The national health policies have given the added emphasis on health insurance. The common minimum program of the new UPA government also focuses on its important aspect. The recent govt. policies emphasize on many technical details and other nitty-gritty of the problems on health insurance. The budgetary provision of 2003 -2004 extended financial interest in establishing hospital custom and excise duty exemption.

Need for health insurance:

A high priority in health insurance is attached due to the following reasons.

1. Involvement of the private sector in upgrading the standard of treatment.

2. Enhance FDI by promoting India as a destination for foreign clients.

3. Tax exemption will give ground to insurance companies to provide low-cost premium and effective policies.

4. According to the World Bank estimate, high medical expenditure for some people pushes around 2.2 % of the total population below the poverty line.

5. Reduced public investment has increased the expenses for health care facilities.

6. The inability of the public sector in discharging its insurance function was due to low and stagnant public spending which is a mere 0.89% of GDP, less than 1.01% during 1985-86, one of the lowest in the world. Besides the Central budget of the health is stagnant at 2.6% of the total central budget, net of debt, less than 3.1% in 1985-86. State have indicated the same falling trend from 7.02% to an estimated 5.32% during the period 1985-2000 with an increasing proportion of expenditure on salaries and wages exceeding 75%

Because of the enormous need, considering the interests of the poor the Government launched a health insurance scheme for low-income groups, called universal health insurance, in July 2003. The scheme is designed for three sizes of households, the premium charged is (a)Re 1 per day per year for an individual (b) Rs. 1.5 per day per year for a family of up to five members and (c) Rs. 2 per day per year for a family of up to seven members. It provides for reimbursement of hospital expenses up to Rs. 30,000 per individual/family.

If an earning member falls sick, the scheme also provides for the loss of livelihood at the rate of Rs. 50 per day up to a maximum of 15 days, and in the case of death of the earning head of the family due to unforeseen reason, Rs. 25000 is given to the nominee.

Some Components of Health Insurance

Health systems are defined and determined by five components: organizations, regulations, financing, payment systems, and information. Of them, the most crucial is financing, taxes, out of pocket expenditures, and public/private health insurance being its major sources.

Assuring that the marginal benefit of paying the premium is higher than its marginal cost would be necessary for the participation of a larger section of people. However it depends on the design of the insurance scheme undertaken: (1) the benefits package; (2) the cost; (3) the payment systems; and (4) the credibility and the competence of the organizational structure in discharging major functions namely, collection of contributions, contracting and payment for services, redressal mechanisms, and solvency.

For health insurance to be viable and sustainable it is necessary to have a sizeable risk pool consisting of low and high-risk persons.

Benefits package: how it should be?

Without adequate public funding, no society can provide better access to the best quality of health care. Accessibility may be in the form of providing health facilities at a low cost and prioritization in respect of benefits to be covered.

Keeping in mind the backdrop of developing countries, having an uneven distribution of skills, income, and infrastructure, with some regions not even capable of providing a very basic level of services and infrastructure mandated benefit package will be of no help. The prevailing disparity leads to wide divergence in social, economic and demographic status which calls for the formulation of different packages for different regions entailing policy implication for future investments in the health sector. The major stress is in attracting public subsidies to the more backward and weaker regions, having lower infrastructure capacity.

Whatever may be the needs, the content of the benefits package ultimately depends on the costs involved for the two key factors, government, and households. Health being merit good, government intervention is unavoidable because of externalities as well as inherent market imperfections.

The State has a big role in determining the cost of the benefits package. The cost implication of benefits package has two aspects (a) quantum of the premium fixation (b) determination of subsidies for those who cannot afford. Premiums fixation is done through the probability of risk factoring for age, health status, and administrative expenses and profits element.

For fixing up premium rates, three sets of information are required (i) disease incidence for enumerating annual morbidity of age and disease pattern, (ii) standards for assuring health care, and (iii) unit cost of treatment. Experience from various countries suggests that without subsidy poorer sections cannot get the chance to be included in the insurance schemes. However, the blanket offer of subsidies would misuse the services.

Institutional Framework

In most of the developing countries’ modern infrastructure like electronic record maintenance, updated communication systems are not available resulting in more intensive use of the human resource (agents) to manually attend various functions.

The success of the health insurance scheme requires a strong institutional framework, which would convert finances from the consumer to the service provider and vice versa. The organizational framework has to do a lot of work like framing and negotiating benefit package, marketing for most possible coverage among beneficiary, collection of contribution, claim settlement, redressal of grievances, screening patients, increasing social awareness for early preventive activities. If administrative cost is high then the cost of the premium is also high. The administrative cost in India is about 30%. To reduce the cost of administration we may resort to community-based health insurance.

The community-based health insurance implies that the community controls the major function of collection and utilization, membership is voluntary and strong will persists to prepay the contributions. The community may be a close-knit social or religious group or maybe of common economic interests.

Implications of Budget 2003 and 2004

The budget 2003 has three major policy intervention while the policy in 2004 further improved upon the one related to health insurance: (a) Long-term capital to private hospitals for establishing new or expanding existing medical facilities to 100 or more beds, by extending benefits of 10(23G) of the IT Act; (b) Increased rate of depreciation from 25 % to 40% and reduction to customs duty from 25% to 5% besides exemption from CVD (additional duty) for all life-saving equipment and nil or normal customs duty of 5% on life-saving drugs, for facilitating replacement and up-gradation of medical equipment and encouraging domestic manufacture and R and D; (c) financial risk protection up to Rs. 30,000 per annum towards medical care in hospitals.

One time compensation of Rs. 25,000 in case of the accident and a grant of Rs. 750 for loss of wages @Rs. 365 for one person: Rs. 547.5 for a family of five; and Rs. 730 for a family of seven. The BPL families were eligible for a premium subsidy of Rs. 100 per annum. The scheme was envisaged to be implemented as a community-based insurance scheme by the NGO’s through the four Public Sector National Insurance Companies. It was targeted to cover 50 lakh families [GoI 2003].

In the 2004 budget this policy was revised in three ways: (1) restricted to BPL families; (2) increased the subsidy element to Rs. 200 against the Rs. 365 premium paid for the individual coverage; Rs.300 for the Rs.547.5 premium for the family of five and Rs.400 for those paying a premium of Rs. 730 for covering a family of seven persons; and (3) a new scheme for covering the member of a self-help group (SHG) under a scheme providing health cover of Rs.10,000 for a premium of Rs.120 per annum or Rs. 10 per month.

The above analysis shows that the government is giving more stress in an ever-increasing manner for a meaningful health insurance policy for the community as a whole. However, more efforts from voluntary organizations, local self-government are necessary for bringing a breakthrough in the entire process. This is particularly more due to the limited resources of the government. Along with this, there should be a strong need for community participation such as NGOs or self- help groups.

Various schemes of health insurance coupled with government health schemes can bring more people under the purview of health insurance. For this purpose, a strong mass consciousness needs to be evolved and a fair movement may be started in this regard.

                                    By Dr.Saroj Upadhyay and Ms. Hrilina Basu Roy, Published in The Insurance Times, January 2005