HEALTH INSURANCE IN INDIA 2014

PROJECT ASSIGNMENT
ON

Health insurance in India

(INSURANCE LAW)

Submitted to:

MRS. SANGEETA CHANDA

FACULTY INSURANCE LAW

Submitted by:

MANASI AGARWAL

Roll No- 428

8TH SEMESTER, 4TH YEAR

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 HEALTH INSURANCE IN INDIA 2014

ACKNOWLEDGEMENT

I feel highly elated to present the project Research on HEALTH INSURANCE IN INDIA,
which owes its very existence to a number of people without thanking whom, I would fail to do
proper justice to its original profounder.

Firstly, I would like to thank the Insurance law Subject Faculty, MRS. SANGEETA CHANDA
for showing his belief in me and considering me potent enough to carry out the research
methodology, and thereby assigning the said topic to me. In fact without his continuous
exemplary guidance and worm- view criticism the project could never have reached its current
stature. Thus I extend a sincere heart-felt thanks to My Preceptor Mrs. Sangeeta Chanda - the
ever helping Faculty of CHANAKYA NATIONAL LAW UNIVERSITY.

Secondly, I would like to extend my sincere acknowledgement towards the Librarian of CNLU,
for making all the reading materials available relevant for my Research Paper, within such short
notice. In fact the CNLU Library came up as an excellent source for all the requisite data.

Thirdly, I would like to thank the Managing staff of CNLU, for providing me with the facility
of 24 hours/ 7 days a week Internet connection, since the search engines namely,
www.google.com, www.bing.com, where an indispensable need to facilitate data access within
fractions of seconds.

MANASI AGARWAL

ROLL NO 428

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RESEARCH METHODOLOGY

Method of Research:
The researcher has adopted a doctrinal as well as non doctrinal method of research. The
researcher has made extensive use of the library at the Chanakya National Law University and
also the internet sources as well as interacted with the general mass of society.

Scope and Limitations

The project offers a comprehensive study of the HEALTH INSURANCE IN INDIA. The
research paper does not provide a complete understanding of the all the provisions of Health
Insurance.

Chapterisation

I have divided the project into various chapters. Each dealing with different aspects of the topic.
In the initial chapters, I have discussed elaborately, the meaning of Health Insurance. Further, I
have elaborate different provisions and lastly; I have concluded the topic by summarizing the
highlighting aspects of the Health Insurance in India.

Sources of Information

The researcher has relied on secondary sources for the purposes of this project such as books,
articles.

Style of writing

The researcher has adopted a descriptive and analytical style of writing for the purposes of this
research paper.

Mode of citation

A uniform mode of citation has been followed throughout the course of this project.

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TABLE OF CONTENTS

INTRODUCTION

BRIEF HISTORY OF HEALTH INSURANCE

DEFINATION OF HEALTH INSURANCE

HEALTH EXPENDITURE

OVERVIEW OF DIFFERENT COUNTRIES

HEALTH INSURANCE SCENARIO IN INDIA

HEALTH INSURANCE FOR SENIOR CITIZENS

HEALTH INSURANCE LAWS AND GUIDELINES IN INDIA

CONCLUSION

BIBLIOGRAPHY

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Introduction

When health is absent, wisdom cannot reveal itself, art cannot manifest, strength cannot fight,
wealth becomes useless, and intelligence cannot be applied. Herophilus

It sums up the importance of good health. No nation could progress without its citizen being
healthy. But, ever increasing medical cost has made health care a distant dream. People are
forced to pay out of their pocket and sometimes due to lack of proper financial assistance even
suffer death or serious health hazard, bringing their or their closed ones life to a still. In India,
particularly such sight is very common. People do not have adequate economic capacity to avail
hi-tech medical facility because of the expensive medical procedure. Every poor/middle
class/upper middle class in their life time faces such contingencies were his or his loved one life
is at risk and require medical attention but due to lack of financial resources they are not able to
help them, in such a situation Health Insurance serves as a boon.

Health insurance is insurance against the risk of incurring medical expenses among individuals.
By estimating the overall risk of health care and health system expenses, among a targeted
group, an insurer can develop a routine finance structure, such as a monthly premium or payroll
tax, to ensure that money is available to pay for the health care benefits specified in the insurance
agreement. The benefit is administered by a central organization such as a government agency,
private business, or not-for-profit entity. According to theHealth Insurance Association of
America, health insurance is defined as "coverage that provides for the payments of benefits as a
result of sickness or injury. Includes insurance for losses from accident, medical expense,
disability, or accidental death and dismemberment"

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Brief History of Health Insurance

The Greek and the Romans have introduced the concept of Health Insurance and Life Insurance
in 600 AD. They organized the society with the name of guilds. These societies were open to
all the persons irrespective of their paying capacity, their class, their work and their status in the
society. Here the member of the society used to divide the expense coming to the society at an
equal platform. Say for example, there are 10 members in a community and A dies leaving
behind dependents and B incurs certain medical expense, then the total cost of the expenses to
the dependents and medical expense will be calculated and will be duly divided among all
members of the community except B.

Hammurabi code, advocated the concept of Health Insurance. The modern day health insurance
drives many of its characteristic from the code of Hammurabi. Rates were set for different
surgeries and successful surgeons were awarded and in case of failure penalty was imposed on
them.1 It was actually in early twentieth century that concept of Health insurance was recognised.
Individual health insurance plans became available in the United States during the Civil War.
The plans provided coverage for injury related caused by travelling in railways and steam boat.
Massachusetts Health Insurance of Boston offered early group policies with a relatively
comprehensive list of benefits as early as 1847.2

Individual accident insurance proved a successful venture, so these kinds of early plans began to
evolve into more expansive programs that covered a broader range of illness and injury,
including early versions of disability coverage by the end of the nineteenth century. In the early
years of the twentieth century, groups began developing relationships with health care providers
to develop what would become the predecessors to modern health insurance plans, or fee-based
contracts.3

1
Allen D. Spiegel, Hammurabi's Managed Health Care Circa 1700 B.C. available at
http://www.managedcaremag.com/archives/9705/9705.hammurabi.shtml (last accessed on 15th February, 2014)
2
See New world Encylopedia, available at www.newworldencyclopedia.org/entry/Health (last accessed on 15th
February, 2014)
3
The History of Health Insurance in the United States of America. available at
http://www.neurosurgical.com/medical_history_and_ethics/history/history_of_health_insurance.htm (last
accessed 15th February, 2014)

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In Germany, insurance for compulsory accident and sickness was triggered by Otto Von
Bismarck.4 After the World War I this policy was adopted by Soviet Union and Great
Britain.5National Health Insurance Act of 1948 provides for compulsory health insurance in
Britain. Cost was bore by the government and tax authority and only minimal service charge was
to be provided.6

4
Lawrence F. Wolper, Health Care Administration- Managing Organized Delivery System, 5th Edition, Jones and
Barlett Publishers International, 12th April, 2010
5
ibid
6
See National Assistance Act 1948 (1948 CHAPTER 29) available at
http://www.legislation.gov.uk/ukpga/Geo6/11-12/29/enacted (last accessed 15th February, 2014)

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Definition of Health Insurance

Health Insurance is a kind of insurance policy taken by the insured to avail benefit whenever he
faces any medical contingencies. The effect on health shack of policies to provide everyone
against known high frequency, health care services such as high risk priority health care. This is
important because many countries introduce this with two fold objective, to reduce the
catastrophic health care cost and to make its citizen healthy by providing them with better
medical facilities.7

A Health insurance contract of insurance is a contract either to indemnify a person against a loss
which may arise on happening of certain events or to pay a sum of money on the happening of
some or any event in agreed consideration. Health insurance in recent years has been introduced
and felt necessary in developing countries. So in a lay man manner we can describe health
insurance as a mechanism to indemnify the insured when he suffers any medical contingencies
by the person who undertakes to pay the money or assistance known as insurer.8

7
Pablo Enrique Gottret & George Schieber, Health Financing Revisted; A practioners Guide (World Bank,
2006)
8
See Section 2 (9) of Indian Insurance Act, 1938

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Health expenditure

Health expenditure means health and health related expenditure. Public health expenditure
consists of recurrent and capital spending from government (central and local) budgets, external
borrowings and grants (including donations from international agencies and nongovernmental
organizations), and social (or compulsory) health insurance funds. It is the sum of public and
private health expenditure. It covers the provision of health services (preventive and curative),
family planning activities, nutrition activities, and emergency aid designated for health but does
not include provision of water and sanitation.9

Health-related expenditures include expenditures on health-related functions such as medical

education and training, and research and development.10In United States of America total per
capita health expenditure amounts to $8,402 (as per 2010).11 The Health expenditure; total (% of
GDP) in India was last reported at 4.05 in 2010, according to a World Bank report published in
2012.12

Now we can see that health care expenditure generally involves two parties either the Public or
Private. Public expenditure generally draws funds from the tax i.e. using central or states revenue
for health which is enshrined in Part IV of the Indian Constitution. It is the duty of the state to
take care of the health of its people. Private expense on the health care in India is generally
meted out of pocket i.e. payments to health care providers for services, sometimes donations are
also channelized and the other mode is Private Health Insurance. It is the premium contributions
towards the health support and health insurance provides pool for future health care. Most
countries have mix of private and public role care of health funding.

9
India - Health expenditure Health expenditure, private (% of GDP) available
http://www.indexmundi.com/facts/india/health-expenditure (Last accessed 16 February, 2014)
10
Definition of Health Expenditure available at
http://www.fhb.gov.hk/statistics/download/dha/en/c_definition_0405.pdf (Last accessed on December, 2013)
11
Centre for Disease control and Prevention available at http://www.cdc.gov/nchs/fastats/hexpense.html (last
accessed on 16 February, 2014)
12
Health Expenditure; Total (% Of GDP) in India

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Overview of Different Countries

In United Kingdom, there is a body called National Health Service. It aims at providing equal
care and protection to every citizen. Medical care is free and each citizen is entitled to avail this
benefit.13

Germany has public corporations which are entrusted to provide compulsory health insurance. In
Australia life time health insurance is a government initiative. Health care fund depends on the
age of the person availing such service.14

There are two major types of insurance programs available in Japan Employees Health
Insurance, and National Health Insurance National Health insurance is designed for people who
are not eligible to be members of any employment-based health insurance program. Although
private health insurance is also available, all Japanese citizens, permanent residents, and non-
Japanese with a visa lasting one year or longer are required to be enrolled in either National
Health Insurance or Employees Health Insurance.

Since 1974, New Zealand has had a system of universal no-fault health insurance for personal
injuries through the Accident Compensation Corporation (ACC). The ACC scheme covers most
of the costs of related to treatment of injuries acquired in New Zealand (including overseas
visitors) regardless of how the injury occurred, and also covers lost income (at 80 percent of the
employee's pre-injury income) and costs related to long-term rehabilitation, such as home and
vehicle modifications for those seriously injured. Funding from the scheme comes from a
combination of levies on employers' payroll (for work injuries), levies on an employee's taxable
income (for non-work injuries to salary earners), levies on vehicle licensing fees and petrol (for
motor vehicle accidents), and funds from the general taxation pool (for non-work injuries to
children, senior citizens, unemployed people, overseas visitors, etc.)

The United States health care system relies heavily on private health insurance, which is the
primary source of coverage for most Americans. According to the CDC, approximately 58% of
13
See http://www.nhsdirect.nhs.uk/About
14
Expat guide to Australia: Health Care, The Telegraph, 21 July, 2013 available at
http://www.telegraph.co.uk/health/expathealth/7898820/Expat-guide-to-Australia-health-care.html (last accessed on
18 February, 2014)

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Americans have private health insurance.15 The Agency for Healthcare Research and
Quality (AHRQ) found that in 2011, private insurance was billed for 12.2 million U.S. inpatient
hospital stays and incurred approximately $112.5 billion in aggregate inpatient hospital costs
(29% of the total national aggregate costs).16 Public programs provide the primary source of
coverage for most senior citizens and for low-income children and families who meet certain
eligibility requirements. The primary public programs are Medicare, a federal social
insurance program for seniors and certain disabled individuals; and Medicaid, funded jointly by
the federal government and states but administered at the state level, which covers certain very
low income children and their families. Together, Medicare and Medicaid accounted for
approximately sixty three percent of the national inpatient hospital costs in 2011. SCHIP is a
federal-state partnership that serves certain children and families who do not qualify for
Medicaid but who cannot afford private coverage. Other public programs include military health
benefits provided through TRICARE and the Veterans Health Administration and benefits
provided through the Indian Health Service. Some states have additional programs for low-
income individuals.17

In India, we do not have any universal health care policy. It is limited to industrial workers and
their family. Central Government Health Scheme (1954) and Employees State Insurance scheme
talks about providing insurance to its employees. It is shocking to know that the country which is
prone to so many fatal diseases and where death due to lack of proper medical attention is
common, has no policy to cover the medical contingencies. Almost 80% of Indian do not have
health insurance policy.18

As per world Health Organization, health insurance sector is not well organized in India and
almost 86% of health care financing is through unplanned and noncontributory spending.19

15
Centers for Disease Control and Prevention. CDC.gov (2011-03-06). Retrieved on 2011-10-26.
16
Torio CM, Andrews RM. National Inpatient Hospital Costs: The Most Expensive Conditions by Payer, 2011.
HCUP Statistical Brief #160. Agency for Healthcare Research and Quality, Rockville, MD. August 2013
17
U.S. Census Bureau
18
Source IRDA and annual report of Apollo Hospital and Max India for 2012-2013.
19
See http://www.who.int/countries/ind/en/

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HEALTH INSURANCE SCENARIO IN INDIA

Health is a human right. Its accessibility and affordability has to be ensured. The escalating cost
of medical treatment is beyond the reach of common man. While well to do segment of the
population both in Rural and Urban areas have accessibility and affordability towards medical
care, the same cannot be said about the people who belong to the poor segment of the society.
Health care has always been a problem area for India, a nation with a large population and larger
percentage of this population living in urban slums and in rural area, below the poverty line. The
government and people have started exploring various health financing options to manage
problem arising out of increasing cost of care and changing epidemiological pattern of diseases.

The control of government expenditure to manage fiscal deficits in early 1990s has let to severe
resource constraints in the health sector. Under this situation, one of the ways for the government
to reduce under funding and augment the resources in the health sector was to encourage the
development of health insurance. In the light of escalating health care costs, coupled with
demand for health care services, lack of easy access of people from low income group to quality
health care, health insurance is emerging as an alternative mechanism for financing health care.

Indian health financing scene raises number of challenges, which are:

Increase in health care costs

High financial burden on poor eroding their incomes

Need for long term and nursing care for senior citizens because of increasing nuclear family
system

Increasing burden of new diseases and health risks

Due to underfunding of government health care, preventive and primary care and public health
functions have been neglected

In the above scenario, exploring health financing options became critical. Naturally, health
Insurance has emerged as one of the financing options to overcome some of the problems of our
system. In simple terms, health insurance can be defined as a contract where an individual or

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group purchases in advance health coverage by paying a fee called premium. Health insurance
refers to a wide variety of policies. These range from policies that cover the cost of doctors and
hospitals to those that meet a specific need, such as paying for long term care. Even disability
insurance, which replaces lost income if you cannot work because of illness or accident, is
considered health insurance, even though it is not specifically for medical expenses. Health
insurance is very well established in many countries, but in India it still remains an untapped
market. Less than 15% of Indias 1.1 billion people are covered through health insurance. And
most of it covers only government employees. At any given point of time, 40 to 50 million
people are on medication for major sickness and share of public financing in total health care is
just about 1% of GDP. Over 80% of health financing is private financing, much of which is out
of pocket payments and not by any pre-payment schemes. Given the health financing and
demand scenario, health insurance has a wider scope in present day situation in India. However,
it requires careful and significant efforts to tap Indian health insurance market with proper
understanding and training.

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HEALTH INSURANCE FOR SENIOR CITIZENS

Ageing health policy questions are now frequently raised in India. India has not yet found a
clear, fair and adequate system for financing the growing demand for long-term care as the
population ages. The migration of population for jobs and livelihood from rural areas to urban
areas and between cities has led to the breaking down of the age old traditional joint or
extended family system in India. This system provides a good supporting structure for the care
of older persons by keeping families together, pooling financial resources and making family
members available in case of need. This weakening in the traditional support systems for older
people is expected to lead to a rapid increase in the demand for formal care provided by
institutions such as nursing and residential homes and also services provided in the community.

At present, there are no social schemes or federal or central government mechanisms for funding
of health care for the aging population. The reliance is currently on private sector, voluntary
organizations and indigenous programs that deliver 80% of health care (the remainder is in the
form of Government hospitals and Municipal corporations). The medical infrastructure to handle
substantial number of older adults is lacking. There is no provision for organized long term care
for chronically sick, except for the upper middle class and the rich who can afford to provide
good care at home with some professional help. Hence, there is a need for innovative, cost
effective health insurance products for senior citizens which cater effectively to their needs.

LONG TERM CARE

This paper focuses primarily on long-term care as the subject of long-term care (LTC) is
receiving increasing attention both in the research community and by Government because of the
belief that an ageing population will greatly swell the demand for long term care services and
create huge public expense. One of the issues which need to be determined is by how much
demand will increase; another is to address the ambiguity over whether long-term care is a
response to a medical condition, a social need or both. The corollary is to decide how the burden
is to be shared between the individual, the family and the state.

Before going on to discussing what different nations are doing, it is essential we first appreciate
the nature and significance of long-term health care. Long-term care is administered to people

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who have reached a stage in life in which they are dependent on others for social, personal and
medical needs. It is usually associated with the very old, but, in fact, could begin at any age
depending on the reasons for their disability perhaps a road accident, a mental or a congenital
condition. An important social objective for long-term care is to ensure that people are given the
opportunity to choose where their care is delivered. Given that older people prefer to remain at
home the availability and affordability of help to support this is crucial.

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Health Insurance, Laws and guidelines in India

Insurance regulation formally began in India, after the passing of Life Insurance Companies Act,
1912 and Provident Fund Act of 1912. Today insurance sector in India is broadly governed by
Insurance Act, 1938 and Insurance Regulatory Development Authority Act, 1999 (IRDA Act,
1999). The preamble to the IRDA Act, 1999 read as follows: An Act to provide for the
establishment of an authority to protect the interests of holders of Insurance policies, to regulate,
promote and ensure orderly growth of the insurance industry and for matters connected therewith
or incidental thereto and further to amend the Insurance Corporation Act 1956 and the general
Insurance Business (Nationalization) Act 1972. Indian insurance companies like the United
India Insurance Co. Ltd., New India Assurance co. Ltd. National Insurance Co. Ltd. keeping in
pace with time have initiated some of the main health policies. There is Central Government
Health schemes which provide comprehensive medical care to government employees.

As per the guidelines issued by IRDA for standardization of health insurance,20 out of the 46
standardized terminologies for health insurance, the regulator has revised 19 of them. The
guideline was introduced to curb the ambiguities and to provide better services and enable
customers to interact more effectively with insurers, third-party administrators and providers.21

Under the new norms, an establishment registered with the local authorities does not have any
minimum in-patient bed requirement. One of the most significant changes brought by IRDA is
that the health Insurance Policy could be extended for life time and can be renewed except the
customized one. Insurer is mandated to set claim within 30 days of application of claim by the
insured. In order to end the confusion regarding critical illness among the insurer Guideline 2, of
the IRDA health insurance recommendation have introduced 11 standardized definitions for
inclusion in every health policy in its Annexure II.

20
Guidelines on Standardization in Health Insurance, available at
http://www.policyholder.gov.in/uploads/CEDocuments/Guidelines%20on%20Standardization%20in%20Health
%20Insurance.pdf (Last accessed on 20th February, 2014)
21
Anirudh Laskar ,Irda issues guidelines to standardize health insurance, Live Mint and The Wall Street Journal,
21 February, 2013

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Suggestions and Conclusion

Having a health insurance policy is the need of the hour. By availing such policy the insurer can
avail best medical services without worrying about the cost of the treatment, he can have regular
health checkups and if diagnosed with any disease could do away with it at the very nascent
stage but there few factors as well, which prevent people from opting for the health insurance
policy. Modern insurance companies are indulging in minting money and are more concerned
about warming their pockets than providing service. Another demerit is that insurance policy
contains too many exclusion clauses. The traditional model have focused on insurer or
intermediaries working with the employment segment only as the front end to one that allows the
flexibility to serve different segments of the population is an efficient manner. Health Insurance
providers may need to align themselves to overall health care including financing, preventive
health care and health outreach in order to grow coverage. Regulations policy must be designed
to encourage this. The experience of different countries suggests that private insurance has an
important role to play in overall health care.

Private health Insurance has enhanced access to timely hospital care. In U.K. waiting time
reduction and private health insurance coverage has led to vicious cycle. Private health insurance
increases choice for the individual. In Australia, it offers the option of access to spare capacity
and elective care in non-public institutions. Thus we see that it has led to expansion of health
coverage and expenditure in other countries. However, regulation as well the role of public
health expenditure cannot be ignored.

Healthcare delivery would certainly be improved tremendously with all these measures.

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BIBLIOGRAPHY

Websites Referred :-

https://www.ssrn.com/

www.legalserviceindia.com

www.timesofindia.indiatimes.com

www.slideshare.net

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