Health Insurance – Current Trends

India is the third largest economy in the world, albeit with a population of 1.3 billion. Indian Healthcare Industry has been growing at a rate 12% per annum. According to an estimate, Indian healthcare spending accounted for 8% of GDP in 2012 and is expected to go up by 12% per annum.

Nonetheless, India is lagging behind in terms of health outcomes when compared to global average. Major population groups in India still do not have access to high quality healthcare. Indian per capita healthcare spending is 109 USD as against the world average of 868 USD in 2010. According to the World Health Organization (WHO) estimate, India had spent only 3.9% GDP (gross domestic product) in health sector in 2011, which was the lowest among the BRICS (Brazil, Russia, India, China, South Africa) nations. Healthcare funding in India is through public funding by state and central governments, private providers (insurers and employers) and individuals, whose out-of-pocket expenditure on healthcare is more than 70%.

Escalating health care costs, especially hospitalization costs are affecting all strata of the society. Chronic ailments can lead to recurring costs, which may adversely impact on the family, more often than not leading to debts. In the prevailing healthcare scenario, health insurance is no more a luxury, but has become a necessity.

Health insurance industry at a glance

According to a World Bank study, 25% of Indian population is covered by some form of health insurance, owing to the significant contribution by government sponsored schemes, while private insurance accounts for 5% of existing coverage. Indian health insurance sector has recorded a growth rate of 34.56% in 2011-12. Market share of private and public insurers in health portfolio is estimated at 40% and 60% respectively for the period 2011-12, with private insurers registering a higher growth rate. Public sector companies comprising National Insurance, New India Assurance, Oriental Insurance, and United India Insurance companies hold 60% of market share. Among the private players, there are four standalone health insurance companies (Star Health, Apollo Munich, Max Bupa and Religare Health), which have received a boost from Insurance Regulatory and Development Authority (IRDA) in 2013, as they are allowed to tie-up with banks. This move is expected to increase health insurance penetration.

Presently various health insurance policies available in the Indian market include individual cover, family floaters, senior citizen policies, employee group insurance policies (standard or tailor made) and policy to cover individual diseases (diabetes, heart disease, AIDS and cancer) to name a few.

Current Trends

Indian healthcare industry valued at 79 billion USD in 2012, is expected to grow phenomenally to 280 billion USD by 2020. With the rise in the Foreign Direct Investment (FDI) cap to 49%, global players are likely to take advantage of the ripe market for health insurance in India.

Currently, health insurance penetration is greatest among the urban middle to high income population. However, insurance sector should facilitate equitable healthcare by expanding to cover rural and lower income sections of the society. In order to be effective, newer products should offer wider than deeper risk coverage, and also cover domiciliary treatment in addition to hospitalization. Health insurance industry has a responsibility to offer fair and inclusive risk coverage of ambulatory, preventive care, long-term care and hospitalization costs at optimal pricing, with continuity and portability options.

Challenges faced by the health sector include shortage of qualified man power, variation in the quality of care available, unaffordable private healthcare services, lack of insurance coverage for ambulatory care, non-standardization of healthcare financing and delivery and adverse social determinants such as poor sanitation, malnutrition and unhealthy lifestyle changes.     

Way Ahead

Major challenges facing the insurance industry can be handled by greater involvement of private insurers, evolution of new business models, innovative and greater use of technology in the whole gamut of insurance operation, standardization of healthcare delivery and funding, and regulatory mechanisms to govern the functioning of healthcare providers and third party administrators. Industry urgently needs evolution of consistent procedure/ treatment specific reimbursement rates, which would eventually benefit all the stakeholders. Already efforts are being made in this direction. The key to success would be the healthy co-existence and co-operation of private and public health insurers to achieve inclusive healthcare delivery and funding. 

July 29, 2014: "Health Insurance - Current Trends" was published on LinkedIn

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