HEALTH INSURANCE THEORY AND PRINCIPLES

PRESENTED BY: BHOOMI LALANI SMIT DAVE BHAKTI DHAROD NEHA CHOUDHARY

Introduction
Health insurance is management of risk of incurring medical expenses among individuals. The existing schemes can be categorized as:
1. 2. 3. 4. Voluntary health insurance schemes or private-for-profit schemes; Employer-based schemes; Insurance offered by NGOs / community based health insurance, and Mandatory health insurance schemes or government run schemes

Evolution of Health Insurance

In 1850 the "accident insurance" was first offered by the Franklin Health Assurance Company in USA. The origins of sickness coverage in the U.S. effectively date from 1890. Later ,Hospital and medical expense policies were introduced leading to development of Blue Cross Organizations during 1920s.

Today, most comprehensive health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and most prescription drugs.

Evolution in India
Phase I: Health Insurance in India began with the introduction of the Mediclaim policy by the four Public Sector Insurance Companies, in the year 1986. Phase II: This Mediclaim Policy was revised in 1991, wherein the quantitative sub limits under each of the policy schemes were removed. Phase III: The year 2001 saw the advent of the Third Party Administrators. Phase IV The policy was altered in the year 2007, to bring back the sub limits.

Present Condition
Indian health financing faces a number of challenges including:
Increase in health care costs High financial burden on poor effecting their incomes

Need for long term and nursing care for senior citizens because of increasing nuclear family system
Increasing burden of new diseases and health risks

Limited government funding leading to negligence of preventive as well as primary care and public health functions

Health-Insurance funding pattern - India

Growing health insurance coverage

Source: Mckinsey India Pharma 2015 Prescribed Growth, Aug 2007

Analysis
Health insurance still remains largely untapped in India. Health insurance penetration is low at about 14% of Indias 1.12 bn population. 5% private health insurance and 9% state-run government employee insurance schemes Public financing in total health care is just about 1 percent of GDP. 80 percent of health financing is private financing, much of which is out-of- pocket payments.

Future Outlook
However, healthcare insurance is slowly picking up pace in India. The total health insurance premiums written by non-life companies and standalone health insurance companies grew by 25.2 percent in FY 2010 over FY 2009.

Source: 2010 statistics released by the IRDA (Insurance Regulatory Development Authority)

HEALTH INSURANCE IN INDIA

HEALTH INSURANCE

PUBLIC SECTOR GIC FOUR SUBSIDARY COMPANIES

PRIVATE SECTOR
PROFIT BASED PREMIUM PAID

PUBLIC SECTOR
LIC

JAN AROGYA BIMA POLICY

NGOS AND COMMUNITY BASED FUNDS

PRIVATE SECTOR
Bajaj Alliance Icici Lombard Max Bupa Tata Aig Star Allied Health Insurance Lic Health Insurance Appolo Munich

COMPARITIVE ANALYSIS

Government insurance Schemes

Government initiatives like the Rashtriya Swasthya Bima Yojna (RSBY), Comprehensive Health Insurance Scheme (RSBY-CHIS), Kerala; Apka Swasthya Bima Trust (ASBT), Delhi; Niramya Health Insurance Scheme, Ludhiyana are now actively driving the health insurance market in India RSBY may also be extended to National Rural Employment Guarantee Act (NREGA) workers who worked under the scheme for 15 days in a year. The initiatives can help address the needs of the people below poverty line as well as the other vulnerable sections of the society.

Emerging role of TPAs:

The TPAs (Third Party Administrators) have added to the changing scenario of health insurance in India. Their role is gradually changing from green field ventures to an established system. Their wide spread network with hospitals and other healthcare providers have certainly strengthened the health insurance structure in India.

Emerging role of TPAs:

To bring in uniformity and smooth functioning of the process, the IRDA (Insurance regulatory and development authority) has directed the TPAs to formulate standard guidelines and formats for better communication and transparency in the system.

Benefits
Visibility of health insurance in the hospitals and amongst the patients could improve Credibility of the health insurance practices will help improve driving more no of people into the system. A formal structure will be created reducing the ambiguity in the health insurance delivery

Potential Benefits:
Private health insurance is the fastest growing segment of the Indian insurance market

Steady growth rates in health insurance leading to a CAGR in excess of 30% during the last six years
Indian banks are expected to enter the Indian health insurance market

There is a reasonable prospect for premiums to return to levels to fully reflect risk attribution in the longer-term
The development of micro-insurance products aimed at offering the high numbers of the low paid elements of society with a range of insurance cover could stimulate significant volumes of new business. The focus for insurers in the Indian general insurance industry will be on improving network efficiency, product development and differentiation as well as cost controls in order to maintain market share linked to the exceptional growth in the Indian economy.

New Advancements in Health Insurance

Indian Government is considering to cover all citizens with Health Cover during Five year Plan (2012-2017).

No. of Families (in crores)

Premium / Family (in rupees)

Yearly Premium (in crores)

BPL
Above Poverty Line but Below Middle Middle

6
8 5

750
1,500 4,000

4,500
12,000 20,000

Upper Middle
Higher Class Total

3
2 24

15,000
30,000

45,000
60,000 141,500

 With growth in population, the figure can be Rs 225,000crores which is 28 times the present size of health insurance or 7 times the size of general insurance industry. This is going to give a big boost to healthcare industry and generate employment opportunities.

Reasons for poor health penetration in India

Lack of regulation and control on provider behaviour Unaffordable premiums and high claim ratios Reluctance of health insurance companies to promote their products Lack of innovation

Too many exclusions and administrative procedures

Inadequate supply of services

Co-variate risks

Growth in Health Insurance in India

At present there are 3 operating stand alone Health Insurance company's in India: (1)Apollo DKV Insurance Company Limited (2)Star health and Allied Insurance Company Limited (3)MaxBUPA

 3 large names from USA have become interested in the growing Indian Market and may enter the market soon. These are

(1)United Health
(2)Aetna (3)Cigna

GROWTH DRIVERS FOR HEALTH INSURANCE IN INDIA

Source: Emerging Market Report: Health in India 2007 PricewaterhouseCoopers

Population Growth

One driver of growth in the healthcare sector is Indias booming population By 2030, India is expected to surpass China as the worlds most populous nation. By 2050, the population is projected to reach 1.6 billion.

Expanding Middle Class

India traditionally has been a rural, agrarian economy. Nearly 3/4 of the population still lives in rural areas. Indias thriving economy is driving urbanization and creating an expanding middle class, with more disposable income to spend on healthcare.

Increase in Purchasing Power

More women are entering the workforce as well, further boosting the purchasing power of Indian households. Between 1991 and 2001, the % of women increased from 22% to 26% of the workforce, according to the latest Indian government census. Many of these women are highly educated: the ratio of women to men who have a college degree or higher level of education is 40:60

Rise in Diseases
Another factor driving the growth of Indias healthcare sector is a rise in both infectious and chronic degenerative diseases. The troubling trend can be attributed in part to substandard housing, inadequate water, sewage and waste management systems, a crumbling public health infrastructure

 Some other growth drivers of Health Insurance in India are: Pharmaceuticals Deteriorating Infrastructure Healthcare Divide Lack of Insurance

Concerns & challenges

India is a low-income country with 26% population living below the poverty line, and 35% illiterate population with skewed health risks. There no mechanism or infrastructure for collecting mandatory premium among the large informal sector. Much of the focus of the existing schemes is on hospital expenses, along with a lack of awareness among people about health insurance.

Concerns & challenges

The growth of health insurance increases the need for licensing and regulating private health providers and developing specific criteria to decide upon appropriate services and fees.

There is also a need to evolve criteria to be used for deciding upon target groups who would avail of the State Health Insurance.
Schemes to address issues relating to whether indirect costs would be included in health insurance.

The way ahead

Implementing regulations would be one, but by no means the best mechanism to contain provider behavior and costs. There is an urgent need to document global and Indian experiences in social health insurance. The wide differentials in the demographic, epidemiological status and the delivery capacity of health systems are a serious constraint to a nationally mandated health insurance system.

The way ahead

Undertake pilot projects to gather more information about the population to be targeted under an insurance scheme and develop options for different population groups.

To undertake costing of health services for evolving benefit packages to determine the premium to be levied and subsidies to be given. The success of any social insurance scheme would depend on its design, the implementation and monitoring mechanisms which would be set in place

THANK YOU