TOPIC: HEALTH INSURANCE

NAME: YATRI SHAH

TYBBI

ROLL NO-534

1) Introductory
2) Origin
3) Meaning & Definition
4) Why Health Insurance Is Must
5) Indian Scenario
6) What Are The Issues And Concerns
7) Licensing Of Health Insurance In India
8) Health Sector Financing
9) What Are The Opportunities And Challenges
10)
Need For Priorities
11)
Government Based System(CGHS) & (ESIS)
12)
Employer Managed System
13)
NGO System
14)
Market Based System
GIC Mediclaim Coverage
LIC Coverage
15)
Mediclaim
16)
Overseas Mediclaim
17)
MICRO Health Insurance
18)
Health Insurance For The Poor
19)
Healthcare Products
20)
Third Party Administrators
21)
Future Issues Relating to Health Insurance
22)
News Related To Health Insurance
23)
Conclusion

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INTRODUCTION
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

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penetration being very low and health insurances share being minimal
in the existing situation, the vast majority of the populations are
outside the existing Health Insurance System. 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 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
century, early 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 20 th 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.

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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 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.

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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 in India:
:
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 countrys 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
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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 healthy.
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
Social
/Mandatory
Schemes

Scheme

Beneficiar

The Employees State Insurance Scheme

ies in lacs
253.

Central Government Health Scheme

43.

State Sponsored Schemes

5.

(This figure may be enhanced with the recent

coverage extended by Assam Government to its
undeserving population)
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Employer

Railways Health Scheme

80.

based

Defense employees

66.

Schemes

Ex-Serviceman

75.

Mining & Plantations (Public Sector)

40.

Employers run facilities/reimbursement schemes

of private sector/public sector.
Commercial Pubic Sector Non-Life Companies
Schemes
Community

60/80.
100.

Private Sector non-life Companies

8.

Health Segment of Life Insurance companies

Community health schemes by NGOs and others

2.3
30.

Schemes
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

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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 necessities only.
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 the rescue.
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.

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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 Indias 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 countrys 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
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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, 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%.
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 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.

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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 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

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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..

Life expectancy

US

UK

Mexico Brazil China India Access to health

77.4

78.3

72.6

71.4

72.5

64.0

providers and

(avg. # of years)
# of Physicians

2.7

1.9

1.7

1.2

1.7

0.4

availability of
physicians is one

per 1,000 people

Healthcare

care service

5365 3036 336

236

62

32

part of the issue

spend (USD per

Financing for

capital
Healthcare

13.2

8.4

5.5

7.5

5.0

5.3

spend (% of

health care is the

other aspect of
the issue

GDP)

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
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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 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

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 Methods for provider payment institutions that pay providers

Role of public and private sectors in the delivery of service
The world Health Organization has defined possible approach to financing of health
expenditure

Using central/state
revenue for health
Compulsory premium
contributors to health
Channeling loans, grants
etc. to healthcare
Payments to health are
providers for service
Premium contributions
towards health support

Tax-based and
out-of-pocket
expenses are direct
expenses related
outlays
Health Ins.
Involves a fund
pool for future
healthcare

Tax
funded
Public

Total health
Expenditure

Private

Social
Security
Externally
funded
Out-ofPocket
Private
Health Ins
Externally
sourced

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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)
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
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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
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 commendable performance.
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.

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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 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

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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 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

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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 insureds 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 Expenses 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.

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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 Indias 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

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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 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 facilities.

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.

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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), 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 SYSTEMS
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
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employees for reimbursement, and reimbursements are not linked to

their individual contribution. Such coverages generally vary according
to the employees salary or designation. Overall, the performance of
these systems in India has been satisfactory.
NGO SYSTEMS
Health facilities are also provided by voluntary and charitable or Nongovernment organizations (NGOs). Some of the important NGOs are
Child In Need Institute (CINI),
Self-employed Womens 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
A.

G
IC Mediclaim Coverages
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 products:

A.1 Mediclaim or Hospitalization Benefit Insurance Policy

Suitability
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23

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.
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

Benefits
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.
Domiciliary Hospitalization

T.Y.B.B.I

24

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.

Exclusions
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
Requirements
A completed proposal form. If the prosper is a Diabetic, a separate
questionnaire completed by the family physician.
A.2 BHAVISHYA AROGYA INSURANCE POLICY
Suitability
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 policy.

T.Y.B.B.I

25

Salient Features
The policy provides hospitalization benefits for

lifetime after

retirements age of the insured.

Premiums can be paid in equated annual installments up to the age of
retirement
Premiums can also be remitted in lumpsum on one time basis.
Discount is offered for one time payment
Benefits
The policy comes into force after retirement and provides for
hospitalization and domiciliary hospitalization benefits, following an
accident or sickness.
Other conditions
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 policy.

T.Y.B.B.I

26

Requirements
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.
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 following table
Age of the person

Up to 45

46-55

years
Head of the family
70
100
Spouse
70
100
Dependent child up to 25 years
190
250
For family of 2+1 dependent children 190
250
For family of 2+2 dependent children 240
300
The policy is available to individuals and family members

56-65

66-70

120
120
290
290
340
by duly

140
140
330
330
380

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.
B. LIC COVERAGES
The Life Insurance Cooperation of India introduced a special
insurance programme in 1983 which covered medical expenses for
T.Y.B.B.I

27

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
Features
Open ended scheme
Covers many surgical procedure
Fixed benefits for surgical treatment can be availed twice (subject
to conditions)
Exclusive Double/Triple accident benefit.
Option to switch over from existing Jeevan Asha plan
Suitable for
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.
Special Features
Under the Jeevan Asha plan, the major surgical procedures covered
for are:
Nervous system (non-malignant causes)
Respiratory system
Cardiovascular system
Haemic and lymphatic system
Endocrine & Ocular system

II. Asha Deep

T.Y.B.B.I

28

 Features
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.
Suitable for:
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.
Special Features
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 assured
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.
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

T.Y.B.B.I

29

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.
Benefits
1. Survival Benefits
2. Sum Assured and vested Bonus on maturity.
Death Benefits
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.

T.Y.B.B.I

30

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).
Basic Cover
Pre hospitalization Benefits
Post hospitalization Benefits
Sponsored Health Check Ups
Discount in Premium for family cover

Basic 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 similar expenses

Note: Under no circumstance will the reimbursement exceed the

sum insured. In case of a Family Mediclaim Policy, the claim

T.Y.B.B.I

31

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 payable.

Spouse

Dependent children

Dependent parents

T.Y.B.B.I

32

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 Travelers
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
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
T.Y.B.B.I

33

of death, loss of sight or limbs of the insured, the Insurance Company

will pay up to US$ 50,000 as compensation.
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 insurance.
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 insurance.
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 services.

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 covered, shall be reimbursed subject to the limit of
cover under Personal Accident.

T.Y.B.B.I

34

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.

Specific Conditions

Claims will be reimbursed only to the extent they are reasonable

and customarily incurred whether in case of medical or dental
attention or transportation.

"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.

T.Y.B.B.I

35

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 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.
Specific Conditions:
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 baggage.
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

T.Y.B.B.I

36

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.
Specific Conditions:
The proof of purchase must be provided for all items reimbursed
under this cover
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.
Specific Conditions:

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.

T.Y.B.B.I

37

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
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 overseas journey.

Specific Conditions:
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 Contractual liability.

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.

T.Y.B.B.I

38

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 addiction.

Supply of goods or services.

Any form of ownership or occupation of land or buildings (other than

occupation only of any temporary residence)

7. Hijack
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 abroad frequently
Features:
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 person.

T.Y.B.B.I

39

 The Monetary Compensations offered in each case:

LIMIT

BENEFIT

US$)

(in

REMARKS

Medical Expenses

500,000

Deductible: US$ 100

Personal Accident

25,000

1,000

100

Delay > 12 hrs

Loss of Passport

250

Deductible: US$ 30

Personal Liability

200,000

Deductible: US$ 200

Loss

of

Checked

in

Checked

in

Baggage
Delay

of

Baggage

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 medical history
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.

T.Y.B.B.I

40

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
Features:

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

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

Medical Expenses
Includes USA &
Canada
Excludes USA &
Canada

500,000
250,000

Deductible: US$ 100

Personal Accident

25,000

T.Y.B.B.I

41

Hospital Benefit

US$15 per day

Hospitalized for not less
Max of US$150
than 24hrs

Loss of Checked in
Baggage

1,000

Delay of Checked in
Baggage

100

Delay> 12 hrs

Loss of Passport

250 US$

Deductible: 30 US$

Personal Liability

200,000

Deductible: US$ 200

Hijack

US$30 per day

Max of US$300

Held hostage for not

less than 24hrs

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
T.Y.B.B.I

42

chance of attracting more members because of high level of trust with

them.
Several community based organizations in India have focused on
developing community based insurance schemes during the last
decade. Most of these 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 students movement. This scheme, which is
called the Students 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.

T.Y.B.B.I

43

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 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 beneficial.

MICRO HEALTH INSURANCE SCHEMES

T.Y.B.B.I

44

UNIVERSAL HEALTH INSURANCE

YESHAVINI CO-OPERATIVE

SCHEME (UHIS)

FARMERS HEALTH SCHEME

(KARNATAKA)

Marketed through public insurance

companies
Covers only Hospitalization
expenses (upto Rs. 15,000)
Premium
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

movement
Covers only surgical procedures
upto Rs. 100,000 per year
Premium: Rs. 120 per/person/per
year(Rs.90 for children under 18)
Cashless services
Hospital network(169)
In-house model (No Insurance
company)
Coverage (2006); 1,830,000
TPA (Family health Plan)
Second largest in the world

INDORE MUNICIPAL CORPORATION

NAANI FOUNDATION SCHOOL

HEALTH INSURANCE SCHEME

HEALTH PROGRAMME

(MADHYA PRADESH)

(ANDHRA PRADESH)

T.Y.B.B.I

45

 Public Department (IMC)

NGO/Private Trust

Targets Senior Citizens (60 to 80

Targets young children (6 to 14

years old)

years-old) enlisted in public

Covers Hospitalization costs upto

schools (Hyderabad City)

Premium: Rs. 120 per child per

Rs.20,000
Premium: Rs. 475/Per Person/Per

year
Services provided by nodal

year.
TPA (MD India):Partner-Agent Model

health clinics + base hospital +

Hospital Network: 14 Private hospitals

referrals
Coverage (2006); 60,000.

Coverage (2006); 49,419

SCHEMES

NO OF
BENEFIC.

YESHASVINI
DHARAMST.
SEWA
KARUNA
PREM

1,83,000
400,000
174,000
118,000
108,000

NAANI
AROGYA
INDORE
ASHWINI

T.Y.B.B.I

60,000
60,000
49,000
12,000

TYPE OF
SCHEME

TYPE OF
COVERA
GE
IN- HOUSE TER
P. AGENT
SEC.
P. AGENT
SEC.
P. AGENT
PER/SEC.
In- House
SEC.

TYPE OF TYPE OF
BENEFIT SUBSIDY
CASHL.
CASHL.
REIMB.
REIMB.
CASHL/

DIRECT
INDIRECT
IND/DIRECT
INDIRECT

In- House

REIMB.
PER+SEC CASHL.

IND/DIRECT

P. AGENT
P. AGENT
P. AGENT

+TER
SEC.
CASHL.
SEC.
CASHL.
PER/SEC. CASHL.

INDIRECT
DIRECT
IND/DIRECT

46

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 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.

T.Y.B.B.I

47

 Company shall not engage itself in any other business.

The minimum paid up capital shall be Rupees One Crore in equity
shares.
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.

Socio-Economic Environment
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

T.Y.B.B.I

48

retirement date which can be used to pr-fund medical expenses (or a

future Medical Expense Policy).

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!

Investment Strategy
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.

Cross Subsidies
The issue of cross-subsidies is another item which needs to be
carefully considered by any insurer. There often tends to be crosssubsidies in health insurance policies and in particular in medical
expenses policy. Even when legislation does not force crosssubsidies, it is quite common for there to be cross-subsidies in health
Insurance products. The insurance company needs to examine the

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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 crosssubsidies.

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

Setting of appropriate premiums

Effective underwriting
effective claim control

Measurement and control of expenses

Appropriate use of reinsurance
avoidance of anti-selection

Appropriate reserving
Internal operational control

Investment strategy and subsequent

measurement

AIDS

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

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50

Insurance) and also add the expected life of the insured, thus
benefiting all parities concerned.
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. MSAs 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 old age.

Capitated Arrangements:
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 doctors
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

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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.
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 insurance
market.
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 more sustainable.
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
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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 features.
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 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.

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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.

Contribution by the : Govt. of India

Rs.800/- per annum

Contribution by the : Handloom weaver

Rs.200/- per annum

Total premium

Rs.1000/- per annum

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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 policy period.

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.
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.
Benefits Enhancement

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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
Radhika Menon
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' by the Insurance Regulatory
and Development Authority (IRDA), recently submitted to the Finance
Ministry as well as insurance companies, says it can.

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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.
`Pool' concept
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

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waiting period for commencement of coverage. Fourth, it will pay for

doctors' consultation fees too, including out-patient consultation.
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
Radhika Menon
Launch in Manipal for group insurance policy holders
The Features
Authorizes transactions based on the customers fingerprints
treatment at hospitals without having to make advance cash
payment Covers head of family, 3 dependents

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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 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 immediately ascertained.
Tie-up with hospitals

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ICICI Lombard will tie up with neighborhood hospitals so that handheld 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.
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.

CONCLUSION
The Government of India, in one of its economic survey reports, has
proclaimed that human development is the ultimate goal of India's
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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.
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.

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