CHAI National AGBM Theme: 2012
Rolling out CHAI National Health Insurance Programme
Solar Energy Initiative
Rev Dr Tomi Thomas, IMS
What is health insurance?
Health Insurance is a form of collectivism by means of which people jointly pool the risk such as incurring medical expenses. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. It may be provided through a government-sponsored social insurance programme, or from private insurance companies. It may be purchased on a group basis (e.g: by a firm to cover its employees) or purchased by individual pay premiums or taxes to help protect themselves from high or unexpected health care expenses.
Kinds of Insurance
There are various types of health insurance plans such as individual, family floater, senior citizens, critical illness. Daily hospital cash, unit-linked health plan, overseas medical, cancer policy etc.
Three types of health insurance
There are broadly three types of health insurance – social health insurance, private health insurance and community health insurance. Social health insurance is prevalent in many European countries. Here, the employed contribute a certain percentage of their salary to an insurance fund. This contribution is compulsory and every single employee has to contribute. The contribution depends on their income i.e. those with higher income contribute more, while those with lower income contribute less. The employer also contributes a matching grant. The government usually fills in the deficit. The insurance fund is used to meet the health care costs of THE ENTIRE population (and not just those who contributed). Thus in this case, there are two benefits – the healthy contribute on behalf of the sick and the employed contribute on behalf of the unemployed. The benefits are usually comprehensive – ranging from primary to secondary to tertiary care and cover most disease conditions. This is similar to the ESIS/CGHS in India, the difference being that the entire population is covered by social health insurance. Obviously, social health insurance works in countries where there are a large number of formal employees who can contribute.
The second type of health insurance is the private health insurance. Popular in the USA, here individuals purchase health insurance from insurance companies. They pay a premium, depending on the risk that they have. Thus those with high risk, e.g. diabetes, hypertension etc will have to pay a higher premium as compared to a person with neither of these. Also, the premium depends on the benefits that the individual wants (primary and/or secondary and/or tertiary care). The insurance company reimburses the costs of the health care when the individual falls sick. This is similar to the “Mediclaim” health insurance policies in our country and is usually affordable only to the elite. Even in a rich country like USA, about 10% of the population cannot afford to buy any form of health insurance. The third type is the community health insurance (CHI).
Community health insurance (CHI)
Devadasan et al (2006) in their Review of CHI in India defines Community Health Insurance as “any not-for-profit insurance scheme aimed primarily at the informal sector and formed on the basis of a collective pooling of health risks, and in which the members participate in its management.”
Types of CHI
Three types of CHI have already been experimented in India. The first is the ‘provider model’ where the local NGOs act as both insurer and provider of health care. Here the premium is paid directly by the people to the NGO-operated health facility, and, in return, they are provided with free or discounted rates for inpatient and outpatient services. The second kind of CHI is termed ‘insurer model’ where the NGO is the insurer but does not itself provide care, which is then purchased from a private provider. Here when a person enrolled under this scheme falls sick, he/she can get health care from a provider of their choice. In the third model, the NGO neither does provide health care nor act as an insurer: Here NGO acts as an intermediary between the target population and the insurance company/ provider.
Health insurance has the following advantages:
- People pay when they are healthy and able.
- Patients do not have to meet their entire health care costs. They contribute a small amount, the rest of the costs are met by the contributions of others.
- There is no/ minimal expenses at the time of illness.
- Of course, health insurance has its disadvantages:
- It is administratively more complex.
- Conceptually, it is difficult to explain to people.
- One needs large numbers (e.g. at least 5000) for it to succeed.
Group insurance is an insurance that covers a group of people, usually who are the members of societies, employees of a common employer, or professionals in a common group.
Group coverage can help reduce the problem of adverse selection by creating a pool of people eligible to purchase insurance who belong to the group for reasons other than for the purposes of obtaining insurance. In other words, people belong to the group not because they possess some high-risk factor which makes them more apt to purchase insurance (thus increasing adverse selection); instead they are in the group for reasons unrelated to insurance, such as all working for a particular employer.
A feature which is sometimes common in group insurance is that the premium cost on an individual basis may not be risk-based. Instead it is the same amount for all the insured persons in the group. So, for example, in the United States, often all employees of an employer receiving health insurance coverage pay the same premium amount for the same coverage regardless of their age or other factors. In contrast, under private individual health insurance coverage in the U.S., different insured persons will pay different premium amounts for the same coverage based on their age, location, pre-existing conditions, etc.
Another distinctive feature is that under group coverage, a member of the group is generally eligible to purchase or renew coverage all whilst he or she is a member of the group subject to certain conditions. Again, using U.S. health coverage as an example, under group insurance a person will normally remain covered as long as he or she continues to work for a certain employer and pays the required insurance premiums, whereas under individual coverage, the insurance company often has the right to non-renew a person’s individual health insurance policy when the policy is up for renewal, which it may do if the person’s risk profile changes (though some states limit the insurance company’s ability to non-renew after the person has been under individual coverage with a given company for a certain number of years).
National Insurance Company
National Insurance Company Ltd (NIC) is one of the leading public sector insurance companies of India, carrying out non life insurance business, headquartered in Kolkata. It is India’s oldest non-life insurance company. It is also the fastest growing public sector general insurance company in the country today. NIC has a network of 1233 offices throughout the country with highly effective distribution channels manned by more than 16,000 skilled personnel, spread over the length and breadth of the country covering remote rural areas, townships and metropolitan cities.
Befittingly, the product ranges, of more than 200 policies offered by NIC cater to the diverse insurance requirements of its 16 million policyholders. Innovative and customized policies ensure that even specialized insurance requirements are fully taken care of.
NIC has been accorded “AAA/STABLE” financial strength rating by CRISIL rating agency, reflecting the highest financial strength to meet policyholders’ obligations.
NIC is also the winner of NDTV Profit Business Leadership Awards 2011 (Business Leadership 2011- Insurance – Non Life) and was ranked ‘Highest in Customer Satisfaction’ by J.D. Power Asia Pacific 2010 Satisfaction Index StudySM (AIS).