Future of Health Insurance

An insurance scheme for 300 Million people who dont have access to good quality healthcare, where each family is entitled to more than 700 in-patient procedures with a cost of up to 30,000 rupees per annum for a nominal registration fee of 30 rupees.

The scheme provides the participating BPL household with choice between public and private hospitals and makes him a potential client worth attracting and keeping due to the significant revenues that hospitals stand to earn through the scheme. Uniquely, the scheme places control over significant resources in the hands of the beneficiary and plantar fasciitis treatment, empowering the BPL household and potentially creating an important source of competition for his business.

Second, and related to this point, the overall design of the scheme involves incentives that are conducive both to the expansion of the scheme as well as long run sustainability. In the case of enrolment, the insurer is compensated for each household enrolled and issued a smart card. Unlike other schemes, that operate as ?unnamed policies?, there is a direct link and ownership by the member who is required to attend the enrollment and pay thirty rupees in order to obtain benefits. In other schemes, government has paid the entire premium for all BPL workers without creating individual records of membership or any other direct link between the insurance program and those that are meant to benefit from it.

Hospitals have an incentive to attract the BPL households as a potentially huge source of revenues. This is true even for public hospitals which are now being allowed to create ?societies? which will allow them to retain a share of the revenues that they collect. Insurers, in contrast, have an incentive to monitor participating hospitals in order to avoid excessive claims through fraudulent or unnecessary procedures. The inclusion of intermediaries such as NGOs and MFIs which are ostensibly interested in assisting BPL households should help BPL households to understand how to utilize the services. Finally, the basic information gathered by government on a timely basis and reported publicly should allow both for mid-course improvements in the scheme as well as contribute to competition during subsequent tender processes with the insurers.

How great is that. Wait, there is more.

Each family gets a smart card! The smart card entitles its bearer to a list of pre-specified in-patient services in the second month following enrollment. So, for example, someone enrolled in the month of February can use the card at designated hospitals as of April 1st of the same year through March 31th of the following year. (Provisions exist for pro-rata premium payments to the insurance company in the event of partial year enrolment subject to a minimum of six months.) The smart cards are nominally paid for and belong to the GOI.

The transaction process begins when the member visits the participating hospital and his or her card is swiped. If a diagnosis leads to a procedure, the appropriate prescribed package is selected in the software menu. Upon release, the card is again swiped and the pre-specified cost of the procedure is deducted from the 30,000 rupee total on the card. A receipt is printed and provided to the member.

And this is a government program!

How does this work?

The majority of the financing, about 75 per cent, is provided by the Government of India (GOI), while the remainder is paid by the respective state government. State governments engage in a competitive bidding process and select a public or private insurance company licensed to provide health insurance by the Insurance Regulatory Development Authority (IRDA). The technical bids submitted must include a number of elements as per GOI requirements. The insurer must agree to cover the benefit package prescribed by GOI through a cashless facility that in turn requires the use of smart cards which must be issued to all members. This requires that a sub-contract be arranged with a qualified smart card provider. The insurer must also agree to engage intermediaries with local presence such as NGOs, MFIs, etc. in order to provide grassroots outreach and assist members in utilizing the services after enrolment. The insurer must also provide a list of empanelled hospitals that will participate in the cashless arrangement. These hospitals must meet certain basic minimum requirements (e.g., size and registration) and must agree to set up a special RSBY desk with smart card reader and trained staff. The list should include public and private hospitals.

The financial bid is essentially an annual premium per enrolled household. The insurer is compensated on the basis of the number of smart cards issued, ie., households covered. Each contract is specified on the basis of an individual district in a state and the insurer agrees to set up an office in each district where it operates. While more than one insurer can operate in a particular state, only one insurer can operate in a single district at any given point in time. The hardware and software specifications laid down by GOI imply inter-operability across districts and states.

The operation of the system involves three (Rashtriya Swasthya Bima Yojana) at RSBY or read the Wall street journal article

Comments

  1. You might be aware that the 12 millionth card under RSBY was handed over by the Union Labour Minister at Bangalore last week. I am hopeful that the scheme which has now started roilling in Karnataka will be as much of a success as it has been in otehr parts of the country. Will look forward to you valuable feedback.
    regards,
    Anil Swarup

  2. Mr Swarup,

    Thanks for the update. We just got two of our hospitals (Shimoga and Mysore) empaneled with RSBY. Look forward to working together. More about the hospitals at vaatsalya.com

  3. Dear Ashwin,
    The RSBY is going from strenght to strength. More than 11 million smart cards have already been issued and lakhs of poor persons have availed hospitalization facilities. Pakistan and Bangladesh are also in the process of implementing a variant of this scheme and a number of other countries have shown interest.
    regards,
    Anil Swarup

  4. "Hi,
    Nice step taken by the government & I think will surely help the BPL families to get some good medical facilities. Here is an online tools which I think you might be interested in which helps people to plan their insurance according to their needs & budget especially health insurance & retirement plan.
    Please check this out at – http://www.simpleinsurance.co.in/"

  5. I do not really know when this article was hosted but it is very well written. The author will be glad to know that the scheme has travelled a lot of distance and is now being implemented in most of the states. So far more than 47 lakh smart cards, covering around 2 crore persons, have been issued and thousands have already benefitted through free hospitalization. There is still, however, a long way to go.
    regards,
    Anil Swarup