Health Insurance

Health Insurance

Introduction

• Definition: Insurance is a contract between the insurer (company) and the insured (individual/organization) in which the insurer provides financial protection against specific risks in exchange for a premium.
• Principle: Risk pooling → Many pay a small premium to create a fund, which compensates the few who suffer losses.
• Key Features:
• Risk transfer: Shifts financial burden from individual to insurance provider.
• Pooling of resources: Many people contribute, reducing individual risk.
• Contractual obligation: Legally binding policy document.
• Types of Insurance:
• Life insurance (financial protection on death/survival).
• General insurance (fire, marine, motor, accident).
• Health insurance (medical expenses, hospitalization).

Concept of Health Insurance

• Definition: Health insurance is a type of insurance that covers medical and surgical expenses incurred by the insured.
• It can also include preventive care, maternity benefits, critical illness, and disability coverage.
• Key Objectives:
• Reduce out-of-pocket expenditure (OOPE) on healthcare.
• Provide financial protection against catastrophic health costs.
• Improve access to healthcare by ensuring affordability.
• Encourage preventive health measures and early treatment.
• Types of Health Insurance Policies in India:
• Individual policies: Coverage for one person.
• Family floater policies: Coverage for entire family under single sum insured.
• Group policies: For employees under an organization.
• Government-sponsored schemes: Ayushman Bharat, CGHS, ESIC, RSBY.
• Specialized policies: Senior citizens, critical illness cover, maternity plans.

Factors Affecting Insurance Pricing (Premium Calculation)

1. Age of insured: Higher age → higher premium (due to higher health risk).
2. Health status & medical history: Chronic diseases, pre-existing conditions, lifestyle (smoking, alcohol) raise risk.
3. Coverage amount (sum insured): Larger coverage requires higher premiums.
4. Type of policy: Individual vs. family floater vs. critical illness plans.
5. Occupation & environment: Hazardous jobs (mining, chemical industries) increase premium.
6. Geographical location: Urban areas have higher healthcare costs.
7. Hospital network & facilities: Policies covering premium hospitals cost more.
8. Claim history: Frequent claims by insured lead to higher renewal premiums.
9. Add-ons & riders: (OPD cover, maternity cover, international coverage).
10. Insurance market dynamics: Inflation in healthcare costs, regulatory changes, competition among insurers.

Medicare

• Definition: Medicare is a publicly funded health insurance program in the United States, established in 1965, primarily for:
• People aged 65 years and above.
• People with certain disabilities or end-stage renal disease (ESRD).
• Parts of Medicare:
• Part A (Hospital Insurance): Inpatient hospital stays, skilled nursing, hospice, home health care.
• Part B (Medical Insurance): Doctor services, outpatient care, preventive services.
• Part C (Medicare Advantage): Private insurance alternative combining Parts A and B (sometimes D).
• Part D (Prescription Drug Coverage): Covers cost of medications.
• Relevance to India: Though not directly applicable, India has similar concepts through schemes like Ayushman Bharat – PM-JAY, providing cashless hospitalization at empaneled hospitals.

Health Policy in India

• National Health Policy (NHP) 1983: Emphasis on primary health care, universal immunization, MCH, and control of communicable diseases.
• NHP 2002: Recognized need for private sector participation, health insurance expansion, and decentralization.
• NHP 2017 (current):
• Goal: Achieve universal health coverage (UHC) and reduce catastrophic OOPE.
• Promotes strategic purchasing of services from both public and private providers.
• Encourages expansion of health insurance coverage through Ayushman Bharat (2018).
• Government-Sponsored Insurance Schemes in India:
• Ayushman Bharat – PM-JAY (2018): Covers ₹5 lakh per family per year for secondary and tertiary hospitalization.
• ESI (Employees’ State Insurance): For organized sector workers.
• CGHS (Central Government Health Scheme): For central government employees & pensioners.
• RSBY (Rashtriya Swasthya Bima Yojana, 2008): For BPL families (now merged under PM-JAY).

Role of TPA (Third Party Administrator)

• Definition: TPAs are licensed organizations (regulated by IRDAI – Insurance Regulatory and Development Authority of India) that act as intermediaries between insurance companies, policyholders, and healthcare providers.
• Functions:
1. Claims processing: Verify and settle insurance claims on behalf of insurer.
2. Cashless hospitalization: Facilitate treatment at network hospitals without upfront payment by insured.
3. Health cards: Issue ID cards to policyholders for availing services.
4. Network management: Empanel hospitals, negotiate rates, and manage service quality.
5. Customer support: Provide 24×7 helpline for policyholders.
6. Data management: Maintain medical records and claims data for analysis.
7. Wellness services: Some TPAs provide preventive health check-ups and wellness programs.
• Importance: TPAs improve efficiency, transparency, and reduce fraud in health insurance operations.

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