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Healthcare unwired
Health Insurance and Healthcare Access

March 2011

Executive Summary
Page - 04

Appendix: List of Participants
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Issues Raised by Participants and their Suggestions
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How key stakeholders can improve access to healthcare
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Final Recommendations
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Executive Summary
Health insurance has historically played a pivotal role in improving access to healthcare around the world. Unfortunately, less than 15% of the Indian population is covered under some form of health insurance, including government-supported schemes. Only around 2.2% of the population is covered under private health insurance, of which rural health insurance penetration is less than 10%. Although healthcare insurance in India is currently underpenetrated, it is expected to grow at a CAGR of 15% till 2015. At the current rate of growth only 50% of India’s population would have health insurance coverage by 2033. The rising level of middle-class incomes in India has led to the emergence of lifestyle-related diseases. Along with inflationary healthcare costs, this has triggered the demand for health insurance. Given the diversity of India’s population and its limited purchasing power, innovative insurance products at multiple price points are needed to penetrate this huge market. This paper highlights the broad policy issues afflicting the health insurance sector, taking into account the views of all industry stakeholders — patients, physicians, insurance service providers, hospitals, as well as Government and regulatory representatives. Based upon the current industry feedback, this paper lists recommendations and specific solutions to the problems pinpointed herein. It has been widely accepted and suggested that certain initiatives be undertaken to improve the coverage of health insurance. Some of these measures include creation of a new business model, reducing premiums and collection costs, switching from patient cure to preventive care and simplifying policies and regulatory reforms in the healthcare and health insurance space. The initiation of these measures will result in increased penetration and improved coverage of health insurance in India.




The healthcare scenario in India
The healthcare sector has made tremendous advances in the past few decades. While small pox has been eradicated, mass killer diseases such as malaria and cholera have been largely controlled. From 80 deaths per 1,000 live births in 1990, infant mortality went down to 50 in 2009. Maternal mortality fell to 230 in 2008 from 570 deaths per 100,000 in 1990. Life expectancy almost doubled to 63.5 years in 2006 from less than 32 years in 1946. Despite such progress, India’s morbidity and mortality rates are still higher than the global average, indicating there is substantial ground still to be covered. Moreover, the discrepancy between rural and urban indicators of healthcare and the wide interregional disparities in health status are evident upfront. These rural-urban healthcare indicator differentials are substantial across all the age groups. Apart from the above shortcomings, the basic requirements for good health such as clean drinking water, proper sanitation facilities and wholesome daily nutrition also need to be addressed urgently.

Role of health insurance to facilitate healthcare access
With less than 15% of the Indian population covered by some form of health insurance, which includes Government-sponsored schemes, the majority of BPL families are unable to access healthcare facilities. In such cases, health insurance can ensure the poor have better access to healthcare.

Issues on access to healthcare in India
There are multiple issues regarding access to healthcare in India. Consequently, more than a million Indians die every year due to lack of healthcare access, most of them being women and children. Some 700 million Indians in the villages and non-urban areas don’t have access to healthcare facilities because around 80% of the specialists and medical facilities are located in urban areas. Around 350 million Indians live below the poverty line (BPL) and survive on less than Rs100/- per day, putting nearly all medicines out of their reach. Even when the medicines are available free, the poor lack the meager resources to travel to the nearest government-supported Primary Health Centre (PHC) located kilometers away from their village. Finally, these PHCs are often under-equipped and under-staffed.

Health insurance with a patient-centric approach
India’s diverse population has limited purchasing power. Penetrating this market therefore requires innovative insurance products at multiple price points. But innovation in the current Indian health insurance market needs to evolve considerably, with health insurers stacking their portfolios with multi-level, differentiated longterm products. Public and private sector players have already shown the way by introducing innovative insurance products with premiums as low as Re1 per day and Rs10 per month, catering to community as well as individual insurance needs. Such low-priced products can play a big role in ensuring higher healthcare access and better health for all sections of Indian society.



Bringing key decision-makers together to address the issue
A vibrant healthcare system is the function of multiple variables. This involves multiple players to facilitate access to healthcare for all. Each group involved in the healthcare system has an essential role to play that contributes to a sustainable healthcare ecosystem. Although every group is directly or indirectly working towards delivering better healthcare services for Indians, a lack of synergy exists between different groups. It is critical that all these disparate groups contributing to the healthcare cause act in concert so that the outcome is beneficial for the masses. It’s imperative to bring all key stakeholders/decision-makers on a common platform so that shortfalls in the present healthcare system are discussed and solutions identified to make certain that the overall quality of healthcare in India improves. In this context, it is important to note that health insurance has the potential to play a crucial role in improving healthcare access and availability by acting as a safety net, particularly in times of emergency.

About the IHP/PwC roundtable
Health insurance is crucial to address problems in India’s healthcare sector. Organized by India Health Progress with knowledge partner PricewaterhouseCoopers (PwC), the roundtable sought to bring together India’s foremost healthcare and health insurance thought leaders, decision-makers and key stakeholders to elicit their views on the best ways to achieve the goal of healthcare accessibility. The roundtable was envisioned to initiate a dialogue among the healthcare and health insurance industries to address the issues concerning out-of-pocket spending on healthcare, considered one of the barriers to healthcare access. It was attended by various healthcare and health insurance industry leaders as well as policymakers who emphasized the need to bring in new health insurance schemes at different price points that would cater to each individual for better healthcare access in India.



Issues Raised by Participants and their Suggestions

The roundtable was constituted of senior representatives from Central Government; CEOs of insurance companies, pharmaceutical firms; Heads of Health departments from insurers and reinsurers; heads of hospitals and other international experts. Issues deliberated upon were • Approaches to increase access of both healthcare and health insurance within the rural fabric of India and requirement of consequent business models to support the same. • Gap in information around healthcare from multiple stakeholders (and possibility of ‘healthcare exchange’) and likely lessons that may be learnt from other industries such as telecom, FMCG. Data around Disease burden is also lacking in depth and quality. Also, post a strong data vault, we would require smart analytics to create the right products.

• Creation of an accredited network of healthcare providers • Smarter ways to manage healthcare costs such as inclusion of OPD, wellness or disease specific coverage and ensuring affordability especially to the poor • Demand supply gap between healthcare infrastructure and a strong need to connect the dots for better utilization. Prevalence of spurious drugs is a bane that needs effective controls • Requirement of a stronger role from Govt as a facilitator to provide infrastructural support • Lack of information on credit rating of individuals • Weaknesses of pharma sector’s distribution capabilities. This was an aspect deliberated at length and agreed to by various stakeholders. Gaps in current distribution structure of medicines/ pharmaceuticals exposes patients/ customers to high risk or spurious medicines and related risks.



How key stakeholders can improve access to healthcare
Pitfalls and barriers at various stages of implementing health insurance schemes have seen most fail to fulfill objectives. Health insurance is particularly critical for people living below the poverty line (BPL). This is because an illness is especially threatening for BPL families. Not only is it a threat to their incomeearning capacity, it could also result in the family falling into a debt trap. Given this scenario, it is important that health insurance policies are explained and made attractive to BPL families. Past initiatives of the Government have seen policy premiums priced as low as Re1 per day and Rs5 or Rs10 per month. While such schemes have been welcomed, they have nonetheless faced key implementation barriers, such as lack of qualified healthcare service providers and a lack of proper understanding of the concept of health insurance. For example, villagers expressed concern whether they would receive benefits equivalent or greater than what they originally paid into the scheme. The drawback is not with the villager, but with the administrators who failed to explain adequately how insurance schemes work. Additional barriers to healthcare access have included absenteeism and lack of medical personnel to run Primary Health Centres, the low availability of medicines, lack of quality drugs, lack of standardization and accountability, absence of synergy and trust between insurance service providers and hospitals, lack of coordination between National and State schemes, unregulated private health centres, the high cost of collecting premiums across vast geographic areas, inadequate healthcare spends and improper business models. Finally, for health insurance to really succeed in India, it is important that modern healthcare facilities and hospitals are also built in rural areas and the hinterland because higher insurance penetration without accessible healthcare facilities would be meaningless. However, higher insurance penetration will lead to greater investment in healthcare infrastructure, and ultimately many well-paying jobs in the healthcare sector.

Adequate healthcare infrastructure would only be possible if India were to increase healthcare spends from the current less than 1% of GDP to around 4% of GDP. This higher level of spend should be achieved through a combination of both public investment and insurance premiums. In return for this investment, the country will benefit from higher worker productivity and better quality of life.



Final Recommendations

Many people in rural India still do not fully comprehend the concept of insurance and its role in improving access to healthcare. But nationwide health insurance coverage will only happen if specific measures are undertaken.

Key recommendations:
Create a New Business Model: Despite untapped opportunities, demand for insurance products still needs to be created. A maze of challenges must be overcome to penetrate rural markets, including the creation of successful business models in rural insurance. FMCG and telecom companies have done an admirable job in penetrating rural markets by creating a need where one did not previously exist. For instance, telecom companies first built networks and tailored products for the rural markets, thereafter providing a distinct value to rural customers. Health Insurance providers could do likewise by first building an ‘accredited’ network and then providing tailor-made policies for people at a price point they can afford. Learnings can be drawn from the much appreciated Rashtriya Swasthya Bima Yojana which is slowly expanding its reach. It has demonstrated an active, cooperative participation between Central Govt, State Govts, private and public insurers, Technology and NGOs/ SHG etc.

Three-tier Model a Better Option: Given India’s broad division into three segments - those living below the poverty line, the middle class and the upper class - it would be better if India followed a threetier model, since a one-size-fits-all model won’t work well in health insurance. Each of the three tiers - Government, private and publicprivate partnerships (PPP) — are suited to meet the needs of different population segments. The poor would almost exclusively fall under a Government-subsidized insurance scheme such as RSBY. Those in the middle may wish to opt for a PPP, which permits a mix of both systems, offering a combination of insurance benefits at a price point that the middle income population can afford. At the other extreme, upper-income groups would likely prefer to pay for additional benefits offered by individual private insurance companies. For the above , healthcare infrastructure needs to be improved dramatically. Some learnings could be drawn from ingenious models such as Narayana Hridulaya. As a forward looking step, it could also be considered wherein Govt could provide cashless treatment for critical illnesses for all citizens in select hospitals. Such a program could be administered through something on the lines of ‘health financing cess’. These could facilitate improvements in healthcare infrastructure building as well as developing protocols of standardized healthcare procedures.

India has vast untapped potential in health insurance, since the market is largely un-penetrated. The importance of health insurance becomes apparent when people realize that India suffers 20% of the global disease burden. The demand for quality healthcare in India is therefore enormous. While India’s coverage gap is staggering, unlike developed countries, this does not imply smooth business opportunities for the private sector (insurance companies, hospitals, healthcare professionals, pharmaceutical manufacturers, etc.) who would seek to meet this demand.



Reduce Premiums and Collection Costs: For penetration among the BPL category and rural sections, insurance premiums should be kept low and manageable. Over time, efficiencies can be achieved and costs lowered. For example, particularly in rural regions, one cost factor is the effort and exercise involved in collecting premiums and providing reimbursements. Solutions can perhaps be found in other industries. A case in point is the tie-ups between banks and telecom service providers whereby the latter are authorised as Business Correspondents and allowed to conduct or facilitate cash transactions on behalf of bank customers. This saves a huge amount for the banks on additional infrastructure costs, while also allowing them to meet their mandatory goals of inclusive growth and penetration into rural areas. For the telecom service providers, this acts as an additional source of revenue and subsidizes their costs in other regions. The insurance sector could develop similar innovative electronic payment and reimbursement systems that work in rural areas, taking advantage of the infrastructure that the banking and telecom sectors have put in place. Tax incentives: The Government also needs to implement multiple measures, including promoting tax incentives, to create a conducive environment that speeds up the creation of a critical mass that makes the business viable. Insurance is sold or bought in India essentially under the aegis of tax advantages. Govt of India introduced the health insurance tax advantage last year.

Due to increasing medical inflation and with a view to providing alternative windows for tax exemptions, it would be a good idea to increase these limits beyond the current of Rs 15,000 for self and Rs 20,000 for parents (above 65). Outpatient Coverage: Given the benefit of hindsight that’s the prerogative of a late starter, India should address issues that are hanging fire even in the developed world. For example, insurance caters only to sickness and in-patients or those under hospitalization, generally the most expensive aspects of healthcare. New policies that cover preventive check-ups and OPD (outpatient department) treatments could also be introduced, so that hospitalization is avoided. Also, another set of patients who undergo severe financial stress is post-hospitalisation patients. Patients undergoing long term medical treatment such as postcardiac or sclerosis would need ‘out-patient’ support. Switch from Patient Cure to Preventive Care: Patient cure policies should be revised to preventive care policies. Preventive healthcare could ultimately reduce the cost of insurance operations, including a reduction in claims. Ignoring preventive care only means that the chances of contracting illness and requiring hospitalization are thereafter higher. System of Checks and Balances: It is important to create a system of checks and balances that increases compliance, prevents fraud and leads to quicker detection in case of fraud.

Create a Credit Bureau: A recurring problem faced by all insurers is the lack of reliable data or a credible data source. Unreliable data increases risk factors, consequently pushing up insurance premiums. A similar problem faced by banks and housing finance companies (HFCs) was resolved via the formation of CIBIL — Credit Information Bureau (India) Limited. Since the formation of CIBIL, banks and HFCs now access the past credit histories of borrowers before advancing new loans, reducing their risk by blacklisting defaulters. CIBIL has made borrowers more disciplined on repayments, as they fear being declared defaulters and losing the opportunity to secure loans in future. A lower number of defaulters will finally result in a lower interest rate for all borrowers. Following this model, the Government should consider the formation of a credit bureau for insurance agencies too, with a detailed history of all insured persons, which would include frauds. During the interim period when such an insurance bureau is being formed, insurance companies should be allowed access to CIBIL data, since many insured people are likely to have taken loans at some time or the other. And for health insurance purposes, this exchange could have a subset wherein health records and payer provisions etc are included. An initiative of similar nature is underway at IRDA, however that is at a aggregate level.

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Simplifying Policies: The terms and conditions and terminology of health insurance policies should be simplified and standardised for the greater understanding and benefit of consumers. If health insurance policies and health insurance companies are to succeed, a critical mass is important. Simplifying policies will help achieve this objective faster. Regulator for healthcare sector: Healthcare sector is one of the largest and critical-to-people sector. The information asymmetry and the human sensitivity only adds to the complexity. Regulator for healthcare is required now, more than earlier as more and more individuals start shifting the onus of financial burden to insurers, who are demanding processes, quality and consistency (in treatment and billing systems) from hospitals. The tiff between TPAs, Insurers and hospitals from last year is a case in point where the individual policyholder was left in the lurch. Group coverages for employees: Govt may consider making provision of health insurance coverage for private sector employee groups (over 50), mandatory. This will provide the advantages of increasing critical mass and bringing more organized sector involvement into the health insurance space. Also, currently employees leaving an employer group do not get the advantage of pre-existing coverage. It would be relevant if such a provision is introduced and employees who have been covered always under a health plan do not need to then qualify for the individual insurance’s ‘pre-existing clause’ of four years.

Reforms Required: The nation also needs to introduce regulatory reforms in the healthcare and health insurance sectors to iron out deficiencies that currently bedevil both industries. Reforms would ensure synergy between the two sectors, benefiting both parties as well as patients who are sometimes caught in the crossfire between the two warring sides. Although the best healthcare facilities are available in India’s metro cities and major towns, small towns and regional cities have healthcare facilities that are largely unserved and unregulated. Presently, the healthcare and health insurance sectors are being opened up very slowly, since the Government believes in a step-bystep approach. While this policy has served India well in the past, at this rate, it will be 2040 before the country is fully served by health insurance. In the meantime, the loss of work productivity due to chronic

disease and other health problems will severely impact our GDP and standard of living. Bold decisions are now required to fast-forward the process of change to make up for lost years and forsaken health as well as to bridge the massive shortfalls India has in catching up with the world-class healthcare standards of developed nations. For reforms to succeed, however, greater trust and transparency are required between all stakeholders, including the Centre and States as well as the public and private sectors. Undertaken together, all the above measures would facilitate faster penetration and improved coverage of health insurance in India. This would gradually improve the overall health of Indian citizens, leading to trickle-down benefits of higher productivity and better outcomes for the nation.



List of Participants

Mr Arun Jha Joint Secretary Department of Pharmaceuticals, GOI Mr Mark G Meehan Chief Marketing and Operations Officer Bharti Axa Life Insurance Company Ltd. Mr Hemant Kaul Managing Director & CEO Bajaj Allianz General Insurance Co Ltd. Dr Devi Prasad Shetty Chairman, Narayana Hrudayalaya Dr Somil Nagpal Health Specialist World Bank Dr H S Rissam Director, Clinical Cardiac Services Max Healthcare Mr Sujay Shetty Director – Pharma & Life Sciences PricewaterhouseCoopers Mr Aman Gupta Principal Advisor India Health Progress Mr Ranga Iyer Advisor India Health Progress

Mr Shreeraj Deshpande Head – Health Insurance Future Generali India Dr Shubnum Singh Vice-President, Medical Affairs Max Healthcare Mr Nayan C Shah Managing Director Paramount TPA Dr Nishant Jain Technical expert, Health Insurance, GTZ Mr Z H Charna Director, OPPI Harsh Bisht Leader - Financial Services, Advisory PricewaterhouseCoopers Mr Manoj Kumar Jha Under Secretary Ministry of Health & Family Welfare Ms Safia K Rizvi Managing Director UCB India Private Ltd. Mr. Alok Sonig Managing Director Bristol-Myers Squibb India Pvt.

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About India Health Progress
India Health Progress is a first-of-its-kind initiative to provide a health policy platform to various partners who work in unison to achieve a common goal --- access to healthcare for all. It is led by various individuals and organizations that can directly or indirectly play a role to ensure access to healthcare in India. As part of the plan, IHP’s advisory board involves various groups --- public as well as private --- to raise awareness levels among all concerned. The working model of India Health Progress revolves around engaging partners in the healthcare industry, involving them in discussions around the identified aspects and resolving the setback by finding a solution. It also provides the resource and knowledge support to partnering organisations on the various critical issues related to healthcare.

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About PwC
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See for more information. At PwC, we push ourselves - and our clients - to think harder, to understand the consequences of every action and to consider new perspectives. Our goal is to deliver a distinctive experience to our clients and people around the world. In India, PwC ( offers a comprehensive portfolio of Advisory and Tax & Regulatory services; each, in turn, presents a basket of finely defined deliverables. Network firms of PwC in India also provide services in Assurance as per the relevant rules and regulations in India. Complementing our depth of industry expertise and breadth of skills is our sound knowledge of the local business environment in India. We are committed to working with our clients in India and beyond to deliver the solutions that help them take on the challenges of the ever-changing business environment. The Indian firm has offices in Ahmedabad, Bangalore, Bhubaneshwar, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune.



This report does not constitute professional advice. The information in this report has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this report are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this report. PwCPL neither accepts or assumes any responsibility or liability to any reader of this report in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take. © 2011 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.
MS 135 - February 2011 health report .indd Designed by: PwC Brand & Communications, India

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