The Evolution of Health Insurance in India

Allopathic medicine in India dates back to the 1600s when medical officers arrived in India with the British East India Company ship surgeons. After the reigns of the Indian Subcontinent or Erstwhile India were taken over by the Company in 1757, the first medical department was setup in Bengal presidency, present day West Bengal and Bangladesh. Subsequently, Madras, present day South India, and Bombay, present day Western India, which was the two other presidencies, formulated their own medical departments. It was not until 1869 that India had a centralized medical system. A Public Health Commissioner and a Statistical Officer were appointed to the Government of India.[1]

For ease of understanding, three milestones have been identified in the insurance literature on the evolution of health insurance in India. The pre independence era, when life insurance was started, the early decades of the independence era, where life insurance gained more popularity and health insurance was more popular as government sponsored insurance programs, and lastly, the liberalization period of the early 1990s when the markets were opened to give new life to the dying Indian economy. It is during this period that private and government sponsored health insurance gained maximum popularity.

Life Insurance in India was the precursor to health insurance

The Oriental Insurance Company in Calcutta, present day Kolkata, started insurance in India in 1818. This was solely for the European Community. A year after the formation of the Indian Medical System, Bombay Mutual Life Assurance Society began offering life insurance for Indians as well. The Indians were charged a higher premium than the British though and it was not easy for them to get insured either. The twentieth century witnessed the emergence of numerous life insurance companies in India. The National Insurance Company was founded in 1906, still exists today, and is the oldest life insurance company in India.[2]

An insurance act introduced health insurance in 1912. Life insurance was and continues to be the most popular form of insurance in India. Part of the reason for the continued popularity is because of historically low life expectancy in India and closely knit family structure.[3] The life expectancy at birth in India was twenty five years in 1921 and fell to twenty three years in 1931.[4]

Nationalization of Insurance

In 1956, the formation of the Life Insurance Corporation nationalized life insurance. In 1948, the first government sponsored health insurance program of India, Employees State Insurance was conceptualized for the blue collared private sector workers. Subsequently, the Central Government Health Scheme was launched for central government employees and their families.3

The government passed the General Insurance Business Act much later in 1972 and General Insurance was nationalized in 1973. The Government of India consolidated one hundred seven insurers under four companies, namely the Oriental Insurance Company Ltd, the New India Assurance Company Ltd., the United India Insurance Company Ltd, and the National Insurance Company Ltd. General Insurance Corporation of India on January 1st, 1973. These insurance companies started the Mediclaim Health Policy for various government sector companies in 1986.[5]

Liberalization the Indian Economy

The process of opening up the health insurance sector was initiated by private insurance companies against the background of Economic Reform process in 1991. A committee headed by the former Reserve Bank of India Governor, RN Malhotra, offered recommendations to regulate the insurance sector in India. The Insurance Regulatory Development Act was passed in 1999 and the Insurance Regulatory Development Authority was formed to regulate the insurance activities in India. The health insurance sector was opened to private and foreign participation.

In 2003, the government of India also launched Universal Health Insurance for the unreached Below Poverty Line individuals. A large number of centrally and state sponsored health insurance programs have been conceptualized for bottom of pyramid population since 2007. Ever since, the government has been launching health insurance programs to provide affordable Health insurance programs are generally popular among the population in India.

The future

The budget allocation for 2016 to 2017 for a new health insurance program called the Rashtriya Swasthya Suraksha Yojana, or National Health protection Program is fifteen billion Indian rupees (USD 225 million). Under this policy, the finance minister announced a cover of one hundred thousand Indian rupees per family per year (USD 1,500). Recently, this budgetary allocation was increased by about six billion Indian rupees (USD 89 million). The details of the policy have yet to be disclosed.[6]

More food for thought

The launch of the National Rural Health Mission by Ministry of Health and Family Welfare in 2005 marked the beginning of a phase of health financing innovations in India. Government sponsored health insurance programs were one of such innovations, looking to provide financial protection to households against expensive inpatient care. The main objective of all these programs has been to provide access to affordable healthcare to the poorest of the poor. Published literature suggests that India’s government sponsored health insurance schemes have had negligible impact on decreasing the incidence of inpatient catastrophic health expenditure (Fan, et al., 2012) (Devadsan, et al., 2007) (Selvaraj & Karan, 2012). Lack of integration with primary and promotive care has been sought as the reasons for this problem. However, there is no evidence to suggest that integration with primary care will contain cost of healthcare.

As per a study published in the Indian Journal of Medial ethics, private health insurance remains highly unregulated and lacks transparency. This study illustrates three “by the hospital which overcharges you or changes rates without informing you; the Third Party Administrator which cheats you by reducing the approved amount for irrational reasons, or by not giving any reasons at all, and the insurance company for washing its hands of the matter and passing the buck to the Third Party Administrator.”[7]

Given this scenario, the nation hopes to witness a highly regulated and well thought health insurance program to address India’s ongoing struggle to access affordable care. The program should take into account the successes and failures of the already existing health insurance programs. The following issues may be given critical importance in this design.

Health insurance in India predominantly covers hospitalization and not outpatient or domiciliary care. A recent publication on healthcare expenditure in India suggests that outpatient healthcare expenditure has increased by almost fifty percent in the past decade. A large portion of this expenditure is spent on drugs, diagnostics and doctor fees. There is a dire need to curtail this expenditure.[8]

Private insurance comes with a promise of comprehensive care, but at a cost. On average, a thirty year old married person with no kids would have to pay between five and eight thousand Indian rupees (USD 75 to 120) for a standard five hundred thousand Indian rupee ($ 7500) family floater policy. But when the same individual buys a plan for a family of four with an average sum insured for one million Indian rupees (USD 15,000), the premium paid is about three to four times higher. This is by no means affordable for a middle class Indian family.[9] It would hence be better to make the government sponsored insurance more comprehensive and equitable.

Quality of healthcare still remains a major issue and is the key to delivering an efficient healthcare program. Many states like Gujarat and Kerala have taken quality of care very seriously. Gujarat has developed “quality assurance cells” to make healthcare and administrative staff more accountable towards quality of care. Similarly, Kerala has developed Kerala Accreditation Standards for Hospitals to ensure high quality of care. Both these states, as a result, have public hospitals providing high quality affordable care.

Better targeting is an issue, especially in case of government programs. The government sponsored health insurance programs were designed to protect those households vulnerable to impoverishment as a result of expensive hospital care. However, in schemes targeted towards the vulnerable population, it is seen that majority of those enrolled, do not qualify, as a result of being non poor.

Demotivated health human resources. Lack of motivation, a clear career path and burnout, especially among the public health workforce, warrants for major health human resource reforms. Pay for performance, increasing local voice, frequent and relevant training, and providing clearer career paths may be an important factor in assuring the success of healthcare programs. Erstwhile Andhra Pradesh provided incentives to surgical teams to deliver treatment under their state sponsored scheme. This arrangement motivated the public hospital to compete with the private hospitals.

These lessons from India’s years of experience with health insurance may be useful to carve out a better health insurance policy to ensure that health equitable to people, no matter where they live, and no matter what their age.