Deepti Bhaskaran is a Senior Journalist with over 15 years of experience. She specialises in personal finance and looks closely into the insurance and pension space.
Being a low-middle income country, the health expenditure in India is amongst the lowest at 3.54 per cent of the Gross Domestic Product (GDP). Of this, the share of public expenditure is about 1.28 per cent of the GDP, indicating that healthcare in India is largely privately funded. In such a market, health financing tools become an important social security measure. It not only enables access but also generates demand for improved healthcare and ensures financial risk protection. An efficient health financing tool, through insurance, ensures risk is spread across the pool instead of concentrated with an individual, thereby mitigating financial shocks and making healthcare affordable. But, in India, the ‘out-of-pocket’ expense on healthcare is a high 62 per cent, which is indicative of the fact that health insurance in India is producing sub-optimal outcomes.
Building a robust health insurance market to enable access to healthcare was one of the drivers for the government to open up the insurance sector to private participation in 2000. However, two decades later, the report card for commercial health insurance ranks poor. Commercial health insurance is headlined not only by under-penetration but also by market failure. The growing instances of market failure can be evidenced through health risk selection (cream skimming), shallow coverage, high administrative costs, and low burning ratios.
A huge part of the problem is the unmet need to build and strengthen a regulatory structure in the healthcare sector, the lack of which is currently impeding the way the private insurance market is working in the country. This is one of the reasons why despite increasing medical costs, health insurance has seen fewer clients. This is also why health insurance cover continues to focus narrowly on hospitalisation expenses (in-patient care) instead of the broader spectrum that includes preventive healthcare and out-patient costs.
Health insurance reforms need a two-pronged approach. There needs to be a more collaborative effort on the part of the government to fix the larger healthcare ecosystem in terms of some regulatory oversight that will give the insurance industry the confidence to step out of its comfort zone. But, even within the health insurance sector, insurance needs to evolve towards ‘episode of care, especially in critical illnesses where if an ailment is insured, coverage should be extended to all treatment modalities for it.
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