Health insurance is the purchase in advance of health coverage by a group or an individual paying a fee called premium.
It broadly includes all financial arrangements where consumers can avoid or reduce their expenditures at time of use of health services. Health insurance is very well established in many countries, but in India it is a new concept except for the organized sector employees.
According to the World Health Organization, more than 80 per cent of total expenditure on health in India is private and most of this flows directly from households to the private-for-profit health care sector.1 Government or state-based systems which cover a small percentage of the population in India include Central Government Health Scheme (CGHS) and Employees State Insurance Scheme (ESIS). ESI Scheme provides protection to industrial workers and their families against loss of wages due to inability to work due to sickness, maternity, disability and death due to employment injury.
There are several government and private employers such as railways and armed forces and public sector enterprises which run their own health services for employees and their families. It is estimated that about 30 million employees are covered under such employer managed health services. Some efforts have also been made by a few NGOs to provide social security to the poor.
The most prominent among them is that of Self-Employed Women’s Association (SEWA). The other scheme by the government insurance companies developed to focus on poor is called jan arogya bima policy, which was introduced in 1995, and covers expenditure up to Rs. 5,000 for a premium of Rs. 70 per annum. It is estimated that about 5 million people are covered under various NGO insurance schemes. The other form of health coverage available to a large number of people is the mediclaim insurance scheme, started by the government insurance companies in 1986. Mediclaim is a reimbursement based insurance for hospitalization. It does not cover outpatient treatments. Approximately two million Indian people are covered by Mediclaim scheme.
2 With privatization of the Indian insurance sector, many private nonlife and life insurance companies have launched new health insurance products. These companies have used focused advertising and public awareness campaigns to publicize their products. The penetration of health insurance products is increasing since liberalization of the insurance sector in 20003 (refer to Box 9.1). BOX 9.1 Private Health Insurance Penetration Over 40% of people who are hospitalized borrow money or sell assets to cover the medical expenses
4. This situation is set to escalate further as private health care expenditure in India are estimated to increase by 2 to 3 times over the next 12 years. The incidence of chronic lifestyle diseases is also on the increase. India has the largest number of diabetes patients in the world, and is projected to have 30 million diabetics by 2020. The number of people suffering from hypertension is estimated to rise to 213.5 million in 2025, compared to 118.2 million in 2000, representing an 80% rise in a span of a quarter of a century.
5 Indirect costs associated with health care also add to the financial burden. These indirect sources of expense arise from travel, boarding and lodging, and even temporary loss of income and account for as much as 35% of the overall cost of treatment (refer to Box 9.2).6 BOX 9.2 Costs Related to Medical Treatment
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