Dr. N. Devadasan Research Fellow Institute of Tropical Medicine, Antwerp AMCHSS, SCTIMST – Trivandrum.
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Overview of health insurance in India
Health care in India is financed traditionally from two sources. The government is both the funder and the provider of health care and has a wide network of primary health centres, hospitals and medical colleges. Unfortunately, the government does not allocate enough money for health – only 0.9% of the GDP. This is one of the lowest in the world and has obvious consequences. Staff is underpaid, there is not enough money to purchase medicines and buildings and equipment are usually in a state of disrepair. Hence it is not surprising that patients prefer to go the private sector for their health care needs. This also implies that they have to pay out-of-pocket for health services. This is the second form of financing health services in India. About 82% of the health care is financed in this manner, one of the highest in the world. Unfortunately, it is also the most inequitable form of financing health care. The poor end up paying more for their health care, compared to the better off. Health insurance is a possible third and more equitable option. Unfortunately, in India health insurance is still at a very nascent stage. Social health insurance covers about 35 million people through the Employees State Insurance Scheme (ESIC) and the Central Government Health Scheme (CGHS). These two schemes cover the formal sector employees and civil servants. Private health insurance is limited to the corporate sector and the upper middle class and cover less than 15 million people. Even counting those covered by employer provided services, the total number of Indians covered by any form of health security is less than 10%. However a new phenomenon called community health insurance has been emerging in the rural areas and has been steadily covering larger and larger sections of the informal sector. This article defines community health insurance and describes its characteristics. It then concludes by enunciating some of the lessons that can be learnt from these innovations.
Community health insurance
Community health insurance is defined as “any not-for-profit insurance scheme aimed primarily at the informal sector and formed on the basis of a collective pooling of health risks, and in which the members participate in its management.” The three key elements in this definition are That it is a not-for-profit venture – unlike private health insurance. On the other hand, it need not be a loss making venture either. Any profits are usually ploughed back into the venture. That it targets the informal sector – in India, this sector is a difficult sector to reach. Most attempts have failed to cover the rural people because of the lack of any formal organization. That the members participate in its management – this is an important element and has many consequences. For one, the product is tailor-made to the needs of the clients; the clients understand the intricacies of health insurance and finally there is a sense of ownership. This means that fraud and moral hazard, which is seen in the private health insurance is much less in community health insurance.
Historically, community health insurance was first reported in European countries. The industrial revolution led to labourers migrating to the cities for work. Finding the health services inadequate and expensive (somewhat similar to the current situation in India); the workers organized “sickness funds” that helped members at the time of illness. These funds gradually merged and are the precursors of the Health insurance companies in much of Europe. History repeated itself in Japan and in Korea also where such CHIs were formed and...