Low Cost Indian Health Insurance Spurring National Healthcare Investment
By Marius | Published May 12, 2011
The Indian government is looking to develop public-private partnerships in hospitals to improve and expand healthcare access towards the more remote and impoverished areas of the country. However, the success of an existing government health insurance scheme designed for the poor has already begun to meet these objectives.
The Rashtriya Swasthya Bima Yojana (RSBY) scheme was launched on April 1st 2008 by the Indian Ministry of Labour and Employment to provide sufficient health insurance coverage for families living Below Poverty Line (BPL), and to better protect them from the financial liabilities that arise out of health shocks involving hospitalization.
Enrolled BPL families under the RSBY are entitled to hospitalization coverage up to a Rs 30,000 (US$670) limit per anum for most maladies that require inpatient services. Transportation charges are also covered up to a maximum of Rs 1,000 (US$22) per year. The beneficiaries of the RSBY initiative pay only Rs 30 (US$1) as an initial registration fee per enrolled family. After the registration fee has been paid, all medical transactions for enrolled individuals are cashless. The RSBY scheme involves cooperation between the Indian Central and State Governments working in tandem with private Indian health insurance companies. Companies offering RSBY coverage are pre selected by the State, and will administer the policies on behalf of the Indian government. Premiums, however, are handled by the Indian government with the Central and State organizations splitting costs 75 percent and 25 percent respectively.
Under the RSBY scheme, coverage extends to five direct family members, including the head of the household, a spouse and up to three dependants. There is no age limit on beneficiaries and pre-existing conditions are covered. Each beneficiary family is issued a biometric-enabled smart card, containing fingerprint and photographic data on each member. Health insurers manage the issuance of cards and, eventually, the payouts of any claims made under the scheme.
The smart card system is portable, enabling migrant labor to utilize the large scale medical IT network created specifically for the scheme. An RSBY policyholder who has been enrolled in a particular district will be able to use their smart card in any of RSBY’s 8,000 empanelled hospitals, both public and private, throughout India
Despite early administrative hiccups, the ambitious RSBY system is a pronounced success and has helped quadruple India’s overall health insurance penetration in the three years it has been in operation. The scheme now covers some 23 million poor families in 330 districts and 27 states across India. This performance has prompted the Labor Ministry to plan for the development of further extensions for the poor, including old age pension schemes and various labor related tie-ins for cover.
The RSBY’s achievements in extending health coverage has also presented an attractive opportunity for entrepreneurs interested in developing hospitals and clinics primarily targeted towards India’s rural poor.
Indian investors are being drawn to low-cost healthcare development due to RSBY’s financial design. RSBY premiums are paid out through a district-wide basis to insurance companies. Many districts, however, remain without accredited hospitals, leaving RSBY beneficiaries to travel to another district or state when medical issues occur. If investors come in and set up sufficient medical facilities in an underserved district, the RSBY can incorporate their services and substantial client-base into the operation straight away. With millions of RSBY smart cards issued and private health insurance premiums on the rise, there is potential to craft sustainable healthcare businesses in more remote parts of the country.
Harendra Singh, owner and CEO at Asarfi Hospital Limited, is an example of one such investor. Mr. Singh is constructing a 100-bed multi-specialty hospital in Baliya in eastern Uttar Pradesh, an area outside of most existing Indian healthcare networks. The state of healthcare around Baliya is currently very poor and he hopes to make a difference.
The first Asarfi Hospital was set up in Dhanbad, Jharkhand in 2007, a year before the RSBY launched. Once the scheme came into effect, Mr. Singh noted that many rural poor were coming in for an assortment of procedures, from gall bladder surgery to appendix removals. On average Mr. Singh estimated that 35 inpatients in his 130 bed hospital would be RSBY cardholders. He further believed that the RSBY’s effect on increasing demand for treatment would have a substantial impact on the healthcare system.
Other established healthcare providers are looking to augment their services around the RSBY. GV Meditech is developing an ambulatory service that travels periodically to distant villages, pools 20 to 30 RSBY cardholders with medical problems, and transports them to the nearest Meditech hospital. The company is also in talks with a prominent Bangalore-based cardiac hospital to set up a 100 bed hospital designed for RSBY patients.
Kolkata-based Glocal Healthcare is aiming to better regulate its rates on RSBY packages. The company is developing a new system that will standardize premium rates for over 750 medical procedures, which empanelled RSBY hospitals will comply with. Glocal hopes to use the success of the RSBY scheme to launch a range of innovative India medical insurance products which would aim to provide affordable healthcare for individuals and families who are not currently eligible to receive coverage under Rashtriya Swasthya Bima Yojana.
The RSBY has rapidly opened up an underdeveloped healthcare market in India. Most hospitals that now deal prominently with low-income families will have some relationship with the RSBY. The growth of this scheme demonstrates that the Indian government could have more success in moving from being a healthcare provider into primarily a healthcare financier.
The Indian government has long focused on supply-driven healthcare management through investments in public hospitals, resulting in an inefficient, centrally-concentrated state healthcare infrastructure. The growth of quality private hospitals in districts where there were no facilities before shows that through providing more citizens and business with the wherewithal to make decisions, the government can more easily satiate healthcare demand.
RSBY furthermore acts as grass-roots advertising for the health insurance industry in India. Every person who gets claim settled under RSBY makes another 5 people aware of the concept of health insurance, it is argued. This in turn has spurred a number of local and international health insurance providers into taking a renewed interest in the Indian health insurance market. The success of the RSBY scheme has proven that health insurance products and providers can achieve success in what was previously considered to be an unprofitable market.
In addition to the RSBY, state-sponsored schemes such Aarogyasri in Andhra Pradesh are having a similar positive impact. Bangalore’s Narayana Hrudayalya recently opened a 500-bed cardiac and specialist hospital in Hyderabad to cater to their state community health insurance system for BPL families.
Deviprasad Shetty, founder of Narayana Hrudayalya, spoke of the changes in low-income healthcare assistance: “We predicted ten years ago that it was a matter of time before government became a health insurance provider and not only a healthcare provider.”