On 1st of February 2018, Finance Minister Arun Jaitley announced a flagship Health Insurance cover, under the Ayushman Bharat initiative. Immediately following this announcement, the rumour mills started, and the misinformation brigade started churning out false narratives, stories to spread confusion around this scheme.
This article, here is a small attempt to dispel some of that confusion. I have a decade-plus experience in the hospitality and the Banking, Financial services and Insurance services industry. My last job was with a tech-healthcare startup, hence I feel I can throw some light on the common misconceptions and myths.
The opposition, some media houses, vested interest groups and many confused individuals have likened this scheme to their INDIVIDUAL POLICY. They contend that similar individual premium amounts to upwards of INR 10,000/- and therefore the amount allocated in the budget is minuscule to meet the costs.
This could not be further from the truth. In the world of Insurance, to begin with there are two types of policy cover: those that cover the Individual and those that cover the group!
Remember the insurance scheme that made you fill the extensive application form, asking myriad questions about your smoking/drinking habits, lifestyle, medical history? This was an Individual policy. They took all that information provided by you and built a picture of your health, which they then used to determine how likely where you to claim a large sum over a given year. They then packaged this cost and charged you the individual premium.
Compare this to the Health Insurance cover provided by your employer to you!
Your employer took his entire employee count and solicited a Group Insurance cover for the company as a whole. The insurer took the age, broad socio-economic details of the entire group and did a premium calculation. The employer then negotiated on the terms and premium and paid the lump sum which incidentally was way cheaper than what all the employee would have to pay for an individual policy. Why you ask? Simply because the Individual policy did not give the breather of risk diversification to the Insurance company whereas the Group Policy did. As a thumb rule the larger the group, the more diversified the risk and the lesser the premium (closer to population mean).
Further, the Government is not expected to reach the entire target population in the first year itself. Thus the outlay in the first year would be considerably lower than a regular year.
Rs 5 Lakhs per family will be a huge burden on the exchequer. Compared to this the budget allocation of Rs 10,000 crore is way inadequate.
The Rs 5 Lakh amount is the pooled Health Insurance cover available to a family. Under this cover, a family can use a maximum of Rs 5 lakhs for hospitalization and related expenditure without spending a penny. They can use it to treat one member or multiple members over a one-year period, depending on their needs. What it eventually means is that a poor family has a Rs 5-lakh worth safety net available in case of any serious/terminal illness. In most cases, however, a much smaller amount will be used for multiple family members, for managing smaller expenditures such as tuberculosis, malaria, dengue-related hospitalization. Eventually, it might even end up being used for pregnancy-related complications, more than anything else, if the treatment is covered by the scheme.
This is a robin-hood policy. The government is taking from the rich and giving it to the poor. It’s misplaced socialism!
To begin with, the workings of group underwriting makes the policy premium quite substantially lower. Why would the government need to inconvenience the middle class when it clearly can manage it from the given revenues?
In an article published in October 2014, The World Bank President argued that a Universal Health Coverage protects the poor, the near poor from catastrophic economic costs related to health expenditure, which impoverish over 100 million people a year!
The most vulnerable sections of society rarely have a fund available to them for medical emergencies. They are often forced to take out impromptu extreme steps like loans at exorbitant interests or even begging on the street & committing suicide! Over a period of time, such imbalances only foster discontent, resentment, high crime rates and even bigger backlash!
In our context for the first time since our independence, we have a unique situation when our tax money will be sincerely used to emancipate and improve the lives of a large section of our fellow countrymen. Are we going to be churlish about it?
The next obvious question raised by sceptics is why to spend so much on healthcare and not hospitals.
Through the multiple post-budget interviews, the finance minister has clarified that there will be at least 24 new medical-college-hospitals built across the country. If one were to take the classic top-down approach then this healthcare scheme will eventually drive healthcare industry and lead to way more hospitals being built.
The simple fact is: Running a health insurance scheme and developing medical care in a country, are not mutually exclusive activities.
Won’t private hospitals fleece the poor?
On the contrary, the introduction of a health insurance company is a deterrent to over-charging. Hospitals receive their payments from Health Insurance companies. The bills are thoroughly checked against overcharging. To begin with, Insurance companies, have teams who whet and em-panel credible hospitals. This empanelled hospital list is circulated to all customers. Chronic over-chargers are frequently blacklisted and rarely make the cut.
The Insurance scheme will collapse after every family claims Rs 5 lakhs in the first year!
It’s not a reimbursement program. Money is paid by Insurance companies against bills raised on actual admittance to a hospital. There is no upfront payment for a life insurance scheme. So, unless the suggestion is that the poor love being admitted to hospitals, one doesn’t see much incentive to the family for falling sick.
In addition, over time, the expected claim and actual claims will converge and provide more accurate and possibly even lower premiums.
Insurance companies will make money!
And Thank God for that. Let’s hope they make money and even some profit, which they will use to open more branches, employ more people. Let’s hope that this, in turn, leads to opening up of the healthcare sector, of a revolution in it. Let’s hope it adds to the government tax revenues, some of which will end up being used to increase the healthcare and build more hospitals, roads etc!
Let’s hope eventually that it will become a self-sustaining cycle of ever-better healthcare!
The Angry Indian (Swati)
Disclaimer: The article is based on author’s work experience, listing out the possibilities and processes. It does not claim that the government mandated scheme will be exactly similar to the points mentioned above.