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Health Insurance: Beyond a Piecemeal Approach

Instead of different ministries taking initiatives to provide health insurance coverage for the areas or populations that are under their jurisdiction, it is important for planners to understand that parallel schemes run on public money can only introduce inefficiencies and wastage into the system. It is necessary to plan the spread of health insurance on a national scale and to set up an apex body that would be in charge of implementing health insurance in the country.


Beyond a PiecemealApproach

Instead of different ministries taking initiatives to provide healthinsurance coverage for the areas or populations that are undertheir jurisdiction, it is important for planners to understand thatparallel schemes run on public money can only introduceinefficiencies and wastage into the system. It is necessary to planthe spread of health insurance on a national scale and to set up anapex body that would be in charge of implementing health

insurance in the country.


here has been a growing interest in India in exploring the mostly untapped potential of health insurance as a tool for improving the health of the population, especially vulnerable groups. Various forms of coverage, viz, social health insurance, voluntary health insurance, coverage by employers, and community health insurance, are being currently discussed in a variety of forums to explore the possibilities of wider coverage for the citizens of the country. There is no doubt that India has not hitherto seen this kind of dynamism and discourse in the context of health insurance.

While this is good news, we are still not able to harness this positive energy in a concerted manner to aim for a systemic change in the health insurance system. But before we discuss this, let us look at why we think the environment is changing rapidly for health insurance.

Some Recent InitiativesSome Recent InitiativesSome Recent InitiativesSome Recent InitiativesSome Recent Initiatives

Recently several studies have discussed and debated various experiments for extending health coverage, and recommended micro and macro solutions to achieve greater coverage [Ahuja and Narang 2005; Acharya and Ranson 2005; Gupta and Trivedi 2005; Devadasan et al 2004a; Devadasan et al 2004b]. There has been a multisectoral approach not only to research studies, but also in discussions, meetings and conferences on health insurance, with most of the major stakeholders participating in the debate in a productive fashion.

More importantly, both the government – central as well as state – and the Insurance Regulatory and Development Authority (IRDA) have shown keenness and resolve to tackle the gap between the current coverage and targeted coverage necessary to ensure better healthcare options for the population. Recently, the central government and a few state governments have initiated schemes to cover populations that do not have health insurance, especially for the vulnerable sections of society under the net of social security. It is necessary to acknowledge these efforts and learn from them, while at the same time point out how they can be better organised, and their energy harnessed for a superior outcome.

Below, we list some of the major initiatives from the recent past:

Unorganised Sector Workers’Unorganised Sector Workers’Unorganised Sector Workers’Unorganised Sector Workers’Unorganised Sector Workers’
Social Security Act, 2005Social Security Act, 2005Social Security Act, 2005Social Security Act, 2005Social Security Act, 2005

The UPA government seems to be progressing rather well in implementing its common minimum programme, in which the social security of workers as well as the improvement health of indicators in general are major components. The government has – along the line of the recommendation of the 2nd National Commission on Labour – passed the Unorganised Sector Workers’ Social Security Act, 2005, with an intention to provide social security benefits to the unorganised sector. However, this is not an altogether new initiative; the labour ministry had announced the Unorganised Sector Workers’ Social Security Scheme a few years ago [Gupta and Trivedi 2005]. At that point, the initiative had not moved forward, which makes the implementation of this new act something the country will eagerly look forward to.

The new act has a few salient features, described below, which indicate that a lot of thought has gone into making it a potentially useful scheme. It visualises a national social security scheme for unorganised sector workers, and envisages a set of minimum coverage called national minimum social security benefits, which may include: (a) old age pension to all workers above the age of 60 years; (b) health insurance for self, spouse and children below the age of 18 years; (c) maternity benefits for women workers or the spouse of men workers; and (d) insurance to cover death and disability arising out of accidents. State governments are stipulated to be real partners in terms of: (a) implementation of the national scheme as well as state level additional benefits through own schemes; and (b) risk-sharing – by making contribution to the proposed National Social Security Fund. The creation of a separate fund and a separate body to manage the scheme would make it a real candidate for social health insurance, where there are components of contribution by employer, employee and government/s.1 If implemented as planned, it would be the second social health insurance scheme after Employee State Insurance Services (ESIS). It was learnt that active discussions are on to

Economic and Political Weekly June 24, 2006 decide upon the amount of provisions required, the source of funds (including the possibility of a cess), infrastructure required and who would implement the scheme.2

Other Central InitiativesOther Central InitiativesOther Central InitiativesOther Central InitiativesOther Central Initiatives

Additionally, discussions are going on to find ways of improving the Central Government Health Scheme (CGHS), the largest employment based scheme in India after the ESIS, and making it more sustainable. The department of administrative reforms and public grievances, along with the ministry of health and family welfare and department of expenditure are exploring various options for the introduction of a medical insurance scheme for government employees as an alternative or as a supplement to the CGHS, with a view to reducing the financial burden on the government, and making it sustainable through partnerships with formal insurance companies.

The ministry of textiles has recently revamped the existing health insurance schemes for handloom weavers. The earlier centrally sponsored scheme introduced in 1992-93 focused only on the health problems related to the profession of handloom weaving. ICICI Lombard, a private insurance company, will implement the revised scheme which offers a comprehensive health coverage including pre-existing diseases, with components of contributions by the weavers as well.

The recently published draft of the

National Pharmaceuticals Policy 2006

discusses the poor access to drugs and emphasises the need to ensure availability of essential drugs to poor people, free of cost. It describes four different initiatives to address the problem: (1) Rashtriya Swasthya Bima Yojna (National Health Insurance Scheme), (2) Illness Assistance Funds at the national, state and district level, (3) Medicare Relief Societies, and

(4) district level drug banks. Since it is an important scheme, with a potentially farreaching impact, it is discussed in some detail here.

The scheme will be implemented as a centrally sponsored scheme, in a phased manner; the pilot phase would involve at least two districts in each state. The public sector general insurance companies would play the role of insurers, with the unique feature of partnering with the chemist shops up to the primary health centre/taluka level. There will be an attempt to extend the current cashless hospitalisation concept to cashless access to drugs, by means of linkages between

  • (a) government hospitals/doctors,
  • (b) chemist shops, and (c) insurance companies. The BPL families – based on the prescription of the government doctor
  • – can collect the prescribed medicines from the authorised chemist, free of cost. The chemist would maintain a complete account of the medicines collected by the BPL families and send the bill to the concerned insurance companies for reimbursement. Although a novel initiative, the involvement of only government hospitals may restrict its uptake, and policy-makers may need to revisit the possibility of involving private providers, who have a significant presence in the country.

    Currently, it is planned that the central government will pay the entire premium of Rs 550 per family per year.

    Indira Gandhi Institute of DeIndira Gandhi Institute of DeIndira Gandhi Institute of DeIndira Gandhi Institute of DeIndira Gandhi Institute of De
    velopment Researvelopment Researvelopment Researvelopment Researvelopment Resear

    Fellowships for Doctoral Candidates Under

    Asia Link Program on Human Resource Development in Law andAsia Link Program on Human Resource Development in Law andAsia Link Program on Human Resource Development in Law andAsia Link Program on Human Resource Development in Law andAsia Link Program on Human Resource Development in Law and
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    Three fellowships are available for resident Indian doctoral students with an outstanding academic record in Economics, Law or Development to pursue research in Law and Economics at University of Hamburg, Germany or University of Ghent, Netherlands for a maximum period of 20 months. The Ph.D. dissertations, however, are to be submitted to their respective Indian institutions.

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    The grant is open to resident Indian doctoral students in Economics, Law, or Development who exhibit a strong interest in Law and Economics. It is awarded for doctoral studies in a variety of sub-disciplines such as Law and Economic Development, Economics of Property Law, Competition Law and Regulation, Economics of Tort and Contract Law, Law-Corporate Finance and Corporate Governance, Law and Environment, on the explicit understanding that the subject of the thesis work deals with the broad area of Law and Economics. The grantees are expected to abide by the rules and regulations of their parent as well as the host Institutions.

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    Economic and Political Weekly June 24, 2006

    It is also visualised that the finances would come from a health cess of 2 per cent levied on various central taxes on the lines of the education cess; this is likely to provide approximately Rs 6,500 crore to the government, which will be spent primarily on schemes meant for the poor. An independent body called the National Public Health Board, which has been specially designated for this purpose will manage the funds. Interestingly, the scheme visualises many heads of expenditure, including subsidy schemes for anti-cancer funds and funding the expanded programme on the anti-retroviral therapy being offered by National AIDS Control Organisation (NACO).

    It is also proposed that if there is a problem in levying of a health cess, the government may provide funds amounting to Rs 6,500 crore, which is equivalent to

    0.02 per cent of the GDP, out of the general budget.

    The IRDA recently passed the Micro-Insurance Regulations 2005 that aim to promote rural insurance. The regulations allow life and general insurers to tie up to offer a combined policy that may cover risks of life, health, crop, huts, livestocks and tools at an affordable cost. The IRDA has allowed insurers to (a) issue policies with cover ranging from Rs 5,000 to a maximum of Rs 50,000 for general and life insurance, and (b) appoint self-help groups, micro-finance institutions and other NGOs to act as micro-insurance agents for the distribution of micro-insurance products under this new regulation. The idea is to make it much easier for different private sector agents – including private insurance companies – to offer insurance products in rural areas, which have hitherto been more or less bypassed by the national schemes.

    State Level InitiativesState Level InitiativesState Level InitiativesState Level InitiativesState Level Initiatives

    At the state level, experiments are on to promote health insurance either by means of covering state employees or offering coverage to entire/specific populations of the state. The Jammu and Kashmir Government’s Employees Group Mediclaim policy has been discussed elsewhere [Gupta and Trivedi 2005], and is an example of a productive partnership between a state government and an insurance company (National Insurance Company), to offer coverage for employees of the state.

    The Assam government, in partnership with ICICI Lombard General Insurance Company, has introduced a combined health insurance and personal accident insurance scheme – ‘Mukhyomantrir Jibon Jyoti Bima Achoni’ – for all those citizens (along with their dependents) of Assam whose names appear on the electoral list, except those whose annual gross income is more than Rs 2 lakh. The scheme covers medical expenses of up to a maximum of Rs 25,000 for the treatment of certain specified diseases, a compensation of up to a maximum of Rs 50,000 in case of death, and reduced amounts in case of permanent disability, under the personal accident scheme.3

    Andhra Pradesh is looking into the possibility of such universal coverage as well. A government order numbered 510, dated October 5, 2005 titled ‘Health Insurance – Constitution of Task Force for Study, Design and Submission of Report on a Comprehensive Social Health Insurance Programme for Andhra Pradesh’ mentions the formation of a task force that would map the existing sources of health financing and health resources. After negotiating with relevant stakeholders, it would come up with a pilot project to cover selected districts, which is likely to start from January 2006.

    The Kerala cabinet recently approved a health insurance scheme for the poor that is to be implemented with central assistance.4 The scheme is supposed to cover about 25 lakh BPL families for a premium of Rs 99 a year for each family. The beneficiary will have to pay only a third of the premium; the state and local governments will pay the rest. The insurance cover will be for a maximum of Rs 30,000 a year for a member, or up to five members of a family taken together. The scheme also provides for payment of a subsistence allowance at Rs 50 for hospitalisation of the breadwinner. Interestingly, the insured families can avail treatment at government as well as private hospitals. ICICI Lombard is partnering with the government on this scheme, which is yet another good example of public-private partnership as well as partnerships within the government (the scheme involves departments like health, finance and local self-government).

    The Rajasthan government initiated a scheme for covering government employees and their dependents, who have joined after January 1, 2004 on a regular recruitment, through Mediclaim, jointly with United India Insurance Company, in August 2004. The premium of Rs 951 plus tax is to be fully borne by the employer, i e, the government.

    Additionally, there was also news that the Punjab government has introduced a scheme called Sanjivni Healthcare Scheme for members of rural cooperative societies.5

    There may be some or many such schemes that are being jointly implemented by the state governments and insurance companies, which are not in the domain of public information. As is indicated by the references, most of these schemes come to light through newspapers and other public fora. It would be imperative for policy-makers to document and analyse all such local efforts and learn from them. The vibrancy in ideas and new thinking, as well as initiatives in terms of innovations and partnerships are good news as far as health coverage in India is concerned. The fact that a regulatory authority is taking initiatives to form expert groups on rural health insurance,6 instead of taking a back seat and simply regulating, is extremely encouraging.

    Piecemeal ApproachPiecemeal ApproachPiecemeal ApproachPiecemeal ApproachPiecemeal Approach

    However, there are still causes of serious concern. The major one is the piecemeal approach of the policy-makers towards a problem that essentially needs coordinated thinking. Examples exist of countries7 like South Korea, Mexico, Philippines and Ghana, etc, where the need to offer cover to the entire population has prompted the setting up of an apex body that has the sole responsibility of overseeing health insurance. Instead of different ministries taking initiatives for covering areas/populations that are under their jurisdiction, it is important for planners to understand that ultimately, parallel schemes with public money can only introduce inefficiencies and wastage into the system. Thus, while it is laudable for the ministries of health, labour, textiles, petrochemicals and fertilisers to launch their own schemes, it is the need of the hour for those in charge of planning to create a body that can fold all these initiatives under its wing.

    The way forward is to go back to the drawing board, with experts, to chart out for the entire country: (a) who needs to be covered, (b) how they can be covered,

    Economic and Political Weekly June 24, 2006 (c) what should be covered, and (d) where they should go to seek services. The discussion could go occupation-wise (formal/informal), or economic statuswise (BPR/non-BPL), or be based on any other classification. The main point is that someone or some group has to do this thinking, and soon. Ultimately, most of the schemes meant for the BPL population or employees of the government, or the informal sector workers, would be based on substantial subsidies that come out of taxpayers’ money. It is important to use this money with care, which can only be done if a consolidated and holistic approach is taken to spread health coverage.

    An important point to note is that state governments are taking many of the health insurance initiatives. Even if health insurance is made a central subject, the centre cannot go ahead alone; it will need the states to share both in the finances as well as the implementation of the schemes. The collaboration, cooperation and coordination between the centre and states need to be worked out in detail for any comprehensive countrywide scheme. The social security bill and pharmaceutical policy mentioned above are good examples of central-state collaboration, but it remains to be seen how these unfold. The point being made here is that it is necessary to plan the spread of health insurance on a national scale, so that all the initiatives currently being put in place in a disjointed fashion can actually become part of the same system. It is also important to do this now rather than later, due to the positive wind blowing around health insurance in India.

    The Way ForwardThe Way ForwardThe Way ForwardThe Way ForwardThe Way Forward

    For all these reasons, it is strongly recommended that planners set up an apex body (say a Health Insurance Corporation of India) that would be in charge of implementing health insurance in India. The exact structure and composition of the body can be worked out by an expert group appointed by the government, which would also chalk out a blueprint of how the country can move towards greater health coverage. IRDA regulations can also be suitably altered so that regulation of health insurance is carried out separately from non-health products. All the existing innovations and schemes might have a place in the new scheme of things, or they may offer valuable insights into what will and will not work. The expert group, and ultimately the new body, will need to also extend public finance considerations to existing schemes like the CGHS, ESIS, railways, etc, which have similar functions, i e, to extend health coverage to select groups of population. As has been proposed before [Ellis et al 2000; Mahal 2000; Guhan (unpublished); Gupta and Trivedi 2005], there is an urgent need to consolidate the existing schemes and bring under the same umbrella new schemes to fulfil the objective of “health for all”, through the mechanism of health coverage for all.




    1 The envisaged contributions are as described below:

  • Re 1 per day by the worker (for above poverty line workers, central government would pay for BPL).
  • Re 1 per day, per worker, by the employer (where the employer is not identifiable, the central government and the respective state governments would pay in the ratio of 3:1).
  • Re 0.75 per worker, per day, by the central government, and Re 0.25 per worker, per day by the state government.
  • 2 ‘Monthly Economic Review’, November 2005;

    Economic Times, November 23, 2005. 3 Planning and development department, Assam,

    untiedFund/jobonJyotiBimaAchoni.htm) 4 The Hindu, December 22, 2005. 5 The Tribune, December 29, 2005. 6 In December 2005, the IRDA constituted a

    13-member committee to chalk out a roadmap to spread health insurance in rural India.

    7 1, 2 http://, 3 ‘Improving Social Protection for the Poor: Health Insurance in Ghana: The Ghana Social Trust Pre-Pilot Project Final Report’, ILO, 2005, 4 Knaul and Frenk, ‘Health Insurance in Mexico: Achieving Universal Coverage through Structural Reform’, Health Affairs, Volume 24, Number 6.


    Acharya, A and M K Ranson (2005): ‘Healthcare Financing for the Poor: Community-Based Health Insurance Schemes in Gujarat’, Economic and Political Weekly, September 17.

    Ahuja, R and A Narang (2005): ‘Emerging Trends in Health Insurance for Low-Income Groups’, Economic and Political Weekly, September 17.

    Devadasan, N, M K Ranson, W V Damme, B Criel (2004b): ‘Community Health Insurance in India: An Overview’, Economic and Political Weekly, July 10.

    Devadasan, N, S Manoharan, N Menon, S Menon, M Thekaekara, AMS Team (2004a): ‘Accord Community Health Insurance: Increasing Access to Hospital Care’, Economic and Political Weekly, July 10.

    Ellis Randall, Moneer Alam and Indrani Gupta (2000): ‘Health Insurance in India: Prognosis and Prospectus’, Economic and Political Weekly, Vol XXXXV, No 4, January 22.

    Guhan, S (nd): Health Insurance – A Note, Centre for Development Studies, Thiruvananthapuram 695 011, the abstract is available at papers/health.htm

    Gupta, I and M Trivedi (2005): ‘Social Health Insurance Redefined: Health for All through Coverage for All’, Economic and Political Weekly, September 17.

    Mahal, Ajay (2000): ‘Who Benefits from Public Sector Health Spending in India? Results of Benefit Incidence Analysis’, National Council of Applied Economic Research.

    7 ½ x 2

    Economic and Political Weekly June 24, 2006

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