Budget 2018: Urgent need for research, regulation and innovation in health insurance

The national health protection scheme announced in the 2018 Budget is a remarkable health insurance plan being offered anywhere in the world. Planned to cover 10 crore families, covering 50 crore citizens with a family cover of 5 lakhs rupees is a bold step towards addressing health inclusion. This, if done well, will bring almost 40 percent of our population under a national protection plan.While the steps taken by the government towards offering a national plan is commendable, it also needs to tighten the entire value chain of insurance agencies, health care providers, TPA’s, primary health centres, diagnostic companies, medical practitioners amongst others. Many of citizens covered for health insurance today have multiple horror stories in claims processing and corrupt practices by hospitals and others towards this issue.Legitimate claims have been often been turned down without reasons and unscrupulous elements have made claims without sometimes possessing even a valid insurance plan. About 80 percent of India’s citizens have no health insurance cover as a result and our country’s health spend is just around 4 percent of GDP, by far the lowest amongst the BRICS economies.Interestingly, health cover business grew nearly 24 percent year-on-year to Rs 30,765 crore for 2016-17, compared with 22.4% growth in 2015-16 and 15.6% growth in 2014-15.How can we improve this?First, encourage health research aggressively. Morbidity studies for health insurance needs to be extensively done to ensure better regulation of health policies, better penetration, customized policies and probably even lower premiums. In the last morbidity survey done by Insurance Information Bureau of India, it has some interesting findings like:[caption id="attachment_4311453" align="alignleft" width="380"] Representative image. Reuters[/caption]1) Individual and individual floaters account for 90 percent of number of polices but only 44 percent of amount of premiums.2) Average premium per policy was Rs. 13,303 against a claim per policy of Rs 10,333. Age-band of '46-55' is highest claim making group both in number and claim paid amount. 41% of the total claim records are from top 11 states only.3) Number of claims of males is more than that of females for all age-bands except for the age-bands '16-25' and '26-35' where they are less by 1 percent and 2 percent respectively.4) The top six highest number of claims paid categories are from disease groups 'Infectious', 'Clinical findings', 'Urology', 'Digestive', 'Pregnancy' and 'Injury', in that order which account for 64 percent in number and 53 percent in claim paid amount.5) 23 percent in number accounting for 15 percent in claim paid amount were paid for hospital stay 'Less than 1' day.*Data as per IIB survey report 2011-2012The above indicates an opportunity for detailed and in depth research, and should also be a feeder to actuaries for designing custom products. There has been very little innovation on the health insurance product side.Second, bring tighter regulation on all service providers. An area which needs attention is regulating TPA’s. Currently they are loosely regulated, and it might make sense to have insurance companies oversee them as the first line of oversight, followed by the insurance regulator IRDA themselves, just like how brokers are monitored by stock exchanges followed by SEBI. This will reduce malpractices and also bring transparencies in claim settlements. For example hospitals often charge more than prescribed rates, the moment they know that the patient is insured. This needs to be fixed by publishing standard rate cards for most interventions.There are companies offering mutual insurance in the health sector who have made some progress. Mutual health plans are usually operated by self-help groups, who approve all claims and thru community networks bring in members. Frauds are minimum and operators conduct extensive preventive health camps to pre-empt avoidable illness. These are interesting models and must be studied for best practices.Third, encourage grassroots innovations. Interesting progress has been made in the last few years where low cost medical devices, wearable tools, use of telemedicine, use of AI in patient management have been made.Data indicates that there has been substantial mortality improvement in all countries in the last few years. Micheal Saze, an actuarial expert rightly points out in a paper that there is substantial decreases in both the birth rate and the death rate in India. The death rates are decreasing more sharply than the birth rates. As a consequence, the percentage population below age 15 has been on a continuous decline. Because the total fertility rate in India is still around 2.4, there are still increases in both the percentages of the working and the retired population – thereby increasing need for healthcare and health insurance.Health care challenges in India includes increase in health care costs, high financial burden on poor, lack of long-term and nursing care for senior citizens, increasing burden of new diseases and health risks, lack of adequate preventive care, poor public health infrastructure, etc. A combination of research and regulation can help implement health insurance better and cover larger number of citizens under the primary health care.