Micro Health Insurance in India: Issues & Challenges

By Munib, Nasiha | Review of Management, January-March 2011 | Go to article overview

Micro Health Insurance in India: Issues & Challenges


Munib, Nasiha, Review of Management


Introduction

The concept of micro health insurance can be traced back to the 'Sickness Funds' of some European countries that were formed by workers way back in the 19th century during the industrial revolution. The main purpose of the 'Sickness Funds' was to protect the workers against risks of illness and premature death. Over the period, the Sickness Funds evolved slowly into protective healthcare system in Europe such as 'German Social Health Insurance', 'The Netherlands Social Health Insurance', etc. Thus, Sickness Funds may be construed as precursor to the modern health insurance. Besides Europe, similar patterns have also been observed in Asia such as the Jyorei scheme in Japan and the Chinese Rural Cooperative Medical System (Devadasan, 2007).

In India, first such scheme can be traced back to the setting up of the Students Health Home in West Bengal in 1955 covering 2 million students in the state (Bhat, 2006). Need for such initiatives has increased in recent times mainly because market-driven healthcare facilities are not at all affordable for many. Interestingly, IRDA regulations in recent years for rural and social sector, has provided much needed impetus to micro health insurance products of a number of private players which hitherto cared only for the urban and rich clientele.

While health insurance is gaining popularity in India, the variety and availability of products is severely limited even for the rich. The situation is worse for the poor who have only partial access to a limited set of healthcare services. Scenario is alarming in terms of overall coverage of health insurance. Merely 3.3% of GDP is spent on all kinds of insurance in India, out of which a very low percentage is spent on non-life insurance and only marginally on health insurance. Broadly speaking, health insurance is grossly under-penetrated: as around 70% Indians live in villages and less than 2% are insured. In a country where a major share of the total spending on health (over 98 %) is OOP, there must be an appropriate pooling mechanism to mobilize this huge sum.

Existing health insurance schemes can be categorized into five broad groups: mandatory, voluntary, employer-based, government-run schemes for families below the poverty line (BPL), and community/NGO based insurance programmes. The first three categories of insurance schemes mainly serve the Indian elite, and those belonging to the organized sector while the last two types of insurance schemes fall under micro insurance or micro health insurance. In this paper, we shall focus on the issues and challenges of micro health insurance.

Health Insurance Schemes for BPL Families

Of late, the government has taken plausible steps to provide quality healthcare to 300 million poor in the country. Most of these people are working in the unorganised sector and are devoid of any formal health and social security policy. For example, the government has launched the Rashtriya Swasthya Bima Yojana (RSBY) for those living below the poverty line. The scheme provides an insurance coverage to the tune of Rs. 30,000 per annum. There is a provision of cashless healthcare facility with the provision of smart card and coverage of pre-existing diseases. The centre and the states contribute towards payment of the premium in the ratio of 75:25.

The Universal Health Insurance Scheme (UHIS) was launched by the Government of India in 2003. The scheme provides for reimbursement of medical expenses in case of hospitalisation up to Rs.30,000, coverage for accidental death of the earning head of the family for Rs.25,000 and compensation due to his loss of earning at the rate of Rs. 50 per day up to a maximum of 15 days. In 2004 the scheme was redesigned and made exclusively for persons and families below the poverty line (BPL). The revised annual premium was set at Rs. 365 with a subsidy of Rs. 200 for individuals, Rs. 548 with a subsidy of Rs. 300 for a family of five and Rs. …

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