July - December 2009
INDIAN HEALTH INSURANCE SCENARIO
by:
Shri Jagendra Kumar,
Corporate Head (Trg.),
Shriram General Insurance,
Jaipur.
The Chairman of the Insurance Regulatory and
Development Authority (IRDA) has said that low
consumer awareness and insufficient healthcare
infrastructure are the major hindrances to widen the reach
of healthcare insurance in India. Health care costs have
witnessed a phenomenal rise in the current times; this has
led the customers to insure not only themselves but their
family members for any future medical expenses and other
related requirements. The need to insure assumes even
more importance with older generations who are either
retired or will be retired in the near future.
In times of high health cost, one needs to get covered for
health risks. A good insurance policy should cover Doctor's
visit, Lab tests, Hospital stays and Diagnostic tests. There
are quite a few companies covering health risks with good
Insurance policies. Health Insurance (popularly known as
Mediclaim) offers protection in case of unexpected
medical emergencies, in India. In case of a sudden illness
or accident, the health insurance policy takes care of the
hospitalization, medical and other costs incurred.
Leading insurance companies are coming out with new
plans to meet the requirements of their customers. Health
care insurance plans especially target customers in the
higher age group. It is necessary for younger people to start
planning for their future after they retire, at an early age, so
as to lead a financially stable life in later years. Medical
expenses are sky high these days. Even a small treatment or
an appointment with a doctor might consume a lot of
money. Health insurance is a must; it saves money and
covers unexpected calamities. Health insurance comes in
handy to meet emergencies of severe ailment or accident.
Sometimes it is associated with covering disability and
custodial needs. Life is unpredictable, insurance can make
it safe and secure from bearing huge loss. Health insurance
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is affordable and carries the assurance and freedom from
insecurities that threaten life now and then.
Provision of healthcare by the Public Sector is the
responsibility shared by Central, State and Local
Governments, but over the years the National spending on
Health under five year plans has decreased from 3.3% in
the first plan to 0.7% in the eighth plan. Approximately 6%
of GDP is spent on Health care out of which only 1.3 % is
in Government Sector. Even then the Life expectancy has
increased from 50 to 61 and infant mortality has decreased
from 137 to 74 per 1000 births.
SPECIAL FEATURES OF INDIAN HEALTH
INSURANCE COVERS:
ICICI Lombard provides EMI payment plan on health
insurance. Family floater is also available but the limit on
family floater is Rs. 3 lakh only. Cholamandalam MS
General provides a health cover upto Rs. 10 lakh subject to
meeting income criteria and also covers the highest number
of 140 day surgeries. IFFCO Tokio General provides
normal products at normal pricing however they allow
Ayurvedic treatment under their health policy. New India
Assurance have started product for senior citizens and have
raised sum assured for normal policy to Rs. 10 lakh. They
are also planning to raise this limit to Rs. 25 lakhs. New
India has recently come out with premium rates where
India is divided into three zones; Zone 1 Mumbai (highest
rates) Zone 2 Delhi/Banglore and Zone 3- Rest of India
(lowest rates). They have a highest list of 4082 hospitals for
cashless arrangements. Oriental insurance has done away
with No Claim Bonus concept for new policy holders
however they provide a discount of 5% on premium if you
do not opt for cashless settlement option. Reliance
General has the lowest premium rates for those who are
below 45 years. They provide on the spot handing over of
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policy with activation on phone. Reliance is not keen on
group health products but provides family floater on their
health policy. Royal Sundaram provides payment facility
by credit card but do not issue policy for individuals on
stand-alone basis. They allow no claim bonus at 15% in
comparison to 5% of others. Star Health & Allied which is
the first stand-alone health insurance company of India, is
issuing policy to Senior Citizens without medical test.
However, those submitting medical tests get 10% discount.
Star Health is making in-house settlement of claims and
not using TPAs. They have introduced the concept of Co.
pay, limit 30% to 50% for senior citizens. They have
special product for senior citizens with higher premium
and Micro Insurance concept for low income group.
TYPES OF HEALTH INSURANCE COVERS:
Normally following kind of insurance products are
available in any insurance market:
1. Basic Medical expenses insurance
2. Major Medical Insurance
3. Disability Income Insurance
4. Medicare Supplement Insurance
5. Long-term care Insurance
1. BASIC MEDICAL EXPENSE INSURANCE:
Medical expense insurance policies historically provided
coverage only when the insured was hospitalized. Not
most policies cover outpatient treatment. Some policies
pay benefits directly to the service providers after the
medical bills are submitted to the insurer by the hospital or
physician. Other insurance companies pay the insured or
allow the insured to assign benefits to the provider. Basic
medical insurance policies often have no deductible
provision and salespeople often call this insurance first-
rupee coverage because the insurer pays covered losses
from the firs rupee onward. For example, if Rajesh
incurred Rs. 2,000 in expenses having an arm set in the
emergency room, basic medical insurance would cover the
entire bill. Insurance company will provide 'reasonable
and customary' payments for the care provided; however,
amount limitations may apply. Some contracts provide
benefits paying a specific amount for example, Rs. 200 per
100
day, that can be substantially less than the amount the
hospital charges. If an insured wants a contract specifying
larger payments, the premium is increased. Contracts can
provide various benefit periods, including 90 day, with the
premium increased accordingly. In purchasing the
coverage, a consumer should consider the trade-off
between the larger daily coverage limit and the longer
length of coverage.
2. MAJOR MEDICAL INSURANCE:
Major Medical Insurance policies provide coverage for
potentially large medical expenses rather than paying for
the first rupees of loss. This coverage provides valuable
family protection but can be expensive, costing families a
higher premium. The following three characteristics
distinguish major medical coverage from basic medical
plans:
a. Major medical policies have a substantial deductible
provision. These policies cause insured to pay an amount
of medical bills equal to a substantial deductible, perhaps
Rs. 500 or so. This deductible lowers the insurer's costs
because the first rupees of all losses are not covered, and
these are the most likely to be incurred. Second, in
marginal cases where treatment may not be necessary, the
insured has strong incentives to avoid overusing medical
care. Some polices apply the deductible to each illness or
accident but limit the total amount deducted to some
annual maximum. If Rajesh has a Rs. 2000 medical bill
with a Rs. 500 deductible, the insurer would only pay Rs.
1500/-.
b. Major medical policies have participation provision.
With a major medical policy, the insurer agrees to pay only
a percentage of the insured's bill; the insured must pay the
difference. This sharing of costs is called the participation
provision. Typically the insurer pays 75 to 80 percent of the
bills after the deductible requirement is met. The insured
pays the remaining 20 to 25 %.
c. Medical Expense and Disability Income Insurance
Major medical insurance plans have high limits of liability,
such as Rs. 50,000 or Rs. 1,00,000, or even larger.
As an example of a major medical plan, assume that
Naresh incurs Rs. 28.000 in medical expenses while being

treated in a hospital. Assume he has a Rs. 1,00,000
medical policy with a Rs. 5,00 deductible and an 80%
participation provision. Under these circumstances,
Naresh collects Rs. 22,000 from his major medical
insurance, calculated as follows:
Rs. 28,000 medical expense
Rs. 500 Deductible
Rs. 27,500 Covered expense
22,000 covered expense X covered percentage 80%
equals the ins.
Payment (0.8 X 27,500) = Rs. 22,000
Rs. 5,500 covered expense patient's co-payment
percentage equals the patient's responsibility ( 0.2 X
27,500) = Rs. 5.500
Some major medical policies place a cap on the insured's
payments. In the proceeding example, Naresh collected Rs,
22,000 from the insurer but he also paid Rs, Rs. 6,000 (Rs.
500 deductible plus Rs. 5,500 in participation payments).
If his major medical policy capped the insured payments
at Rs. 3,000 for example, his participation payment
responsibility would have needed after he paid Rs. 2,500,
because at this point the deductible (Rs. 500) plus his
participation payment equaled the cap ( Rs. 3,000).
3. DISABILITY INCOME INSURANCE
Disability resulting from illness or accident may be an even
greater peril to a family than premature death because
disability not only cuts off income but also may create large
medical expenses. Moreover, a six month or longer period
of disability is a more likely of cause of loss to people in
their working years than is premature death. Disability
income insurance replaces income not earned because of
illness or accident. Disability income insurance policies
are designated as either short or long term, depending on
the period for which coverage is provided. Short-term
policies provide a specific number of weeks of coverage,
after a brief (for example, one week) elimination period.
An elimination period also called a waiting period is a
period that must pass before an insured is eligible to receive
insurance payments. The purpose of the elimination
period is to exclude payments for minor illness. The
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July - December 2009
elimination period is consistent with the purpose of
insurance to cover severe losses but not expenses. This
provision also helps keep premiums affordable. Longer
term disability income insurance policies provide a number
of years of protection after a substantial elimination period
has elapsed. Coverage typically ends at the age 65, the age
when many people retire.
The definition of disability is one of the most important
contractual features. Some contracts have an 'own
profession clause while others have an 'any profession'
clause. Even among these categories, different insurers can
vary contractual language. Consider the following clause
defining the term 'totally disabled. “The insured is totally
disabled when he is unable to perform the principal duties
of his occupation. After the initial period, the insured is
totally disabled when he is unable to perform the principal
duties of his occupation and is not gainfully employed in
any occupation. Insurers generally state temporary
disability benefits as a % age or amount per week or month,
for a stated number of weeks, months or years. Disability
contracts also vary according to the length of each benefit
period and the amount of each monthly benefit. Benefits
may be paid for any practical length of time, including life
say 1% of the sum insured or maximum Rs. 30,000/- per
week.
4. MEDICARE SUPPLEMENT INSURANCE
Medicare supplement insurance, also known as Critical
illness insurance, is designed specially to supplement
benefits provided under the Health insurance policies.
This coverage typically pays for such illnesses the various
health policies exclude.
Insurers base the premiums for critical illness cover on the
insured's age when the policy is issued and the amount of
coverage provided. Policies do not cover ordinary illness
and normal hospitalization.
5. LONG TERM INSURANCE:
Many insured could benefit from insurance policies
covering lengthy stays in long-term care facilities. Among
the different types of conditions that can create a need for
long-term care are paraplegia, arthritis, mental illness,
mental retardation, and respiratory disorders. These
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conditions affect both of young and old people, which interesting developments in the sector. The manufacturers
argue against the common misconception that only older of insurance products have to sit up and take notice of how
people require long-term care. As our society ages and the consumer is behaving and responding to stimuli in this
healthcare costs increase, long term care facilities will market. General insurers of India have the pricing freedom
become more necessary. Demographic factors also point and can rate their products according to their suitability.
to a great need for long-term care facilities and for The rate variation of various insurers is visible here:
innovative methods to finance people's stay in such
Co's Name Product Name Coverage Premium
facilities. Certain demographic factors lead to the Amount
conclusion that the need for nursing homes will increase in Apollo DKV Easy Health Individual - Rs. 1,00,000 Rs. 1,095
the next few decades. Many women now work outside the Standard Plan
home and cannot provide care for elderly relatives. Many STAR Health Medi Classic Rs. 1,00,000 Rs. 1,200
families have fewer children than preceding generations, New India Mediclaim policy Rs. 1,00,000 Rs. 1,270
Oriental Individual Mediclaim Rs. 1,00,000 Rs. 1,310
making care of elderly parents by family members more
National Mediclaim Rs. 1,00,000 Rs. 1,377
difficult. The mobility of families means many children no
IFFCO Tokio Individual Medishield Rs. 1,00,000 Rs. 1,384
longer live close enough of their parents to provide care if it Bajaj Allianz Health Guard Policy Rs. 1,00,000 Rs. 1,453
is needed. STAR Health STAR Medi premier Rs. 1,00,000 Rs. 1,488

Among the many issues long-term care insurance policy
designers must address, are: the trigger of coverage, the
benefits provided, and the limitations of coverage. A
fourth concern is premium. The general pattern for
insurers is to require level premiums payable for life using
merged-gender rates that increase rapidly with age. Some
policies specify medical certification of need as the trigger
of coverage. More modern policies specify the insured
event as an inability to perform a specified number of
activities of daily living. A few policies mention the loss of
cognitive capability, thus covering mental impairment.
Two types of benefits are most common. One type of long-
term care policy provides a specified daily amount limit of
coverage say Rs. 200, Rs. 500 or more, that is paid
regardless of the expenses incurred. Another type of
policy provides a percentage reimbursement of the costs
incurred. Naturally, the higher the percentage covered, the
higher the premium.
PREMIUM TREND OF PRODUCTS:
India's health insurance market is growing. In order to
reduce the public burden of healthcare costs and address
issues with the healthcare system, the government is
incentivizing health insurance off-take in the country on
both the customer and the manufacturer ends.
Consequently the country is seeing heightened activity in
the health insurance domain resulting in some very notice
The penetration of health insurance in India has been low.
It is estimated that only about 3% to 5% of Indians are
covered under any form of health insurance. In terms of
the market share, the size of the commercial insurance is
barely 1% of the total health spending in the country. The
Indian health insurance scenario is a mix of mandatory
social health insurance, voluntary private health insurance
and community based health insurance. Even if there is a
marginal increase in the type of healthcare insurance
services, we will find our physical capacities insufficient.
Therefore, there is an urgent need to build alternative
systems to take care of the deficit in healthcare
infrastructure. There is a need of building up investment in
infrastructure and adequate training along with focus on
improving the traditional systems of government and
public hospitals. Affordable Indian health insurance
policies provide financial cover for routine and critical
illness. Although the affordable Indian health insurance
sector is in its infancy, it has great growth prospects. In the
insurance sector, the presence of an increasing number of
private international players will prove beneficial. Most
Indians are benefitted and covered by group insurance
policies as these are typically sponsored by employers.
IRDA Chairman has said that “Indian health industry is a
buoyant sector with lots of potential and scope for
expansion. Requiring the third-party administrators

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(TPAs) to build their IT systems and infrastructure for
speedier claim processes, encouraging insurers to make
their systems robust and embarking on wide consumer
awareness programmes are the various measures
undertaken by IRDA towards the growth of the health
insurance in India.” However, things are improving
gradually. It is time to take major steps in bringing good
health to all people. Affordable Indian health insurance
policies cover hospitalization expenses including nursing,
diagnostics and medicine costs. Most of these policies
exclude healthcare expenses during the first month of the
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July - December 2009
policy. Treatment expenses for certain diseases are also not
covered in the first year span of the policy. These diseases
are listed in the healthcare policy document. Some of the
insurers offer reimbursement only for medical facilities that
are availed at designated medical institutions. With
increasing focus on healthcare and availability of several
attractive plans by large number of players, health
insurance coverage in India has picked up in recent times.
Young professionals are also focusing on proper planning
to take care of any future emergency.