National Council of Applied Economic Research
Opinion: Palash Baruah, DL Wankhar and Yashika Khattar.
The overall health insurance coverage of house holds is impressive but pricier, complex self-financed insurance products hinder wider adoption.
One of the most concerning and unsustainable aspects of healthcare financing is the significant out-of-pocket (OOP) expenses that households bear. These costs are aggravated by the relentless rise in medical expenses and inflation. Health insurance, often called medical insurance, acts as a vital buffer. This coverage can come through direct payments to healthcare providers or reimbursements. Health insurance is increasingly recognised as a crucial financial tool designed to to safeguard the financial stability of the insured.
Health financing schemes can be self-financed, government-financed, or employer-financed. The Comprehensive Annual Modular Survey (CAMS) from the NSS 79th round (2022-23) reveals that 61.5% of urban households and 59.9% of rural households in the country have at least one member covered by such schemes. In urban areas, 50.2% of the lowest income quintile have coverage, rising to 77.6% in the highest. In rural households, the coverage is 54% for the lowest quintile and 66.1% for the highest. This data indicates a positive trend in health coverage accessibility across income levels in both urban and rural settings.
Analysis at the granular level reveals that 18.9% of urban households and 29.5% of rural households have at least one member covered under the Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY). This programme offers health coverage of Rs 5 lakh per family, each year, for secondary and tertiary hospital care, specifically targeting the poorest and most vulnerable 40% of the population. Since the scheme is designed for low-income families, its reach is notably higher among household.in the lowest income quintiles in both rural and urban areas.
The Janani Suraksha Yojana (JSY) is a programme dedicated to lowering maternal and neonatal mortality by encouraging institutional deliveries among economically disadvantaged pregnant women. Although its reach is modest, covering just 1% of urban households and 2.2% of rural households, the scheme’s coverage remains fairly consistent across all income groups. JSY’s goal of fostering safer births among low-income families highlights its vital role, especially in rural regions.
The Employees’ State Insurance Scheme (ESIS), managed by the Employees’ State Insurance Corporation (ESIC), offers targeted coverage for health issues commonly faced by workers. Currently, 7.7% of urban households and 1.6% of rural households benefit. from this scheme. Analysis reveals that the coverage is more prevalent among households in higher income quintiles, both in rural and urban areas, suggesting that the scheme’s reach aligns more with the middle- and upper-income workers.
The Central Government Health Scheme (CGHS), along with the Ex-Servicemen Contributory Health Scheme (ECHS) for retired armed forces personnel, and various health schemes under the Railway Ministry, collectively provide comprehensive medical coverage. for government employees and pensioners. These schemes cover approximately 3.2% of urban households and 1.1% of rural households. Designed to include all eligible family members of the insured, these programmes ensure holistic healthcare support for the entire household, with benefits provided through reimbursements.
Private sector employers often provide health insurance to employees, either as cashless claims or through reimbursement options, though this is largely limited to the organised sector. As a result, about 6.7% of urban households and just 1.1% of rural households have at least one member with this type of employer-sponsored insurance. Meanwhile, workers in the unorganised sector benefit from other supportive programmes, such as AB-PMJAY, the Unorganised Workers’ Social Security Act, the Employees Compensation Act (for those not covered under ESIC), and various health initiatives under the Labour Welfare Scheme.
State programmes score in reach
Among all the health financing schemes, state government programmes stand out for their broad reach. Unlike most schemes, these state-run health insurance plans strive for universal coverage. Approximately 22.5% of urban households and 26.8% of rural households have at least one member enrolled in a state health insurance scheme. Notably, these programmes maintain a fairly even spread across all income groups, both in urban and rural areas, underscoring their inclusive approach to healthcare access.
For individuals not covered by the above programmes, health insurance from commercial insurance companies is often the only option. Although these plans are accessible to most, subject to health requirements, their reach remains limited. Only 8.3% of urban households and a mere 1.1% of rural households have at least one member covered by private insurance. Given the complexities and higher premiums, these products are typically purchased by those in the higher income brackets.
Households with at least one member covered by other forms of health insurance make up 6.3% of urban households and 3.4% of rural households.
While approximately 60% of the households have at least one family member with some form of health insurance, there is a crucial concern that lingers. How many of these individuals are insured? The NSS data leaves us in the dark regarding the number of family members covered in these households, highlighting a significant gap in understanding the true extent of health coverage.
Government-funded health schemes offer affordability, often at no cost, but self-financed insurance products are pricier and more complex to understand. This discourages many from pursuing health insurance altogether. Also, there is a noticeable increase in premium costs, especially in the aftermath of Covid.
Reducing tax rates can entice more people to embrace health insurance, but simplifying insurance products is equally vital for wider adoption. Starting January 1, 2024, the IRDAI has mandated insurance companies to provide a simplified customer information sheet (CIS) but policy documents remain complex. Given that health insurance is a personalised product, a unique marketing approach with simplified product information can be a game changer.
(Palash is Fellow at the National Council of Applied Economic Research, New Delhi; Wankhar is a retired officer of the Government of India and Yashika is a Research Associate at NCAER)