1.3 Meaning & Definition
1.4 Why Health Insurance Is Must
1.5 Indian Scenario
Issues And Concerns
2.1 What Are The Issues And Concerns
2.2 Licensing Of Health Insurance In India
2.3 Health Sector Financing
3.1 What Are The Opportunities And Challenges
3.2 Need For Priorities
Health Insurance System
4.1 Government Based System(CGHS) & (ESIS)
4.2 Employer Managed System
4.3 NGO System
4.4 Market Based System
i) GIC Mediclaim Coverage
ii) LIC Coverage
Mediclaim At Glance
5.2 Overseas Mediclaim
6.1 MICRO Health Insurance
6.2 Health Insurance For The Poor
7.1 Healthcare Products
7.2 Third Party Administrators
7.3 Future Issues Relating to Health Insurance
7.5 News Related To Health Insurance
2. SHRI CHINAI COLLEGE OF COMMERCE & ECO
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
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
3. 7) Your Views on Health Insurance Scheme
A) Level of satisfaction of the scheme __________________________________
B) Quality service provided ___________________________________________
C) Agent & Customer Relationship ______________________________________
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
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
4. 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
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.
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
5. 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
insurance, the population covered by health insurance is only 1% of the total
population. The following table demonstrates the progress of health insurance
Year People Covered
(Rs. In Crs.)
6. 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
“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
7. 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
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
Railways Health Scheme
Mining & Plantations (Public Sector)
Employers run facilities/reimbursement schemes
of private sector/public sector.
Pubic Sector Non-Life Companies
Private Sector non-life Companies
8. Health Segment of Life Insurance companies 2.3
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
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
9. 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
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
Health Fire Marin
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
10. 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
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,
11. 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
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
premium (in Rs
as a % age of total
Growth of health
ICICI Lombard 118.78 13.4 257.0
Bajaj Allianz 70.39 8.3 242.2
Royal Sundaram 30.02 9.1 88.8
IFFCO Tokio 28.37 5.6 73.3
Tata AIG 26.64 5.7 35.3
Cholamdalam 20.12 11.8
Reliance 7.98 4.9 2.4
HDFC Chubb 1.97 1.1
Private Sector 304.27 8.6 148.0
New India 504.28 11.9 43.9
National 364.29 9.5 26.3
United India 294.19 10.0 5.2
Oriental 265.14 8.7 13.9
Public Sector 1427.9 9.8 24.0
Total 1732.17 9.6 36.0
12. 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
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
13. 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
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
physicians is one
part of the issue
(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
(USD per capital
5365 3036 336 236 62 32
14. health care is the
other aspect of
(% 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.
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
15. 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
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)
Improving the quality and targeting of healthcare (increasing effectiveness)
revenue for health
contributors to health
♠Channeling loans, grants
etc. to healthcare
♠Payments to health are
providers for service
towards health support
expenses are direct
Involves a fund
pool for future
The world Health Organization has defined possible approach to financing of health
16. 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%
for the one-year period (June 05 to June 06). In absolute terms, it has
17. 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
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
promote the administration of vaccinations against such invalidating conditions
18. 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
valid in the case of a limited number of listed diseases, which often include the
19. 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.
20. 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
21. 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
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),
22. 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 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.
23. 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
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
A.1 Mediclaim or Hospitalization Benefit Insurance Policy
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.
24. 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
• 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.
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.
25. • 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
A completed proposal form. If the prosper is a ‘Diabetic’, a separate
questionnaire completed by the family physician.
A.2 BHAVISHYA AROGYA INSURANCE POLICY
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
The policy provides hospitalization benefits for lifetime after retirement’s age of
Premiums can be paid in equated annual installments up to the age of
Premiums can also be remitted in lumpsum on one time basis. Discount is
offered for one time payment
The policy comes into force after retirement and provides for hospitalization and
domiciliary hospitalization benefits, following an accident or sickness.
• 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
• 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.
27. 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
Age of the person Up to 45
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
In Rs. Crore
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
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
TOTAL 1.87 2.05 58.74
Past two year’s business performance of the Bhavishya Arogya Policy
Year Company Target
In Rs. Crore
OICL 0.12 0.01 14
TOTAL 0.12 0.01 14
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
• Open ended scheme
• Covers many surgical procedure
• Fixed benefits for surgical treatment can be availed twice (subject to
• Exclusive Double/Triple accident benefit.
• Option to switch over from existing Jeevan Asha plan
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.
Under the Jeevan Asha plan, the major surgical procedures covered for are:
• Nervous system (non-malignant causes)
29. • Respiratory system
• Cardiovascular system
• Haemic and lymphatic system
• Endocrine & Ocular system
II. Asha Deep
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.
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.
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
in force for the full sum assured. Immediate payment of 50% of the sum
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.
30. 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.
1. Survival Benefits
2. Sum Assured and vested Bonus on maturity.
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.
31. 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).
Pre hospitalization Benefits
Post hospitalization Benefits
Sponsored Health Check Ups
Discount in Premium for family cover
The insured person can claim reimbursement for the following expenditures,
provided they are reasonable and necessary incurred:
• Room expenses
• Nursing expenses
• Surgeon, anesthetist, consultants, specialists fees
• Artificial limbs, cost of organs, O.T charges, medicines and drugs and
32. • 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
• Dependent children
• Dependent parents
33. 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
34. 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
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
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
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
• 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
35. covered, shall be reimbursed subject to the limit of cover under Personal
• 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.
• Claims will be reimbursed only to the extent they are reasonable and
customarily incurred whether in case of medical or dental attention or
• "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
36. 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.
• 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
• 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.
37. • The proof of purchase must be provided for all items reimbursed under this
• 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.
• 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
38. 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
• 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
• 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
Supply of goods or services.
39. Any form of ownership or occupation of land or buildings (other than
occupation only of any temporary residence)
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
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:
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
Personal Liability 200,000 Deductible: US$ 200
40. 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
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
• 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
and should include, ECG Reading, Fasting blood sugar/Urine sugar, treadmill
test in case of medical history
41. • 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$) REMARKS
Includes USA & Canada
Excludes USA & Canada
Deductible: US$ 100
Personal Accident 25,000 -
US$15 per day
Max of US$150
Hospitalized for not less
Loss of Checked in
Delay of Checked in
100 Delay> 12 hrs
Loss of Passport 250 US$ Deductible: 30 US$
Personal Liability 200,000 Deductible: US$ 200
US$30 per day
Max of US$300
Held hostage for not less
Past two year’s performance of National Insurance Co. & New India
Assurance Co. under Overseas Mediclaim Policy
Year Company Target
In Rs. Crore
NICL 15.68 7.32 46.68
NIACL 30.00 24.30 22.37 92.05
TOTAL 39.98 29.59 74.25
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
have more chance of attracting more members because of high level of trust with
Several community based organizations in India have focused on developing
community based insurance schemes during the last decade. Most of these
43. 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
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
44. 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
TABLE 1: TYPES OF CBHI SCHEMES IN INDIA
(Examples) SEWA, BAIF,
Role Plays role of agent
Purchase care from
Plays role of insurer
Purchase care from
Plays role of
both insured &
Low-medium Low Low
Negligible Low Significant
Is an Issue May be an Issue Not an Issue
Mostly Fixed Indemnity Cashless system
Nature of Membership/ Membership/ Geography
45. Pool Geography Based Geography Based Based
MICRO HEALTH INSURANCE SCHEMES
UNIVERSAL HEALTH INSURANCE
FARMERS HEALTH SCHEME
Marketed through public insurance
Covers only Hospitalization
expenses (upto Rs. 15,000)
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)
Exclusion: Pre-existing diseases,
delivery, pregnancy-related illness
Marketed through the cooperative
Covers only surgical procedures
upto Rs. 100,000 per year
Premium: Rs. 120 per/person/per
year(Rs.90 for children under 18)
In-house model (No Insurance
Coverage (2006); 1,830,000
TPA (Family health Plan)
Second largest in the world
46. INDORE MUNICIPAL CORPORATION
HEALTH INSURANCE SCHEME
NAANI FOUNDATION SCHOOL
Public Department (IMC)
Targets Senior Citizens (60 to 80
Covers Hospitalization costs upto
Premium: Rs. 475/Per Person/Per
TPA (MD India):Partner-Agent Model
Hospital Network: 14 Private hospitals
Coverage (2006); 49,419
Targets young children (6 to 14
years-old) enlisted in public
schools (Hyderabad City)
Premium: Rs. 120 per child per
Services provided by nodal
health clinics + base hospital +
Coverage (2006); 60,000.
47. 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.
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
78140 298796 561264 236490
Total 3460905 2580630 1826219 3226207
Individual Mediclaim 626000 2705322
Group Mediclaim 593000 994460
SCHEMES NO OF
YESHASVINI 1,83,000 IN- HOUSE TER CASHL. DIRECT
DHARAMST. 400,000 P. AGENT SEC. CASHL.
SEWA 174,000 P. AGENT SEC. REIMB. INDIRECT
KARUNA 118,000 P. AGENT PER/SEC. REIMB. IND/DIRECT
PREM 108,000 In- House SEC. CASHL/
NAANI 60,000 In- House PER+SEC
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
Overseas Mediclaim 55890
Mediclaim 7560666 2864532
Jan Arogya 171603 101556 70000 67391
Bhavishya Arogya 1108
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.
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
49. 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
tribal rural location); Maharashtra (one rural and one urban location); and Bihar
(mostly rural location). The survey conducted focus group discussions (FGD),
50. 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
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.
The policy insight: The
declared WTP levels are
51. 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
protection against the cost of illness would wish to ensure that the benefit
packages should include drugs, tests and consultations; in addition to
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
episodes. As shown in
52. 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
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
innumerate, are unable
53. rationing decisions regarding the composition of a health insurance benefit
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, 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
The results of this
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.
54. 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
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
55. 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.
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).
56. 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!
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.
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-
57. 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
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.
Setting of appropriate premiums
Measurement and control of expenses
Appropriate use of reinsurance
avoidance of anti-selection
Investment strategy and subsequent
effective claim control
Internal operational control
58. 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
intended to build up to a substantial sum for either major expenditures or for
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
59. 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
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.
60. 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.
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
• Heart attacks
• Prolonged illnesses
61. • Loss of limb, eye, or other parts of the body due to accident
• Maternity expenses
6. What are the main health policies or schemes offered by Indian insurance
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
• 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?
62. 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?
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 Status
Sun life, Canada Life Received
Old Mutual, South
HDFC Standard Life, U.K. Life Received
Reliance No foreign Alliance Non-Life,
ICICI Prudential, U.K. Life, Health Received
Max India New York Life, U.S.A Life Received
Tata Group AIG, U.S.A Life and Non
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.
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
10. What are the pros and cons of privatization of health insurance?
64. 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’.
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
Flexibility in health insurance
products and prices
Supplier induced demand which
would lead to increase in cost of care
Comprehensive and cost effective
Risk Selection practices where the
disabled, poor, elderly would be
Medical plans will be tailored as per
the requirement of an individual
based on pre-negotiated rates
Exclusion of pre-existing conditions
Fewer age, disease and benefits
Monopoly of profit oriented insurance
cartel with poor quality products.
65. The condition of the patient being such that he cannot be moved to the
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
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
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
66. 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.
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
67. 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
• 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
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.
16. What is the amount of Insurance offered by a Critical Illness policy?
68. 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
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
• Hospital receipts/ bills/ cash memos with medical and pathological reports
69. • 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
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
Whole family covered under one policy
Optional benefits Each member eligible for overall cover
Expenses incurred for general health
Pre-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
• In event of a fatality, in addition to the FIR and the relevant supporting
documents, additional documents are also needed.
Post-mortem report wherever applicable
Coroner’s report or Inquest/police report
Letter of probate/will/ letter of administration/ succession certificate
Affidavit from claimant that he/she is/ are the legal heirs of the
70. 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
71. 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
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
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
72. 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.
73. 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
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.
Contribution by the : Govt. of India
Contribution by the : Handloom weaver
Rs.800/- per annum
Rs.200/- per annum
Rs.1000/- per annum
74. 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.
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
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'
75. by the Insurance Regulatory and Development Authority (IRDA), recently
submitted to the Finance Ministry as well as insurance companies, says it can.
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.
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-
76. 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
Launch in Manipal for group insurance policy holders
Authorizes transactions based on the customer’s fingerprints treatment
at hospitals without having to make advance cash payment Covers head
of family, 3 dependents
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
77. 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
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
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.
78. 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.
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
restricting premium rates, on the other hand, can exacerbate the problem of
adverse selection and lead to chronic market instability.
79. 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.
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
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
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
80. 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
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.
81. 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
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
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
82. 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
and service tax for providing health insurance may be abolished to increase its
83. 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-
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
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
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.
84. 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.
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
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