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Healthcare Insurance


Mediclaim, the traditional health insurance product accounting for more than 80% of total health insurance market in India, is short-term in nature and covers only ... – PowerPoint PPT presentation

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Title: Healthcare Insurance

Healthcare Insurance Past , Present Future
  • It is not pieces of gold silver but
    health that is the real wealth
  • Mahatma Gandhi

Economic growth is an indicator of a countrys
well being and development
  • Empirical evidence suggests that a significant
    portion of economic growth is contributed by
    human capital the elements of which are level
    of education and health of the people

Health Scenario in India
  • India with a population of 1.2 billion possesses
    around 16.6 of the global population and 20 of
    the global disease burden.
  • Health care expenditure in India is around 5 of
    GDPI as compared to 8.4in UK, 7.5 IN Brazil In
    USA and Japan the Govt.spending on Health is
    around 80. MORE THAN 70 OF HEALTHCARE
  • Given the implication that a healthy and
    productive population has on economic
    development, there is need to step up health care
    funding mechanism

History of Health Insurance
  • Medical Insurance was first offered in the United
    States in 1850 and insured injuries arising from
    railroad and steamboat accidents.
  • In India the formal health insurance started with
    the ESIS (Employees State Insurance Scheme) under
    the ESIS Act 1948 and with the CGHS (Central Govt
    Health Scheme) 1954.
  • In 1981, a limited cover was devised for
    individuals and families. This was structured
    formally in 1986 when 4 subsidiaries of GIC
    launched the Mediclaim policy (HDH) both for
    individuals and Groups

Milestones for Mediclaim since 1986 Changes
introduced from 1991
  • Removal of Sub limits
  • Introduction of Family Floater Concept
  • Critical Ilness Cover
  • Tailormade Policies for Corporates
  • Hike in Premium and Sum Insured

The next phase ( 2000 2005 )
  • Opening up of the Insurance Sector
  • Introduction of TPAS
  • Govt Health Insurance Schemes

Latest Trends - 2005 onwards
  • - Three products for different age groups
  • - Family Package Cover
  • - Pre-existing Disease Cover
  • - Disease Specific Policy
  • - Senior Citizens Policy

Latest Trends - 2005 onwards
  • Life Insurance Companies providing Health Cover
  • Govt Schemes
  • - Weavers Artisans Cover
  • - Universal Health Ins. Cover
  • - Rajiv Aarogyashri AP Govt.
  • - Yeshasvini Scheme Farmers in Karnataka
  • - Rashtriya Swasthya Bima Yojona ( RSBY)

Tax Benefits As it stands today
  • Under Section 80D, Premium upto Rs 15,000 paid
    for Self spouse dependent children qualifies
    for Tax Benefit. (This amount is likely to be
    increased to Rs 50,000 through DTC in 2012.)
  • Additional premium paid upto Rs 15,000/ for
    parents health insurance also qualifies and in
    case of Sr Citizens parents, premium paid upto Rs
    20,000 qualifies for tax deduction.
  • As per Section 80 DD a fixed total of Rs 50,000
    qualifies as deduction irrespective of amount
    incurred towards expenditure / investment for
    medical treatment of handicapped dependent and in
    case of severe disability this is increased to Rs
  • As per Section 80 DDB, deduction of upto Rs
    40,000 ( For Sr citizens Rs 60,000/) is allowed
    for medical treatment of specified diseases
    certified by Govt hospitals.

Health Insurance Claims settlement process
  • Cashless
  • For availing cashless treatment (only at
    authorized network hospitals), the TPA has to be
    notified in advance (for planned hospitalization)
    or within the stipulated time limits (for
    emergencies). The claim amount needs to be
    approved by the TPA, and the hospital settles the
    amount with the TPA/ Insurer. Typically there
    will be exclusions and such amount will have to
    be settled directly at the hospital.
  • Reimbursement
  • Reimbursement facility can be availed at both the
    network and non-network hospitals. Here the
    insured avails the treatment and settles the
    hospital bills directly at the hospital
  • Self administered portfolio
  • Insured may opt to purchase Health Insurance
    policy without TPA in which case the settlement
    would be on reimbursement basis by the insuring
    Office concerned.

Role of Third Party Administrator (TPA)  
  • TPAs licensed by IRDA are the intermediary
    between Insured and Insurance Company and
    responsible for providing value added services to
    policy holders including all aspects of claim
    arising out of health insurance policies.
  • The work of the TPA starts once the Policy is
  • TPAs have helped insurance companies provide
    better service to their policyholders through
    their efficiency in claim settlement .
  • There are at present 29 IRDA registered TPAs

Functions of Third Party Administrator (TPA)  
  • 1) TPA issues ID cards to all their policyholders
    in order to validate their identity at the time
    of Claim.
  • 2) In case of a claim, policyholder will have to
    inform TPA on their 24 hr toll free line . In
    case of a network hospital the TPA issues
    authorization letter to the hospital for
    admission of policyholder and also pays for
    treatment. At the time of discharge all the bills
    are sent to TPA for processing the claim.
  • In case of Emergency hospitalization in a
    hospital outside the network, cashless facility
    cannot be extended and claim is reimbursed after
    submission of documents .
  • 3) After making the payment to the hospital, the
    TPA sends all necessary documents of claims to
    insurance company and the Insurance company then
    reimburses TPA.
  • .

The Preferred Provider Network (PPN)
  • The Preferred Provider Network (PPN) of hospitals
    is an initiative of the 4 Public Sector General
    Insurance Companies (PSGICs) taken in July 2010
    to introduce
  • Discipline on the pricing of hospital services
  • Pre-negotiated rates for medical procedures and
  • overall standardisation of hospital facilities.
  • The Agreement is entered into with Hospitals
    which are then listed under the PPN Network.
    Presently the PPN Facility operates in Delhi,
    Mumbai, Chennai and Bangalore and will be
    extended to four more cities, viz. Hyderabad,
    Kolkata, Ahmedabad and Chandigarh from 1 July
  • .

Health Insurance
Health Care Provider
Health Insurance Council
Government Scheme
Financing Health care
In India healthcare is financed through a
combination of sources like -
  1. Household and Individual out of pocket payments
  2. Central State Government tax revenue
  3. Mandatory Social Voluntary Health Insurance
    like ESI, CGHS,
  4. Micro Insurance
  5. Other Employees / Mutual Schemes not using public
    or private Insurance companies

Necessity of Health Insurance Life style diseases
  • Every one needs medical care. Of all the risks
    facing a household, health risk probably poses
    the greatest threat to lives livelihoods.
  • Sedentary life style, hectic schedules, long
    working hours and eating habits are leading to
    silent diseases and causing rise in number of
    people suffering from obesity, diabetes and
    cardiovascular diseases.
  • As per Government of India Report 2006, the
    morbidity rate for males is 8.3 (Rural) and 9.1
    (Urban) and for females 9.3 (Rural) and 10.8
  • 2.5 million hospitalization in 2005 due to road
    accident. Projected 3 million by 2010 and 3.5
    million by 2015 National Medical Journal 2008

Necessity of Health Insurance Mediflation
  • High escalation in medical costs due to
    advancement high tech intervention in health,
    diagnostic therapeutic procedures, prescription
    drugs leading to Mediflation.
  • The explosion of knowledge in genetic engineering
    Bio technology, Nano-technology, Medical
    Informatics Gene therapy will further escalate
    health care costs beyond the reach of most people
    in future.
  • Medical Tourism As more and more patients from
    Europe, the US and other affluent nations with
    high medicare costs look for effective options, a
    blend of top-class medical expertise at
    attractive prices is helping a growing number of
    Indian corporate hospitals lure foreign patients.
    Costs would escalate for the Indian insured.

Necessity of Health Insurance Mediflation
  • Expenses towards medical expenses is the second
    highest cause of rural indebtedness after
    agriculture. Major portion of the countrys poor
    (over 45) had to borrow / sell assets to meet
    costs of care.
  • This huge out of pocket expenditure does not pass
    through any pooling mechanism and thus needs to
    be channeled through Health Insurance.

Health Insurance Figures
According to figures upto Feb 2011, the total
health insurance premiums written by non-life
companies and standalone health insurance
companies grew by 22.95 . The health insurance
market continues to be dominated by the four
state-owned general insurers, which together
accounted for almost 58.39 per cent of the
premiums. March 11 figures reveal that National
Insurance Company, led the Health Portfolio pie
with 1492 crores registering a sharp Growth of
46.47 cent this fiscal with an exceptional
Accretion of 473 crores. ICICI Lombard, Bajaj
Allianz General and HDFC ERGO are the top players
amongst private non life insurers.
Rashtriya Bima Yojana Policy Health Insurance for
the Poor

RSBY has been launched by Ministry of Labour and Employment, Govt of India to provide health insurance coverage for Below Poverty Line (BPL) families. RSBY started rolling from 1st April 2008. The objective of RSBY is to provide protection to BPL households from financial liabilities arising out of health shocks that involve hospitalization. Beneficiaries under RSBY are entitled to hospitalization coverage up to Rs. 30,000/- for most of the diseases that require hospitalization. Government has even fixed the package rates for the hospitals for a large number of interventions. Pre-existing conditions are covered from day one and there is no age limit. Coverage extends to five members of the family which includes the head of household, spouse and up to three dependents. Beneficiaries need to pay only Rs. 30/- as registration fee while Central and State Government pays the premium to the insurer selected by the State Government on the basis of a competitive bidding.
Unique Features of RSBY
  • Empowering the Beneficiary
  • Freedom of choice to BPL Policy holder to choose
    hospitals and be treated as a significant
    provider of revenue
  • Business Model for all Stakeholders
    Insurers/Hospitals/ Intermediaries/Govt.
    Incentives have been built for all stakeholders .
    Conducive both in terms of expansion of the
    scheme as well as for its sustainability.
  • IT intensive
  • Every beneficiary family is issued a biometric
    enabled smart card containing their photographs
    and fingerprints. All hospitals empanelled under
    RSBY are IT Enabled and connected to the server
    at the district level.

Unique Features of RSBY
  • Safe and Foolproof
  • The use of the biometric cared and a key
    management system makes this scheme safe and
  • Portability
  • A beneficiary will be able to use his/her smart
    card in any RSBY empanelled hospital across
    India. This is of great help to migrant workers
  • Cashless and Paperless transaction
  • No payment is to be made by the beneficiary and
    participating providers may send online claims to
    the insurer and get paid electronically.
  • Robust Monitoring and Evaluation
  • An elaborate data management system is being put
    in place which can track any transaction across
    India and provide periodic analytical reports .
    This should allow for mid course improvements in
    the Scheme.

Financing for RSBY
  • The majority of the financing, about 75 percent,
    is provided by the Government of India (GOI),
    while the remainder is paid by the respective
    state government. Government of Indias
    contribution is 90 percent in case of
    North-eastern states and Jammu and Kashmir and
    respective state Governments need to pay only 10
    of the premium.
  • Beneficiaries need to pay only Rs. 30 as the
    registration fee. This amount shall be used for
    incurring administrative expenses under the

RSBY Facts
  • More than 376 districts in 29 states in India are
    covered under this scheme
  • There are 8096 private and public hospitals
    empanelled as Health Care Providers
  • As of April 2011 the number of Active smart cards
    issued is 2,33,46,929 .
  • National Insurance, Oriental Insurance and United
    India Insurance are the 3 major non life
    insurance players with ICICI leading the private
    non life insurer group.

Rising Claims Ratio
  • RSBY, has been witnessing an increase in its
    Claim ratio.
  • Several states have reportedly exceeded 100
    percent mark, a pointer to be concerned with
    future premium rate setting. The number of
    Hospitalisation cases reported as on April 11 is
  • rate of hospitals is extremely low.

Health Insurance Future Initiatives for
Holistic Health care
  • Portability of Mediclaim in India w.e.f. 1st July
  • This is to ensure that a customer continues to
    enjoy benefits under the Health Policy even if he
    wishes to change his insurance provider.
  • Traditional Healthcare practices to be brought
    under Mediclaim fold.
  • A panel has been set up by the General Insurance
    council to examine the merits of reccognizing
    Ayurveda, Unani, Siddha and Homeopathy forms of
    Healthcare. These alternative practices though
    recognised by GOI have yet to be brought under
    the Mediclaim list.
  • Clinical Establishment Registration and
    Regulation Act
  • This law passed last year aims to regulate
    standards at private hospitals and check
    overcharging, unnecessary tests, negligence and
    other malpractices. Since health is a state
    subject the State Assemblies need to pass a
    resolution before the central law can apply in
    that State

Health Insurance Future IRDA Initiatives
  • IRDA is working on a set of comprehensive health
    insurance guidelines which would cover
  • Standard Treatment Guidelines (STGs) for common
    causes of hospitalisation like diarrhoea, asthma,
    cataract surgery and typhoid. FICCI has
    recommended 22 STGs to the regulator.
  • A list of items as part of common exclusions
    under non-medical expenses may include costs for
    diabetic chart, external durable devices like
    walking aids and cervical collar, eye kits and
    X-ray films.
  • Standard definitions of 11 critical illnesses
    such as cancer, first heart attack, open heart
    replacement and major organ/bone marrow
    transplant. Insurers would be required to cover
    these under their critical illness plans.
  • A common form for claim settlement including
    claim settlement protocol.

Health Insurance Future IRDA Initiatives
  • Health Insurance Councils
  • IRDA is working on setting up of Health Councils
    through provision of Section 14(f) of the IRDA
  • This proposed common health body is envisaged to
    help in ensuring harmonized growth of business
    and also in reducing differences arising between
    stakeholders like TPAs , Insurers, Hospitals and
    the public.
  • In addition to other functions, the council will
    also set up mechanisms to enforce strict
    vigilance on attempts to defraud the insurance
    system and take effective and concrete action

Health Insurance Future Govt. Initiatives
  • The National Aids Control Organisation (NACO) has
    pressed for inclusive and universal healthcare
    for people living with HIV. The Karnataka
    government has launched a health insurance scheme
    to benefit about 12,000 HIV-positive children in
    collaboration with Star Health.
  • The Government is actively considering the scope
    for a public-funded health insurance scheme
    covering all citizens as part of the 12th Five
    Year Plan, with premium rates linked to the
    beneficiarys income levels. The ambitious scheme
    is planned to cover both hospitalisation expenses
    and treatment expenses at listed hospitals.

Health Insurance Future Govt. Initiatives
  • The Employees' State Insurance Corporation
    (ESIC), which provides health insurance to all
    workers whose monthly gross pay is up to
    Rs15,000, is gearing to improve its services.
  • All the beneficiaries will soon be issued a smart
    card to avail treatment at any ESI hospital or
    affiliated healthcare provider across the
  • The initiative, spearheaded with the help of the
    software company, Wipro, is to inter connect the
    2,200 ESI institutions across the country and
    launch an online portal.

Health Insurance Future Corporate Health Care
  • Preventive Health Care Wellness initiatives.
  • The goal of these programmes is to make the
    workplace environment healthier, to improve the
    health of individual employees , to reduce
    healthcare costs and increase employee value. As
    part of the healthcare policy, organizations
    offer various benefits including Health
    insurances, mental health counselling , physical
    health camps, wellness camps etc
  • Corporate Health Check Ups
  • Earlier confined only to MNc or those industries
    with Health hazards such as paints, pesticides or
    manufacturing companies, today there is an
    increase in Corporate sponsored Health testing.
    Some employers make this annual check up
    compulsory for all above 40 as commonly
    hypertension, diabetes and deranged lipid
    profiles have begun to be diagnosed

Health Insurance Future Scope for Employment in
Health Care related Industry
  • Considering that only 10 of the India population
    of more than
  • 1 billion is insured under Health policies, the
    arena of Healthcare
  • offers a large universe for employment
  • Specialisation in subjects like Hospital
    Administration, Risk Management,
  • Actuarial Sciences will be the need of the day .
  • Insurance Companies, Health Specialists, Health
    Tourism centres, TPAs ,
  • Hospitals will be the potential employers.

Mediclaim its shortcomings
  • Mediclaim, the traditional health insurance
    product accounting for more than 80 of total
    health insurance market in India, is short-term
    in nature and covers only inpatient costs. More
    than 70 of the total health spend ( Rs.1700
    crores WHO-2007 estimates) is for outpatient
    cost and there are very few, products to cover
    these costs in India today.
  • Further, Mediclaim falls under the category of
    protection products where there is no payment
    from the insurer if no claim is made. Many Indian
    people see less value in protection products like
    Mediclaim as compared to savings products like
    endowment policies.
  • There is need for long term health products to
    enable customers to provide for their health and
    long-term care costs, particularly after

Health Insurance Way Forward
  • Global experience both in highly industrialised
    countries as well as in low and middle income
    economies clearly demonstrate the importance of
    achieving universal coverage through either a
    purely tax based regime or social health
    mechanism or both.
  • Medical savings accounts or Health Savings
    Accounts Much like Pension Funds, Health
    Savings accounts have been successful adapted in
    Singapore, USA, China and South Africa where the
    Govt . Extends tax concessions for savings on
    this account.

Health Insurance Way Forward ?
  • Health Savings Account Issues and applicability
  • An HSA is a tax exempt savings account similar to
    an Individual pension account but earmarked for
    medical expenses.
  • Deposits in the account are tax exempt and can be
    easily withdrawn to pay for routine medical
  • HSA works in conjunction with a special High
    deductible health insurance policy resulting in
    the provision of comprehensive health insurance
    coverage at the lowest possible net cost
  • Health Savings Account, enables an insured to
    save his money, which he may use to meet the
    expenses when he falls sick .
  • USA, China, Singapore and South Africa have
    adopted the HSA model for their citizens .

Utilization of funds in an HSA
  • The balance in health savings accounts may only
    be used to pay medical expenses at any time
    during the account holders life-time such as
  • Medicines and drugs
  • Diagnostic expenses
  • Dental expenses
  • Co-pays or deductibles as part of the medical
    insurance cover
  • Other miscellaneous medical expenses not covered
    under medical insurance like medical cost for
    pre-existing diseases, maternity related
  • Specialist consultations fees
  • Long-term care expenses

HSA The Indian Context
  • Bhavishya Arogya was the first HSA type product
    introduced in the Indian market in 1990. The
    coverage under the policy was similar to
    Mediclaim, i.e. hospitalisation benefits, but
    with the difference that the utilisation of
    benefits was deferred up to the retirement age (
    vesting age) between 55 and 60 years.
  • Introduction of HAS in the Indian market will
    help deepen health insurance penetration.
  • HSAs with ensuing tax benefits are likely to
    encourage people to start saving early for their
    old age health expenses since they would have an
    incentive to accumulate HSA balances. An early
    entry into the health insurance system would help
    address the systemic and contentious issue of
    pre-existing condition exclusions.

HSA The Indian Context
  • Rationalizing and reducing healthcare expenses
  • With HSA providing greater discretion to
    individuals on their total healthcare spending,
    it is expected that patients would seek greater
    transparency and efficiency in the medical
    services accorded to them by healthcare providers
    eventually rationalizing and reducing healthcare
  • HSAs would provide greater emphasis to the
    insurance industry towards reviewing the need for
    providing high risk, catastrophic policies which
    will encourage individuals to self-insure for
    routine medical care. The corresponding reduction
    in premium costs would allow more individuals,
    households and employers to purchase health
    insurance, thus deepening health insurance

HSA The Indian Context
  • Learning from the Singapore and China model of
    HSA suggests that controlling healthcare demand
    should be achieved simultaneously with Government
    initiatives to implement health sector reforms.
  • The reforms should include
  • development of standard treatment guidelines
  • accreditation of different layers of healthcare
  • adoption of DRG (Diagnosis Related Group) and ICD
    (International Classification of Diseases) coding
    and quite importantly,
  • the revival of the Indian Medical Council of its
    original charter for enforcing ethics and
    professionalism in the medical profession.

Challenges which hinder Growth of Health care
services in India
  • Low awareness of health insurance
  • Affordability
  • Lack of standardization of healthcare providers
    and Proper data for informed decisions
  • Limited understanding of the features of policy.
  • Consumers skeptical about tedious claim
  • High loss ratio of health insurance particularly

Ushering in Change
  • Increasing consumer awareness
  • Standardization and accredition of health care
  • Enhancement of health care infrastructure
  • Building of Health Insurance repository

Enablers of growth
  • Technology
  • Innovation around products
  • Pricing Channels of Distribution
  • Positive contribution of the Key stakeholders -
    Govt., IRDA, Insurers, Healthcare Providers,
    Distribution channels, Health Centers, Media.

  • India has a great opportunity to spearhead a
    viable and competitive health insurance sector
    and encourage the development of a sound high
    quality health delivery system .
  • What is required is a good understanding of the
    actuarial and other risks in the business , a
    long term vision for those entering it, simple
    product design , supportive regulation and
    sustained customer education.

  • An Arab proverb says
  • He who has health has hope. And he who has
    hope, has every thing
  • We say
  • He who has a Health policy has hope. And he who
    has hope has every thing

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