Healthcare in India Although over the last 50 years, India has shown some improvements in its health infrastructure,

it is at a far from satisfactory level. According to some estimates, India has less than 100 beds per 10,000 population which is in stark contrast to developed countries, where this ratio is much higher. This article briefly reviews the current health infrastructure and indicates some of the opportunities in healthcare in India. Demographics Key demographic indicators are expected to show significant improvement over the next decade. For example, life expectancy at birth in 2000 of 64.6 years is expected to increase to 66.9 years by the end of 2010 and the infant mortality rate is expected to drop dramatically from 70 per 1000 in 2000 to 45 by the end of 2011. Further, provisional results from the Census of India 2001 indicate that Indias population as at March 2001 had finally crossed the one billion threshold. Healthcare needs can therefore be expected to evolve as the population both expands and lives longer. Health infrastructure In India, public spending on healthcare is low compared to the developed countries, having declined from 1.3% of GDP in 1990 to 0.9% of GDP in 1999, placing India amongst the lowest quintile of countries. Aggregate expenditure on health is around 5.2% of GDP, implying only 17% is met through public health spending, the balance by out-of-pocket expenditure. Based on the services provided, healthcare splits into public and private sectors. The public sector provides government financed and managed healthcare services throughout the country, from primary health centres to hospitals. The private sector, comprising mainly of profit oriented, fee-for-service practitioners, plays a dominant role in the provision of individual curative care through ambulatory health services. The Government, in its National Health Policy, 2002 (NHP 2002), is targeting an increase of healthcare expenditure to 6% of GDP by 2010, with 2% of GDP being funded by public health investment. NHP 2002 seeks the participation of the private sector in all areas of health activities covering primary, secondary and tertiary (speciality hospitals and top-end diagnostic facilities) sectors. It also encourages the establishment of private insurance instruments in order to extend the coverage of the secondary and tertiary sectors. The opportunities for private investment in healthcare facilities and services are also increasing. Because the Government has opened the insurance sector to private companies, the availability of private health insurance is expected to increase access to private healthcare facilities for millions of families. Max Healthcare and Apollo Hospitals are examples of providers already offering services in each of the primary, secondary and tertiary sectors. Health insurance Health insurance is grossly underdeveloped in India. According to some estimates, only 3% of Indias population is covered under some form of voluntary health insurance. Thus, it presents a huge opportunity with some estimates suggesting that the potential health insurance market could be worth as much as 600 billion Rupees by year 2007. Regulatory environment Any insurance company intending to enter the life or non-life insurance markets in India is required to have a minimum paid-up capital of 1 billion Rupees (approximately US$20.5 million). While there have been suggestions that the minimum capital requirement for

specialist health players might be reduced, this has not happened yet. Foreign equity participation is also capped at 26%. As a pre-condition for granting a license, each new insurer is required to write some health insurance business. Recently, the Insurance Regulatory and Development Authority (IRDA) has also issued regulations recognising the third-party administrators (TPAs) in insurance business. TPAs are required to have a minimum working capital of 10 million Rupees and its senior officers are required to meet certain minimum training requirements from a recognised institution. Providers and products Most of the new life insurance entrants are providing health insurance benefits as riders to their base products. ICICI-Prudential Life offers surgical assistance benefit rider, whereas Allianz Bajaj Life offers hospital cash benefit rider, which is an indemnity type rider that provides reimbursement of medical hospitalisation facility. To date, many insurance companies have only offered limited benefits, primarily due to lack of data and experience of the local market and the relatively underdeveloped nature of the healthcare infrastructure in the country. Opportunities and challenges Given the potential size, India is one of the most promising countries in South East Asia for the development of its health insurance market. There is a limited network of health/social security schemes such as the Employee State Insurance Scheme (ESIS), the Central Government Health Scheme (CGHS) and some community-based schemes and employer-based schemes. However even here, access and availability of health services is likely to be less than satisfactory. When combined with the relatively small proportion of people with voluntary health insurance, the number of lives covered represents at best 100 million people, about 10% of the population. The support of the IRDA will be crucial. It is keen to see health insurance coverage grow rapidly in the country and is likely to encourage insurers and service providers in their efforts to develop the market. The challenges should however not be underestimated. Delivering healthcare to the rural Indian population where the medical infrastructure is minimal will be a significant task in itself. Even in urban areas where services can be more readily established, little or no data for pricing products will remain an issue for insurers to resolve. And finally, the continuation of some less than ethical practices by some healthcare practitioners may cause concerns for the orderly development of the sector. However despite these challenges, with around 90% of the population reliant on state hospitals or self-finance, the potential prize is great for the insurers that can capture the interest and provide relevant products and services for the Indian consumer.