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Healthcare unwired
Health Insurance and Healthcare Access
March 2011
Executive Summary
Page - 04
Overview
Page - 05
Final Recommendations
Page - 09
Executive Summary
Health insurance has historically played a pivotal role in improving access to healthcare around the world. Unfortunately, less than 15% of the Indian population is covered under some form of health insurance, including government-supported schemes. Only around 2.2% of the population is covered under private health insurance, of which rural health insurance penetration is less than 10%. Although healthcare insurance in India is currently underpenetrated, it is expected to grow at a CAGR of 15% till 2015. At the current rate of growth only 50% of Indias population would have health insurance coverage by 2033. The rising level of middle-class incomes in India has led to the emergence of lifestyle-related diseases. Along with inflationary healthcare costs, this has triggered the demand for health insurance. Given the diversity of Indias population and its limited purchasing power, innovative insurance products at multiple price points are needed to penetrate this huge market. This paper highlights the broad policy issues afflicting the health insurance sector, taking into account the views of all industry stakeholders patients, physicians, insurance service providers, hospitals, as well as Government and regulatory representatives. Based upon the current industry feedback, this paper lists recommendations and specific solutions to the problems pinpointed herein. It has been widely accepted and suggested that certain initiatives be undertaken to improve the coverage of health insurance. Some of these measures include creation of a new business model, reducing premiums and collection costs, switching from patient cure to preventive care and simplifying policies and regulatory reforms in the healthcare and health insurance space. The initiation of these measures will result in increased penetration and improved coverage of health insurance in India.
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Overview
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The roundtable was constituted of senior representatives from Central Government; CEOs of insurance companies, pharmaceutical firms; Heads of Health departments from insurers and reinsurers; heads of hospitals and other international experts. Issues deliberated upon were Approaches to increase access of both healthcare and health insurance within the rural fabric of India and requirement of consequent business models to support the same. Gap in information around healthcare from multiple stakeholders (and possibility of healthcare exchange) and likely lessons that may be learnt from other industries such as telecom, FMCG. Data around Disease burden is also lacking in depth and quality. Also, post a strong data vault, we would require smart analytics to create the right products.
Creation of an accredited network of healthcare providers Smarter ways to manage healthcare costs such as inclusion of OPD, wellness or disease specific coverage and ensuring affordability especially to the poor Demand supply gap between healthcare infrastructure and a strong need to connect the dots for better utilization. Prevalence of spurious drugs is a bane that needs effective controls Requirement of a stronger role from Govt as a facilitator to provide infrastructural support Lack of information on credit rating of individuals Weaknesses of pharma sectors distribution capabilities. This was an aspect deliberated at length and agreed to by various stakeholders. Gaps in current distribution structure of medicines/ pharmaceuticals exposes patients/ customers to high risk or spurious medicines and related risks.
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Adequate healthcare infrastructure would only be possible if India were to increase healthcare spends from the current less than 1% of GDP to around 4% of GDP. This higher level of spend should be achieved through a combination of both public investment and insurance premiums. In return for this investment, the country will benefit from higher worker productivity and better quality of life.
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Final Recommendations
Many people in rural India still do not fully comprehend the concept of insurance and its role in improving access to healthcare. But nationwide health insurance coverage will only happen if specific measures are undertaken.
Key recommendations:
Create a New Business Model: Despite untapped opportunities, demand for insurance products still needs to be created. A maze of challenges must be overcome to penetrate rural markets, including the creation of successful business models in rural insurance. FMCG and telecom companies have done an admirable job in penetrating rural markets by creating a need where one did not previously exist. For instance, telecom companies first built networks and tailored products for the rural markets, thereafter providing a distinct value to rural customers. Health Insurance providers could do likewise by first building an accredited network and then providing tailor-made policies for people at a price point they can afford. Learnings can be drawn from the much appreciated Rashtriya Swasthya Bima Yojana which is slowly expanding its reach. It has demonstrated an active, cooperative participation between Central Govt, State Govts, private and public insurers, Technology and NGOs/ SHG etc.
Three-tier Model a Better Option: Given Indias broad division into three segments - those living below the poverty line, the middle class and the upper class - it would be better if India followed a threetier model, since a one-size-fits-all model wont work well in health insurance. Each of the three tiers - Government, private and publicprivate partnerships (PPP) are suited to meet the needs of different population segments. The poor would almost exclusively fall under a Government-subsidized insurance scheme such as RSBY. Those in the middle may wish to opt for a PPP, which permits a mix of both systems, offering a combination of insurance benefits at a price point that the middle income population can afford. At the other extreme, upper-income groups would likely prefer to pay for additional benefits offered by individual private insurance companies. For the above , healthcare infrastructure needs to be improved dramatically. Some learnings could be drawn from ingenious models such as Narayana Hridulaya. As a forward looking step, it could also be considered wherein Govt could provide cashless treatment for critical illnesses for all citizens in select hospitals. Such a program could be administered through something on the lines of health financing cess. These could facilitate improvements in healthcare infrastructure building as well as developing protocols of standardized healthcare procedures.
India has vast untapped potential in health insurance, since the market is largely un-penetrated. The importance of health insurance becomes apparent when people realize that India suffers 20% of the global disease burden. The demand for quality healthcare in India is therefore enormous. While Indias coverage gap is staggering, unlike developed countries, this does not imply smooth business opportunities for the private sector (insurance companies, hospitals, healthcare professionals, pharmaceutical manufacturers, etc.) who would seek to meet this demand.
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Reduce Premiums and Collection Costs: For penetration among the BPL category and rural sections, insurance premiums should be kept low and manageable. Over time, efficiencies can be achieved and costs lowered. For example, particularly in rural regions, one cost factor is the effort and exercise involved in collecting premiums and providing reimbursements. Solutions can perhaps be found in other industries. A case in point is the tie-ups between banks and telecom service providers whereby the latter are authorised as Business Correspondents and allowed to conduct or facilitate cash transactions on behalf of bank customers. This saves a huge amount for the banks on additional infrastructure costs, while also allowing them to meet their mandatory goals of inclusive growth and penetration into rural areas. For the telecom service providers, this acts as an additional source of revenue and subsidizes their costs in other regions. The insurance sector could develop similar innovative electronic payment and reimbursement systems that work in rural areas, taking advantage of the infrastructure that the banking and telecom sectors have put in place. Tax incentives: The Government also needs to implement multiple measures, including promoting tax incentives, to create a conducive environment that speeds up the creation of a critical mass that makes the business viable. Insurance is sold or bought in India essentially under the aegis of tax advantages. Govt of India introduced the health insurance tax advantage last year.
Due to increasing medical inflation and with a view to providing alternative windows for tax exemptions, it would be a good idea to increase these limits beyond the current of Rs 15,000 for self and Rs 20,000 for parents (above 65). Outpatient Coverage: Given the benefit of hindsight thats the prerogative of a late starter, India should address issues that are hanging fire even in the developed world. For example, insurance caters only to sickness and in-patients or those under hospitalization, generally the most expensive aspects of healthcare. New policies that cover preventive check-ups and OPD (outpatient department) treatments could also be introduced, so that hospitalization is avoided. Also, another set of patients who undergo severe financial stress is post-hospitalisation patients. Patients undergoing long term medical treatment such as postcardiac or sclerosis would need out-patient support. Switch from Patient Cure to Preventive Care: Patient cure policies should be revised to preventive care policies. Preventive healthcare could ultimately reduce the cost of insurance operations, including a reduction in claims. Ignoring preventive care only means that the chances of contracting illness and requiring hospitalization are thereafter higher. System of Checks and Balances: It is important to create a system of checks and balances that increases compliance, prevents fraud and leads to quicker detection in case of fraud.
Create a Credit Bureau: A recurring problem faced by all insurers is the lack of reliable data or a credible data source. Unreliable data increases risk factors, consequently pushing up insurance premiums. A similar problem faced by banks and housing finance companies (HFCs) was resolved via the formation of CIBIL Credit Information Bureau (India) Limited. Since the formation of CIBIL, banks and HFCs now access the past credit histories of borrowers before advancing new loans, reducing their risk by blacklisting defaulters. CIBIL has made borrowers more disciplined on repayments, as they fear being declared defaulters and losing the opportunity to secure loans in future. A lower number of defaulters will finally result in a lower interest rate for all borrowers. Following this model, the Government should consider the formation of a credit bureau for insurance agencies too, with a detailed history of all insured persons, which would include frauds. During the interim period when such an insurance bureau is being formed, insurance companies should be allowed access to CIBIL data, since many insured people are likely to have taken loans at some time or the other. And for health insurance purposes, this exchange could have a subset wherein health records and payer provisions etc are included. An initiative of similar nature is underway at IRDA, however that is at a aggregate level.
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Simplifying Policies: The terms and conditions and terminology of health insurance policies should be simplified and standardised for the greater understanding and benefit of consumers. If health insurance policies and health insurance companies are to succeed, a critical mass is important. Simplifying policies will help achieve this objective faster. Regulator for healthcare sector: Healthcare sector is one of the largest and critical-to-people sector. The information asymmetry and the human sensitivity only adds to the complexity. Regulator for healthcare is required now, more than earlier as more and more individuals start shifting the onus of financial burden to insurers, who are demanding processes, quality and consistency (in treatment and billing systems) from hospitals. The tiff between TPAs, Insurers and hospitals from last year is a case in point where the individual policyholder was left in the lurch. Group coverages for employees: Govt may consider making provision of health insurance coverage for private sector employee groups (over 50), mandatory. This will provide the advantages of increasing critical mass and bringing more organized sector involvement into the health insurance space. Also, currently employees leaving an employer group do not get the advantage of pre-existing coverage. It would be relevant if such a provision is introduced and employees who have been covered always under a health plan do not need to then qualify for the individual insurances pre-existing clause of four years.
Reforms Required: The nation also needs to introduce regulatory reforms in the healthcare and health insurance sectors to iron out deficiencies that currently bedevil both industries. Reforms would ensure synergy between the two sectors, benefiting both parties as well as patients who are sometimes caught in the crossfire between the two warring sides. Although the best healthcare facilities are available in Indias metro cities and major towns, small towns and regional cities have healthcare facilities that are largely unserved and unregulated. Presently, the healthcare and health insurance sectors are being opened up very slowly, since the Government believes in a step-bystep approach. While this policy has served India well in the past, at this rate, it will be 2040 before the country is fully served by health insurance. In the meantime, the loss of work productivity due to chronic
disease and other health problems will severely impact our GDP and standard of living. Bold decisions are now required to fast-forward the process of change to make up for lost years and forsaken health as well as to bridge the massive shortfalls India has in catching up with the world-class healthcare standards of developed nations. For reforms to succeed, however, greater trust and transparency are required between all stakeholders, including the Centre and States as well as the public and private sectors. Undertaken together, all the above measures would facilitate faster penetration and improved coverage of health insurance in India. This would gradually improve the overall health of Indian citizens, leading to trickle-down benefits of higher productivity and better outcomes for the nation.
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Appendix:
List of Participants
Mr Arun Jha Joint Secretary Department of Pharmaceuticals, GOI Mr Mark G Meehan Chief Marketing and Operations Officer Bharti Axa Life Insurance Company Ltd. Mr Hemant Kaul Managing Director & CEO Bajaj Allianz General Insurance Co Ltd. Dr Devi Prasad Shetty Chairman, Narayana Hrudayalaya Dr Somil Nagpal Health Specialist World Bank Dr H S Rissam Director, Clinical Cardiac Services Max Healthcare Mr Sujay Shetty Director Pharma & Life Sciences PricewaterhouseCoopers Mr Aman Gupta Principal Advisor India Health Progress Mr Ranga Iyer Advisor India Health Progress
Mr Shreeraj Deshpande Head Health Insurance Future Generali India Dr Shubnum Singh Vice-President, Medical Affairs Max Healthcare Mr Nayan C Shah Managing Director Paramount TPA Dr Nishant Jain Technical expert, Health Insurance, GTZ Mr Z H Charna Director, OPPI Harsh Bisht Leader - Financial Services, Advisory PricewaterhouseCoopers Mr Manoj Kumar Jha Under Secretary Ministry of Health & Family Welfare Ms Safia K Rizvi Managing Director UCB India Private Ltd. Mr. Alok Sonig Managing Director Bristol-Myers Squibb India Pvt.
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About PwC
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www.pwc.com/india
This report does not constitute professional advice. The information in this report has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this report are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this report. PwCPL neither accepts or assumes any responsibility or liability to any reader of this report in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take. 2011 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers Private Limited (a limited liability company in India), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.
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