Dr Sanjay Arya
A contract where individual or group purchase
in advance health coverage by paying a fee
Also defined as,” including all financial
arrangements where consumers can avoid or
reduce their expenditures at the time of use of
Why Health Insurance?
Basic Figures (GDP-related)
Public Covered Out of pocket
Country Total Health expenditure expenditures expenditures
expenditure as % of the as % of the as % of the
as% GDP total health total health total health
expenditures expenditures expenditures
India 5.2% 13% 2.4% 84.6%
Singapore 3.1% 35.8% -- 64.2%
UK 5.6% 96.9% -- 3.1%
Germany 10.5% 77.5% 11.3% 11.2%
USA 13.7% 44.1% 39.3% 16.6%
Source : WHO/2000
Status of health care Financing
Out of total health spending :
87% - Private financing
13% - Public financing
15% Centre (.9% of GDP)
Average cost of hospitalization : 58% of
40% of hospitalized sell asset or borrow
25% fall below poverty line after spell of
Private vs Public sector
1978 : 70% bed in public sector
1998 : 80% bed in private sector
60% OPD – private sector
60% Indoor – public sector
Expenditure on care is 2-5 more in private sector
Over years, for each % increase in per capita
income, private health expenditure has increased
Government run set up free, so people did not
demand quality and better access & people
turned to private set up.
Why Health Insurance?
Government has difficulty in cost recovery.
Government unable to provide more
WTO agreement forced govt. to open up
Healthcare Services Growth
Healthcare services – expected CAGR of 11 to 13%
Financing models in select Countries
100 Meet demand for prepaid care by: -
% of payment from pvt voluntary insurance
A- Allowing growth of pvt voluntary
B- State assumption of responsibility
0 50 100
% of payment from social insurance or public finance
An alternative means of health care
Expected to bring capital into health
Expected to improve access.
Capacity to pay premium
Network of credible service provider
Tight regulatory framework
How Are We Placed?
In India, only 315 million people (35%)
are insurable with capacity to spend Rs.
1000/- premium per annum.
70% population : Rural
Lack of Health care providers in rural
Total Health Expenditure : 3 Lakh crore
Hospitalization Cost : 1 Lakh crore
Health Insurance Premium : 6,000 crore
Health insurance coverage of urban
population is higher
Claim ratio/pay out > 100%
Health care spending of population with
insurance is thrice that of population
• Skimping: Insurers deny benefits to the
sick by having several exclusion
• Skimming: Practice of insuring well off
• Adverse Selection: The sick seek a
coverage and the healthy does not.
• Moral hazards: Behaviour of the insured
is effected by insurance.
All adverse effects are visible
None of the stated benefits are visible.
Impact of liberalization so far : Escalation of
What Is The Way Out ?
Insurance is not an intuitive concept for most
D. Kehneman & A.Tversky have shown that:
People tend to accept large uncertain risk in
order to avoid small sure losses
Underestimate low probability event as if
probability was zero.
How to overcome this Barrier?
Some countries have overcome
this misconception by
implementing universal health
Options for Government
Government pays premium
Government make scheme for middle
class with subsidy to poor
Affiliating health insurance to employment
Micro health finance
Employer based insurance : 20 million with
Employer provide care : 30 million
Community Health Insurance (CHI) - A
form of micro finance : 5 million
Micro Health Insurance
Works on the principle of the reduction
or elimination of the uncertain risk of
loss for the individual or household
By combining a larger number of
similarly exposed individuals or
households who are included in
That makes good the loss caused to any
one member (ILO - 1996)
A voluntary, non-profit insurance
scheme formed on the basis of solidarity
Collective pooling of health risks
Members participate effectively in its
management and functioning
Provision of tailor made health insurance
product involving low premium and modest
Resource mobilization from targeted
Intermediary agency to over come
informational disadvantages and high
Contributions from employers and
Contributions proportional to the
earnings of the employees.
Coverage is without a means test.
Scale of medical benefit is not related
Health insurance is not merely private
Many developing countries have reaped
the benefits of the concept.
The concept has great possibilities for
“One of the greatest investments which
we can make is to invest in health, for
there is no other investment like it…..
Health is life insurance, success and