This document discusses the health insurance market in India. It outlines key factors needed for a thriving health insurance industry, such as availability of healthcare providers and medical cost data, and notes that many of these factors are currently lacking or poor in India. The market potential for health insurance in India is estimated to be huge, covering hundreds of millions of people currently without coverage. To develop the industry, the document recommends establishing an independent institution to standardize healthcare facilities and procedures, collect medical data, and evaluate insurance plans. It also suggests initial guidelines from IRDA to improve services from TPAs, insurers and reinsurers as the first step toward developing the proper environment for health insurance in India.

1. HEALTH INSURANCE MARKET IN INDIA
August 16, 2002 1

2. HEALTH INSURANCE MARKET IN INDIA
August 16, 2002 2
Topics that will be covered in this discussion:
 Definition of “Health Insurance”
 Factors necessary for a good health insurance market
 Current Health Insurance scenario in India
 Possible Health Insurance products for the Indian market
 Possible market size of Health Insurance products in India
 The Missing Links and solutions
 Conclusion

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Definition of Health Insurance:
 Health insurance signifies the coverage that provides for the
payment of benefits as a result of sickness and injury and which
includes insurance for losses from accident, medical expense,
disability, or accidental death and dismemberment

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August 16, 2002 4
Some key social and economic conditions are necessary for a country to
have a thriving health insurance industry:
Social/Economic Factors Conditions Required
Healthcare Providers  Good supply and equitable distribution of quality healthcare
providers
Morbidity Data  Availability of good data about morbidity rates of various
ailments
Accreditation and licensure  Proper accreditation and licensure of physicians, medical
care providers, and service providers
 Well established and universally accepted medical protocolsMedical Protocols
Customers  Knowledgeable and well-informed customers
Medical costs  Detailed data on ALOS (Average Length of Stay) and
reasonable and customary cost for various ailments with
providers in different parts of the country
Billing  Proper coding of various ailments and standardized billing
format for all providers
Risk Financing  A strong well structured medical risk financing mechanism

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However, after studying the Indian market we find the following:
Social/Economic Factors Current Indian Condition
Healthcare Providers  Acute shortage of quality health care facilities and
specialists
 The public hospital system is in very poor condition and
is overburdened
Morbidity Data  Very little morbidity data available, especially for the
target population
Accreditation and licensure  There is no accreditation methodology for medical
facilities
 There is no universally accepted practice of licensure
and continuing education for health professionals
 Absence of any nationally accepted medical standards,
and lack of any regulatory body to monitor and enforce
those standards
Medical Protocols

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Current condition of the Indian market (continued):
Social/Economic Factors Current Indian Condition
Medical Costs  There is very little data about medical costs in various
parts of the country
 Practically no information is available regarding medical
cost “trend”
Billing  No coding of ailments and treatments is done by the
medical practitioners and facilities
 Billing structure is practically different in each medical
facility
Risk Financing  “Mediclaim” has failed to reach the vast majority of its
target market, though accident and disability coverages
are common in the corporate world
 Private life insurance companies has just launched some
fixed sum medical riders
 Customers have little understanding of medical risks and
the appropriateness of the various products in the market
Customers

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Health insurance can be offered under various coverages:
HEALTH
INSURANCE
Long Term
Care
Hospitalization
&
Surgical
Emergency
Medical
Critical Illness
&
Surgical
Specialty
Coverage
Supplemental
Medical
STD
&
LTD
AD&D
Comprehensive
Medical
PPD
&
PTD
Administrative
Services
Only
Medical Stop
Loss

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August 16, 2002 8
The market for health insurance in India is huge and practically
totally untapped:
Lower Middle Class
150-160 million
Middle Class
90-100 million
9-10 millionUpper Middle Class
6-7 millionUpper Class Only a small portion (around 10%) of
this market of around 50 to 60 million
individuals has some health insurance
coverage
These segments have practically
no health insurance coverage
….the key is HOW to address the factors that are hindering insurers
from accessing this vast market

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Clearly, the factors – “MISSING LINKS” – that are hindering this
development are:
Proper Supply
of Medical
Practitioners
Lack of
Medical Data
Lack of
Medical
Protocols
Lack of
proper
Accreditation
Lack of
Billing
Standards
This can be only
resolved over
time However, this “missing
links” can be addressed
NOW by setting up an
independent institution in
the mould of NCQA in USA

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This independent institution will be responsible for the following tasks:
Independent
Institution
Accreditation and
licensure of
Medical Providers
Establishing
Medical Protocols
Setting up medical
coding procedure
& billing standards
Accumulation &
analysis of medical
cost data
Accumulation &
analysis of medical
morbidity data
Evaluation of
various health
Insurance plans
Evaluation of
various TPAs, PPOs,
and other health
service providers
Establishing the IT
architecture for
collection of data
from various parties

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State &
Central
Governments
Medical
Practitioners
Medical
Service
Providers
Insurance
Companies
Reinsurance
Companies
TPAs &
PPOs
Pharmaceutical
Companies
Medical
Institutes
Independent
Institution
All the parties in the health industry need to contribute financially and
technically for the set-up and functioning of the institution:

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To start the process of eventual setting up of the proposed independent
institution, IRDA can create some service guidelines for TPAs/PPOs,
insurance companies, and reinsurance companies:
Service Categories Specific Services
Provider Network  Categorization by providers by primary, secondary,
tertiary, and super-specialty
 Proper geographical distribution of the providers
 Written service agreements with the providers
Provider Reimbursement  Reimbursement to the providers will be based on a
mutually agreed fee schedule included with the service
agreement
Medical Management  Promotion of globally established clinical guidelines for
treatment of various ailments among providers
 Disease management programs for members with
chronic ailments
 Medical management capability to assist members with
major medical situations

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IRDA mandated service guidelines for TPAs/PPOs, insurance companies,
and reinsurance companies (continued):
Service Categories Specific Services
Claims Coding  Medical coding of all claims based on one globally
accepted coding standard
Claims Payment & Monitoring  Medical bill settlement directly with the providers as per
the pre-determined fee schedule
 A cash reserve of 25% of the annual targeted claim cost
need to be maintained
 Monitor and analyze claim utilization and cost pattern
Financial & Operational Reporting  Capability to produce detail reporting of premium, claims
cost, morbidity rates, medical management, and trend
reports both for customers and IRDA
24-Hr Help Desk  Help Desk in all major centers
 Cost of call to be borne by the company for medical
situations
 Operated by medically qualified persons (nurses,
paramedics, doctors)

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Conclusions:
 The fundamental factors that are required for development of health
insurance industry and either lacking or in a poor state in India
 The market potential is huge as the vast majority of the target population
currently have no coverage
 For the next decade the focus need to be totally on standardization of
health care facilities, setting up of uniform medical procedures and billing
procedures and collection and analysis of medical data
 The insurers, health care providers, pharmaceutical companies, health care
institutes, other service providers, and various government and non-profit
organizations have to work together to develop the proper environment
 The starting point in this process can be IRDA mandating proper service
guidelines for TPAs, insurers, and re-insurers regarding health insurance
coverages