Recently, Sumit Sen, a Bengaluru-based software professional, had to have his 68-year-old father admitted to hospital twice. Here, her father spent 10 days the first time and seven days the next time. Both times the bill was a few hundred thousand dollars, costing around 60,000 to 70,000 rupees a day in intensive care.
Despite using health insurance provided by his company, Sumit had to pay 20% of the bill himself. He also spent an additional 10% of the bill on protective gear and food.
“Only 70% is covered by insurance. To insure my parents, I have to pay Rs 11,000 per month to get Rs 10 lakh coverage,” says Sen. Her father, a retired entrepreneur from a large public sector company, and her stay-at-home mother are not covered by any private or public insurance program.
Many like Sen depend on employers for health insurance and do not opt for private coverage. Then there is a substantial part of the population – 30% according to data from Niti Aayog – who have no health insurance of any kind. For this group and the “missing middle” who do not fall under any insurance plan, holistic health coverage remains a pipe dream.
An unexpected injury or illness can be catastrophic for the families who make up this “missing link”. A study by the Ministry of Statistics and Program Implementation places the average cost of treatment in a public hospital at Rs 4,452 per day and estimates that a day of hospitalization can cost Rs 31,845 in the private sector . Even long-term hospitalization in public hospitals can put families in financial difficulty.
Without a regulatory mechanism to control rising medical treatment costs, lack of health insurance can be particularly devastating for low- and middle-income families.
In fact, seven percent of India’s population falls into poverty every year due to medical debt, according to a study by Brookings India. A 2019 report from the National Bureau of Statistics suggests that medical expenditure contributes 11.9% of debt in rural areas and 12.7% of debt in urban areas of India.
Nearly 63% of all medical expenses in the country are paid out of pocket – the highest in the world. To reduce economic vulnerability, the Niti Aayog has set a goal of achieving universal health insurance by 2022. Despite this, according to a 2021 Niti Aayog report, 40.5 crore of eligible people are not covered by any insurance scheme.
The report also shows that most people – around 69 crore – who are insured fall under the Ayushman Bharat scheme, followed by the Employees State Insurance Scheme (ESIS). Coverage by private providers and the central government health scheme constitutes a tiny part of India’s health insurance scheme.
The “missing link” is not economically homogeneous. It contains several groups with all expenditure quantiles.
The Niti Aayog report attributes the reason why the middle missing remains uncovered to “the absence of a low-cost health insurance product, the middle missing middle remains uncovered despite the ability to pay nominal premiums. A comprehensive product designed for this segment…can extend health insurance coverage.
Existing issues
Even people covered by these programs are not immune to unforeseen medical emergencies that could reduce their savings.
Aruna Krishnaswamy (name changed), a media worker, had toured one of Delhi’s top private hospitals with her late father. Although she is covered by her company’s health insurance plan, a long-term hospitalization for a chronic illness such as cancer has put her family in financial difficulty. Eventually, she resorted to crowdfunding to support her father’s treatment.
This financial pressure forced her to ignore her own gynecological ailments. “Every penny I earned would go into my dad’s treatment. I haven’t been able to get treatment yet. I have nothing but company health insurance which is not enough,” she says.
Even though a large portion of private hospital revenue comes from insurance, patients still have to pay out of pocket. Called co-pay systems, they require patients to pay part of the bill. “Nearly 70% of revenues come from patient insurance. It is rare that patients who pay out of pocket or in cash can afford to do so. They pay out of pocket because the insurance coverage is less than the bill amount or if they are not covered at all,” says Dilip Jose, general manager and CEO of a network of hospitals.
“Some are elderly people who do not have insurance and who cannot currently benefit from it,” he adds.
Another important question is what happens to those who go to private hospitals for treatment but cannot afford to pay the bill. Many hospitals have a protocol in place whereby they provide subsidized treatment to a few of those who cannot afford it.
“We can’t offer this to all patients, but we do when needed. Pediatric congenital cases, dialysis and cancer patients are areas where we want to help our patients. However, we do not track the number of patients we have helped,” says Jose. He adds that the hospital waives the doctor’s fee in such cases and only charges for the equipment and materials that the hospital needs to procure.
Azad Moopen, president of a chain of hospitals, identifies some cases of patients who lack funds. The foundation helps them with crowdfunding to continue the treatment.
But such initiatives are rare, look like lottery tickets and in no way offer the security of insurance.
Then there is the issue of hospital accessibility. Even if residents of Tier II and Tier III cities have insurance, they may not be able to access hospitals for treatment. A general lack of awareness among people is also a barrier to achieving universal coverage.
The pandemic
During the pandemic, the percentage growth of the insurance industry actually slowed down from 16.63% in 2019-2020 to 14.34% in 2020-21. There was also only a marginal increase in the number of people claiming hospital bills. The loss ratio fell from 85.70% in 2019-2020 to 89.51% in 2020-21.
Has the pandemic changed the way Indians view health insurance in any way? Amit Chhabra, head of health and travel insurance at an insurance company, says people often viewed insurance as a tax-saving product. “The pandemic has changed things. Three or four years ago, beyond the top 50 cities, our market was only 10%, but now it has grown to around 30%. Previously, the number of people looking for an insured amount of Rs 20 lakh and above was negligible, now the number has risen to 20-30% of sales volumes,” says Amit Chhabra.
Chhabra adds that another major change due to the pandemic is that young people have also started thinking about health insurance. In the past, most requests came from middle-aged people with dependent families.
Exit
One solution is to think of health insurance as end-to-end coverage that also pays for consumables and non-medical components, says Ashish Yadav, product manager at a health insurance company. He adds that now people are also looking for insurance with outpatient service benefits.
Krishnan ASV, an institutional analyst for a bank, believes that “greater financial awareness and higher per capita income are both crucial to increasing health insurance coverage in India. Since per capita income can only improve gradually, in the meantime, health insurance penetration will need a regulatory body and political support through government subsidies.
Health spending in the country is 4.5% of GDP, which is significantly lower than the global average, which also deserves attention, he says.
Regarding the way forward, everyone in the ecosystem believes that once health insurance becomes more inclusive and the health system reaches all small towns in India, health insurance will become current.
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