitalization” is any instance when and where the insured

individual requires medical treatment for more than three days for an illness/

disease/ injury that in the normal course would require hospitalization and is

conducted at his or her home within India due to

The condition of the patient being such that he cannot be moved to the

hospital

Lack of hospital accommodation

4. What is meant by Pre- hospitalization and Post-hospitalization expenses?

The relevant medical expenses incurred during 30 days prior to hospitalization

are known as ‘Pre-hospitalization expenses’

Medical expenses incurred for 60 days after hospitalization are known as

‘Post-hospitalization expenses’

5. Under Mediclaim, is the limit of insurance per sickness or annual?

Mediclaim covers room, boarding charges, nursing expenses, surgeon,

anesthetist /doctor’s fees, blood, oxygen, operation theatre charges, X-ray,

other tests pertaining to sickness, etc.

6. What is family discount under Mediclaim?

Under Mediclaim, when the husband or the wife and children or dependant

parents are covered under same policy, a discount of 10 percent is given on the

total premium by way of family discount.

7. What are the factors which determine the premium payable under Mediclaim?

Under Mediclaim, the age and the amount of cover are the factors that decide

the premium.

T.Y.B.B.I 67

8. What are the factors which determine the premium payable under Mediclaim?

Under Mediclaim, the age and the amount of cover are the factors that decide

the premium.

9. What are the minimum and maximum amounts for which a Mediclaim policy

can be taken?

Under Mediclaim, the minimum amount that can be insured for is Rs.15, 000

and the maximum amount is Rs. 5, 00,000. In any case, the amount for which

the insurance company may grant increase is at their own discretion

10. Are all diseases and injury covers by Mediclaim?

There are certain diseases and injury that are not covered by this policy. They

fall under basically three categories. The injury or diseases that are not covered

in the first year of operation of the policy are:

Cataract, Benign porstatic hypertrophy, Hysterectomy for menorrhagia or

fibromyoma, Hernia, hydrocele, Congenital internal diseases, Fistula in anus,

Piles, Sinusitis and related disorder

Note: The disease listed above are only excluded from cover only for the first

year of the policy and not afterwards. The injuries and diseases or medical

conditions not covered at all under Mediclaim are:

Cost of spectacles, contact lenses, hearing aids

Dental treatment, surgery unless it requires hospitalization

Convalescence or rest cure congenital external diseases Sterility Venereal

diseases Condition directly or indirectly related to AIDS Pregnancy

Circumcision, unless it is necessary under certain circumstances alone.

T.Y.B.B.I 68

11. Can the Mediclaim the insurance contract be cancelled midway?

The policy can be cancelled at any time during the course of its operation. In such cases, the insurance

company will refund the premium paid (on the basis of the table provided below) only if no claim bas

been up to the date of cancellation.

Date of cancellation Amount to be refunded

within 1 month ¾ of the annual rate

Within 3 months ½ of the annual rate

After 6 months No refund

12. What is the difference between Mediclaim & Critical Illness policies?

A Mediclaim policy is a reimbursement of the medical expenses where as

Critical Illness insurance is a benefit policy.

13. What is a benefit policy?

Under a benefit policy on happening of an event, the insurance company pays

the policyholder a lump sum amount. Whether the client spends the amount

received on the medical treatment or not rests on his or her own discretion.

14. Are all the illness is under the Critical Illness policy?

The Critical Illness policy covers only five major illnesses

Cancer

Kidney failure

Organ transplant

Multiple Sclerosis and Coronary artery surgery (20 percent of Sum Insured)

15. Is there a minimum annual income requirement under Critical Illness

Insurance?

If the client is an income tax payer and his annual income is worth a minimum

of Rs.2 lakhs, he can opt for Critical Illness insurance.T.Y.B.B.I 69

16. What is the amount of Insurance offered by a Critical Illness policy?

Under a Critical Illness policy, the amount of insurance has to be selected by

the client. It is at 4 levels- Rs. 5 lakhs, Rs. 10 lakhs, Rs.20 lakhs and Rs. 25

lakhs.

17. Explain the procedure to apply for cover under overseas mediclaim?

Certain documentation has to be provided in detail to avail of cover under the

Overseas Mediclaim policy. The necessary papers are

Visa details along with visa validity.  

Country of visit & Passport details.

Name and address of sponsor plus a certificate giving  details of

employment, studies and the duration.

Period of desired cover.

Medical examination certificate. 

18. What is the rate of premium calculated under the Critical Illness Policy?

Under Critical Illness insurance, the premium depends upon the age and the

sex of the person.. For instance, a 35-year old male will be charged a premium

of Rs.1.53 per thousand whereas for a female of the same age, it is Rs.2.28 per

thousand. For a 65-year male it is Rs21.86 per thousand while a female of the

same age will be charged Rs.15.25 per thousand.

19. How file to be claim under Mediclaim insurance policy?

Preliminary notice of hospitalization must be given to the insuring company

within 7 days of the starting date of the hospitalization procedure. Final claim

form must be submitted with the entire relevant document

T.Y.B.B.I 70

Hospital receipts/ bills/ cash memos with medical and pathological reports

Prescriptions for medicines purchased from chemists within 30 days of

discharge from the hospital

What Do The Policies Offer

MEDICAL POLICY CRITICAL ILLNESS RIDER

Medical expenses incurred prior to the

hospitalization

A fixed sum insured is paid on diagnosis of illness

covered under the policy

Cashless hospitalization for all the

expenses incurred in the hospital

Money can be used to avail better treatment

options, in any country

Post-hospitalization expenses Family cover

Expenses incurred on ambulance

servicesWhole family covered under one policy

Optional benefits Each member eligible for overall cover

Expenses incurred for general health

examinationPre-existing diseases covered

Daily hospital allowance No health check-up till the age of 45

20. Explain the procedure to apply for cover under personal accident insurance

Immediately give notice of the accident to the insurance company.

File a First Information Report (FIR) with the local police station

Submit the claim form with all the relevant supporting documents/medical

bills/reports.

In event of a fatality, in addition to the FIR and the relevant supporting

documents, additional documents are also needed.

Death certificate

Post-mortem report wherever applicable

Coroner’s report or Inquest/police report

Letter of probate/will/ letter of administration/ succession certificate

T.Y.B.B.I 71

Affidavit from claimant that he/she is/ are the legal heirs of the

deceased

No-objection affidavit from other relatives of the deceased towards

payment to be made to the claimant

INFORMATION ON HEALTH INSURANCE

The domestic health insurance market is set for a transformation with foreign

players setting their sights on it. Deutsche Krankenversicherung AG (DKV), a

Munich Re group's health insurance firm, is entering the under-explored health

insurance market through a joint venture with Apollo Hospitals Enterprise.

US-based United Health Group, too, is keen on India debut but prefers to wait

till the foreign holding limit in the country is raised to 49 per cent from the

current 26 per cent. Apollo Hospitals informed the Bombay Stock Exchange

that its board of directors authorized Chairman Prathap C Reddy to sign a JV

agreement with DKV on Wednesday. DKV is the leader in the European health

insurance market.

T.Y.B.B.I 72

United Health Group International, a division of United Health Group and the

largest and most diverse healthcare services company in the US, intends to set

up a standalone health insurance firm in India. We are informally looking for

partners. The minimum capital requirement of Rs 100 crore (Rs 1 billion) is too

high, and if regulatory changes lower it to Rs 50 crore (Rs 500 million), it will be

more sustainable.

Leonardi said, "The regulatory challenges in health are the costs involved in

setting up a health insurance company. Health insurance is not regulated as a

separate line of business. There needs to be clarity in minimum benefits. B D

Banerjee, insurance ombudsman for Maharashtra and Goa, said, "Health

insurance products offered by insurers lack versatility with certain exclusions

and limits, pre-existing diseases are excluded from coverage. There is no major

plan for preventive treatment and cost of insurance is prohibitive for the

average middle class."

Reliance General launches health plan

BS Reporter/Mumbai December 28,2006

Reliance General Insurance has launched Reliance Health wise- a health

insurance policy covering hospitalization expenses, day –care treatment and

critical illness along with a cover against hospitalization expenses incurred by a

donor in case of major organ transplant. Available in three plans- Standard,

Silver and Gold – the premium for a couple for a cover of Rs 1 lakh would be Rs

820 (Standard Plan), Rs 900 (Silver) and Rs 1,000 (Gold). Depending on the

plan opted by the policy holder, Reliance Health wise Policy will offer variable

features.

Pre-existing diseases are covered from third year onwards in Gold and Silver

plans. In case the insured person contracts any of the nine critical illnesses

T.Y.B.B.I 73

mentioned in the policy, the sum insured under the policy is doubled to meet

hospitalization expenses. If a person wishes to cover his entire family, he can

choose the Family Floater Option. In case of an emergency, the sum insured is

made available to each member. This is unlike policies where the total cover

may be, say Rs 4 lakh, but is spread as Rs 1 lakh on four members and no

individual member can avail benefit beyond Rs 1 lakh.

Other benefits present in the policy are daily hospitalization allowance for a

maximum period of seven days, nursing allowance for a maximum period of five

days, reimbursement of charges towards local road ambulance services,

recovery benefit of Rs 10,000 in case of hospitalization for more than ten

consecutive days, allowance towards expenses of an accompanying person at

the hospital/nursing home for a maximum of five days and reimbursement of

cost of health check-up at the end of a block of four years, provided there were

no claims reported.

IMPLEMENTATION OF “HEALTH INSURANCE SCHEME (HIS)”

FOR HANDLOOM WEAVERS

The Government of India was implementing a Health Package Scheme since

the year 1992-93 as a welfare measure for the benefit of handloom weavers.

Now in its place, the Government of India has introduced a Health Insurance

Scheme for Handloom Weavers from the Current Financial Year i.e. 2005-06

in collaboration with ICICI Lombard General Insurance Company Ltd.

The Health Insurance Scheme aims at financially enabling the weaver

community to access the best of healthcare facilities in the country. The

scheme is to cover not only the weaver but his wife and two children, cover all

pre-existing diseases as well as and keeping substantial provision for OPD.

T.Y.B.B.I 74

FUNDING PATTERN

Release of funds:

1. The Central Govt. share of premium will be released to the ICICI Lombard

directly for coverage of weavers under the scheme in installments.

2. Service Tax of 10.2% over the annual insurance premium of Rs.1000/- will

be borne by the Government of India

3. In the event the claims ratio including all related costs is below 70%, with the

view to incentives the scheme, the surplus shall be rolled over to the next

policy period.

ESIC to enhance benefits for employees

New Delhi , Dec. 23

The Employees' State Insurance Corporation (ESIC), which earned the highest

revenue ever this year, has decided to enhance its scale of benefits to

employees, but at no additional cost to employers. The ESIC will ask the

Government to increase expenditure on medical benefits from Rs 900 per

insured person family per annum to Rs 1,000.

The corporation has also decided to increase the exemption limit from paying

employees contribution from Rs 50 to Rs 70, thus exempting 5.7-lakh

employees from paying their contribution.

T.Y.B.B.I

Contribution by the : Govt. of India

Contribution by the : Handloom weaver

Total premium

Rs.800/- per annum

Rs.200/- per annum

Rs.1000/- per annum

75

Benefits Enhancement

The organization also wants to increase sickness benefits, disablement

benefits and the existing limit for reimbursement of funeral expenses,

estimating a total liability of Rs 61 crore from these enhancements of benefits.

The announcement was made at the ESIC's annual meeting, chaired by the

Minister of State for Labour and Employment, Mr Oscar Fernandes, to approve

its annual report.

Announcing a revenue income of Rs 2,410.61 crore for the year 2005-2006 in

a press release, the ESIC stated that the scheme had been implemented in 10

new centres and 90 new geographical areas, covering additional 1.48-lakh

employees this year. The corporation has been able to distribute 31.44 lakh

cash benefit payments to the tune of Rs 273.73 crore over the year.

Health insurance premium may vary from one location to another

Radhika Menon

Geography, a key differentiator for pricing products: IRDA

Mumbai , March 30

Can the health insurance premium paid by a Mumbai resident be more than

that paid by a Chennai resident, on the strength of the geographical location,

other things being equal? A report on `Innovations in health insurance policies'

by the Insurance Regulatory and Development Authority (IRDA), recently

submitted to the Finance Ministry as well as insurance companies, says it can.

T.Y.B.B.I 76

According to the report, geography would be one of the key differentiator for

prices of products since healthcare costs vary in different parts of the country.

"The healthcare costs in Chennai, for example, are lesser than the costs

incurred in Mumbai. This should be used as a differentiator for prices for

products being offered in various parts of the country," said the report. Thus,

there could be restrictions in terms of where the treatment can be availed.

`Pool' concept

The IRDA constituted committee has also strongly recommended the concept

of a `pool', which will be maintained by the regulator for covering pre-existing

illnesses like congenital ailments and conditions like AIDS. The funding of the

pool would be from the contributions of insurance companies, voluntary

contributions from corporates, grants from Central and State governments and

aid from international bodies such as World Bank and WHO

Star Health policy targets Gulf NRIs

`With strict control over expenses, it would be possible for Star to make profits

on the product'.

Chennai , Jan. 12

The country's only standalone health insurance company, Star Health

Insurance, has launched a new product that has several unique features. First,

it will cover pre-existing diseases. Second, it will provide cover for `parents'

regardless of their age. Third, there is no waiting period for commencement of

coverage. Fourth, it will pay for doctors' consultation fees too, including out-

patient consultation.

T.Y.B.B.I 77

But where is the catch? Mr V. Jagannathan, Chairman and Managing Director

of the company, told Business Line on Friday that to avail himself of the

cover, the patient will have to be admitted into one of the "designated

hospitals". If the patient goes to other hospitals, Star's liability will be capped at

50 per cent of the final admissible claim, subject to a maximum of 50 per cent

of the sum insured.

Mr Jagannathan believes there would be a good demand for this product,

which is for now open to NRIs in West Asia. Star intends to extend the policy to

resident Indians also, but over time. There are 4 million Indians in West Asia,

many of whom are concerned over the health (expenses) of their parents, for

whom no insurance company would offer coverage. For a sum assured of Rs 1

lakh, the gross premium is Rs 1,751 (including tax). Star charges Rs 438

additionally for including one child and Rs 875 for one more adult. How will it

work for Star? Mr Jagannathan says that with strict control over expenses, it

would be possible for Star to make profits on the product.

ICICI Lombard plans biometric health cards

Radhika Menon

Launch in Manipal for group insurance policy holders

The Features

Authorizes transactions based on the customer’s fingerprints treatment

at hospitals without having to make advance cash payment Covers head

of family, 3 dependents

T.Y.B.B.I 78

It's now the turn of insurance companies, after banks, to introduce biometric

cards in rural and semi-rural areas. ICICI Lombard General Insurance

Company plans to offer family biometric cards to group health insurance

policyholders. The card will enable policyholders to get hospital treatment

without making any advance cash payment. Biometric cards authorise

transactions based on the customers' fingerprints.

To begin with, ICICI Lombard will launch these cards for health insurance

policyholders in Manipal, Karnataka. This family card will cover the head of the

family and three other dependants, said Mr Pranav Prashad, Head, Rural and

Agriculture business, ICICI Lombard. The insurer plans to introduce these

cards to 7,000-10,000 policyholders by month-end. ICICI Lombard has tied up

with Financial Information Network & Operations Pvt Ltd (FINO) to create this

card. ICICI Bank, the parent company, has a 20 per cent stake in the newly

launched FINO- a company that provides financial institutions with

technological solutions to reach the underserved in the country.

ICICI Lombard's family card will contain a smart chip, which carries biometric

information, personal details as well as the photograph of the policyholder and

three dependants. Mr Rishi Gupta, CFO, FINO, said the `smart card' would

also load the sum insured that the policyholder is entitled to. So, when the

customer presents the card at the hospital, the balance in the card can be

immediately ascertained.

Tie-up with hospitals

ICICI Lombard will tie up with neighborhood hospitals so that hand-held

machines that read these cards can be installed. Mr Prashad said the card

would reduce administrative hassles for the customer and would eventually

drive down distribution costs. If the experiment works in Manipal, it may extend

T.Y.B.B.I 79

this service to other rural health and motor insurance policyholders. ICICI

Lombard would have to tie up with garages in the case of motor insurance.

In rural areas

Collecting biometric information in rural areas is, however, ridden with its own

set of problems. "The fingerprints of people in the rural areas are not very clear

as they perform intense manual labour. So, we take the impression of all the

fingers and choose the best two prints of each hand," he said. The card has

the capacity to load as many as 15 applications and FINO is in talks with

several other finance providers and government agencies. So, besides cash

withdrawal, deposits and insurance premium payments, the urban and rural

poor may also use this card at the neighborhood kirana store and the post

office. Among banks, ICICI Bank has introduced biometric cards and Citibank

has set up biometric ATMs. Several PSU banks are also on the verge of

introducing similar technology for micro-finance customers.

CONCLUSION

The Government of India, in one of its economic survey reports, has proclaimed

that human development is the ultimate goal of India's developmental plans. It

is also being realized that sound long-term development of social sectors, such

as education, and health is crucial to sustain economic growth in an

increasingly integrated world economy. The government can intervene in the

health insurance market in two ways: by directly providing subsidizing

insurance or by regulation. These two forms of intervention do not lead to

identical results. Provision of partial public insurance, even supplemented by

the possibility of opting out, can lead to second beat equilibrium. Regulation of

the private insurance market by imposition of a standard contract or by

T.Y.B.B.I 80

restricting premium rates, on the other hand, can exacerbate the problem of

adverse selection and lead to chronic market instability.

There is yet another criticism about the Indian health delivery system: urban

bias in the allocation of resources. As of 90-91, 66.96 percent of the resources

spent on health care had gone to the urban sector which accounts for 25.7

percent of the total population, while only 33.04 percent of the resources had

gone to the rural sector, which accounts for 74.30 percent of the total

population. The per capita expenditure on health care of the urban sector was

said to be around Rs.152 as against Rs.26 of the rural sector.

The Government being the central player in the health care delivery, the system

is suffering from financial constraints and inefficiency in allocating whatever

resources available. It is slowly being realized that sole reliance on the public

health care system is no longer desirable.

RECOMMENDATION

STAND-ALONE HEALTH INSURANCE COMPANY

Stand-alone health insurance companies in the Public Sector with model

performance can encourage the Private Sector to perform accordingly keeping

in view the issue of affordability of large sections of the needy population and

thus help create a conducive environment for spread of health insurance

business.

Universal Health insurance scheme

The subsidy was subsequently enhanced in 2004 and the scheme was

confined to the BPL segment of the population only, and in spite of it, the

T.Y.B.B.I 81

scheme failed to make much head way. An exercise to identify BPL families

should be initiated immediately and the entire exercise be completed within a

specific time-frame and the scheme should also be made applicable to lower

middle class and the people who are just above the Poverty Line.

LACK OF COORDINATION

The Employee’s State Insurance Schemes, the Central Government Health

Scheme and other Commercial Health Insurance schemes are being operated

by three different Ministries viz. the Ministry of Labour, Ministry of Health &

Family Welfare and Ministry of Finance respectively and there is no

coordination amongst the three Ministries. A pilot health insurance scheme

involving the Ministry of Health and Family Welfare, Ministry of Finance, IRDA

and Public Sector Insurance Companies should be evolved and launched

within a specific time-frame.

LACK OF AWARENESS

The level of public awareness about the need, availability and benefits of

health insurance in the country is still very low despite the fact that public

sector general insurance companies have been operating in the field of health

insurance for nearly two decades, beginning from 1986. There is need to

create awareness about availability and benefits of health insurance schemes

especially in rural areas through a multi-pronged strategy involving the public

insurance companies, the central Government, the state Governments and the

Panchayati Raj Institutions as well as Non-governmental organizations so that

more and more people come forward to adopt Health Insurance schemes.

LACK OF PRODUCT VARIETY

T.Y.B.B.I 82

There is a serious lack of variety of health insurance products in terms of

flexibility to cater to the specific needs of different segments of the population.

There is an imperative need to introduce long term health insurance products,

covering out-patient care, maternity care, pre-existing diseases, suitable

products for the aged, abandoned women, widows, physically and mentally

challenged, children and the rural poor.

LACK OF ADEQUATE HEALTH INFRASTRUCTURE

The two factors that discourage a majority of potential customers from buying

health insurance cover are

(i) Lack of adequate health care infrastructure, especially in rural areas where

75% of the country’s population lives, and

(ii) The consequent inaccessibility to health care for a majority of the

population

It feels that strengthening of the existing infrastructure for providing health

care to the rural masses is of paramount importance. The Governments of all

States and Union Territories may be requested to allot land for development of

health infrastructure in rural areas at concessional rates to private bodies/Self-

help Groups/cooperatives etc. Soft loans from Life Insurance Corporation of

India, Banks and other financial institutions should be made available to these

bodies for creation of rural health infrastructure.

CLAIMS MANAGEMENT & THIRD PARTY ADMINISTRATOR SYSTEM

Third Party Administrators in the Country have been following unethical

practices in collusion with health service providers and insurance companies in

settlement of claims. They also lack the competence and necessary

infrastructure to fulfill the role and functions expected of them. They also note

that complaints relating to claim settlements have increased considerably after

T.Y.B.B.I 83

the introduction of the TPA System and the increase in cost of premium as

also claim costs. a sub-committee of IRDA’s Internal Working Group on Health

Insurance has, inter-alia, recommended that the insurance companies should

take certain concrete steps to provide clear guidelines to enable TPAs to

effectively manage and settle claims.

LACK OF PROFITABILITY

The most health insurance schemes offered by public sector insurance

companies are loss-making primarily due to their inability to insure the younger

people who are relatively free from major diseases. Besides this, the absence

of proper re-insurance facility for health insurance is also adversely affecting

the confidence of insurance companies to underwrite health covers on a large

scale. the Government and the regulator, after due consultation, prescribe

viable targets of health coverage to the insurance companies, both in the

public and private sector, and introduce incentives linked to their performance

in fulfilling those targets.

POVERTY AND NEED FOR SUBSIDY

The premium of health insurance schemes is beyond the economic capacity of

people living below the poverty line as well as for a large section of the

population living just above the poverty line. The only way to ensure health

insurance cover for the poor is through subsidy to be provided by the

Government to make the premium affordable for the poor. The only subsidized

scheme at present is the Universal Health Insurance Scheme launched in

2003 and it has been confined exclusively to the BPL segments in 2004 with

enhanced subsidy. A system of differential subsidy for the poor and the BPL

segments may be introduced across the board for health insurance schemes

T.Y.B.B.I 84

and service tax for providing health insurance may be abolished to increase its

affordability.

LACK OF DATA

The lack of adequate data on morbidity, demographic groups and diseases

etc., is a major hindrance in formulating and designing new products in health

insurance and thus affect the development and progress of health insurance in

the country. A road map should be drawn for establishing a data repository and

should be evaluated and examined for expeditious implementation.

POLICY RELATED REFORM INITIATIVES:

1. Decide on regulator for the health care and its financing

2. Private the infrastructure. The government has pumped in billions of rupees

into the infrastructure, which is resultantly very ineffective and non-

performing

3. Allow the financing agencies and insurance companies to dictate the

performance of health facilities and the constituents.

MARKET AND PRACTICE REFORM INITIATIVES:

1. Permit entry of new players and managed healthcare organizations into the

health insurance market and introduce risk based capital norms for these

entities

2. Introduce rating and credentialing of the providers to encourage

standardization of services from various providers.

3. Creation of standards for diseases and treatment procedures to develop a

common understanding and database as well as to introduce cost

containment measures

T.Y.B.B.I 85

4. Creation of an information bank on insurance, diseases, and treatment

involving creation of a centralized data warehouse besides the enforcement

of standardized billing, claims forms and proposal forms.

5. Portability across players and schemes especially with respect to the pre-

existing diseases condition

6. Encourage community initiatives in healthcare financing to complement

formal social security schemes that cover regularly employed or self

employed, especially in the rural communities.

Appropriate Regulation

1. Permit entry of new players and managed healthcare organizations into the

health insurance market by reducing minimum capital norms, adopting

solvency margins and reinsurance requirements appropriate to this class of

business.

2. Consolidation and improvement in cost effectiveness including withdrawal of

public subsidies and reform of the ESIS and CGHS schemes.

3. Regulation of private healthcare including creation and enforcement of

licensing procedures, and standardization of fees structure

T.Y.B.B.I 86

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