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Article: Health Insurance: Enabler for Universal Health Coverage

June, 2017

Mayank Bathwal, CEO, Aditya Birla Health Insurance, in a conversation with CFO Insights gives an account of the health insurance sector and its role to ensure universal health coverage   

What are the current challenges faced by the Indian health insurance sector?

The Indian health insurance industry is one of the fastest growing sectors in the country. However, overcoming following challenges on multiple facets like operating ecosystem and building digitised synergies across stakeholders through innovation will help expand and continue the growth momentum of the Industry;

- Low awareness: The most significant issue in health insurance sector is the low level of awareness. Even today most of the people are unaware of health insurance products and their benefits. The need for insurance products is discussed, but very little is done in this regard. One might be covered by their corporates but with the rising inflation this cover isn’t sufficient and there is a need to have adequate health insurance coverage

- Perception of Affordability: One of the major reasons for low health insurance penetration in India could be the lack of affordability of the consumers in the tier-2 and tier-3 cities

- Insufficient consumer data: Non-availability of data on health insurance consumers, disease patterns and limited control of healthcare delivery network from a single repository is resulting in limited product and pricing innovation

- Lack of influence over healthcare delivery system: In general, treatment protocols vary from provider to provider and are influenced by the paying capacity, and insurance coverage of customer. There are evident abuses such as medical bills are inflated for claiming higher re-imbursements. Hospitals are free to revise their tariff rates to any extent, and it is generally justified on account of rising professional fee of doctors, high cost infrastructure and advancement in medical technologies

The Indian health insurance industry has started on the path of digitization, but it is still a long way to go before full potential is realized. But adoption has been slow till date due to several inhibiting factors since across the insurance value chain, stakeholders are using different systems. Interconnecting these would require upgradation, and creation of middleware which requires high investments.

However, at Aditya Birla Health we have identified the above challenges and are in process of laying a road map for better customer experience. We first want to expand the range of offerings by the health insurance sector to make it relevant to a much larger mass of consumer. We have also leveraged technology to standardise procedures and delivery systems. We are working to integrate with data exchange switches to make the claims exchange process faster and seamless. This data can also be used to identify and understand the various healthcare trends and can lend itself to research and predictive analytics. Our aim is to move towards a paperless health insurance experience.

What is the potential for growth in this sector?

There is immense potential for growth as the Indian market is highly under penetrated and is vastly underexposed to benefits of health insurance. Last decade and a half has seen very rapid expansion of health insurance coverage in India. There are increasing attempts to create insurance awareness.  Inflationary healthcare costs due to technological advancement in medical science are also contributing to the potential for growth.

In 2003-04 the total premium for health insurance in India was INR 1370 crs. which has risen in FY 2017 to INR 30,000 crs. This is a CAGR of nearly 30%, making health insurance the fastest growing segment in the Indian insurance sector. Currently only 27% of the total population of India is covered under the various health insurance schemes, with the majority covered under either government or employer programs. Voluntary private health insurance has around 3% penetration of the country’s population. There is a huge untapped market and certainly potential for growth.

Currently the focus of health insurance is limited largely to covering hospitalization expenses. So a large part of customer segment like the very young and healthy, don’t feel the need for health insurance as they don’t consider hospitalization a serious probability. We saw this as a huge opportunity and therefore have created a product offering which could bring in this concept of healthy living in addition to insurance and provide holistic digital engagement ecosystem that will empower and motivate them to lead healthy and fulfilling lives. Our program incentivizes customers to improve their quality of life and reduce their long-term medical costs.

Besides changing lifestyles that cause conditions like diabetes and hypertension, the high level of pollution across Indian cities is acting as a catalyst for diseases such as cardiovascular disease etc. According to the reports published by National Health Profile - Central Bureau of Health Intelligence and International Diabetes Federation, India is now both the cardiovascular disease and the diabetes capital of the world and the third most obese country behind US and China. Presently Indian insurers are reluctant to cover people with chronic diseases. Even if they are covered it is only for hospitalization with a substantial waiting period and sub-limits. Therefore we bring a specialized treatment protocol called ‘Chronic Management Program’ that in addition to a comprehensive hospitalisation policy offers day 1 cover for diabetes, hypertension, hyperlipidaemia and asthma.

Thus it is clear that there is a huge scope for the sector to innovate and introduce best practices to engage and acquire new customers. Aditya Birla Health Insurance has entered the health insurance market with an aim to expand through product innovation and a wide choice of consumer relevant offering.

How has the consumer attitude toward Health Insurance evolved over the years? What could be underlying reasons for the same?

Increasing urbanization and problems related to modern-day living in urban settings are contributing to the rising lifestyle diseases such as diabetes and hypertension. On one hand healthcare providers now have cutting edge technology and processes to provide the best medical care to our people to enable to detect diseases and conditions early. On the other hand the same has put pressure on the price points to cause a high level of medical inflation. This is causing affordability problems for a common man to avail up to date healthcare services.  

In such a financial crunch situation, the need for a robust healthcare financing model cannot be overstressed. Over the last few years, health insurance has evolved as the best financing tool to counter the rising healthcare costs.  As customers are increasingly realising that the corporate cover is not sufficient, there is a shift from employer based cover to individual cover by opting for comprehensive and cost effective health insurance products.   

Standalone health insurance players have contributed to making health insurance one of the fastest growing segments of the Indian insurance sector, with health insurance premiums registering a compounded annual growth rate (CAGR) of around 30%. They have gained ground in the last few years as compared to general insurance players. Standalone players focus only on one line of business, and hence they are constantly innovating to attract customers’ attention and ring-fence existing customers which has contributed to increase awareness around the category.

Also today, customer expectations are changing rapidly and are moving towards more personalization across different industries such as travel, hospitality or retail with the ubers, and amazons of the world. Similar expectations are evolving from the healthcare industry and health insurance companies are also expected to follow suit.

A large number of consumers are now looking at insurance products that provide wellness solutions and rewards.  We at Aditya Birla Health Insurance Co. Ltd., have been the pioneer in introducing this philosophy in India, a first of its kind wholesome solution of protection and prevention by offering health insurance and comprehensive wellness initiatives to enable a healthier ecosystem. We aim to achieve this through a unique design where consumers can get to know about their actual health conditions, improve their health by staying active and get rewarded. We are increasingly seeing that technology can uncomplicate and enhance customers’ experience multifold. We have also developed a smart app which is interconnected to our health ecosystem and enables a seamless experience across our holistic ecosystem.

How can the National Health Policy 2017 impact the health insurance sector?

National Health Policy (NHP) 2017 has spoken about achieving Universal Health Coverage through promoting card based health insurance schemes.

The health policy recognizes that there are many critical gaps in public health services which would be filled by “strategic purchasing”. Such strategic purchasing would play a stewardship role in directing private investment towards those areas and those services for which currently there are no providers or few providers. The main mechanisms of strategic purchasing are insurance. Schemes like Arogyasri and RSBY have been able to increase private participation significantly.

These schemes have helped in the expansion and penetration of health insurance sector in various underpenetrated markets with the philosophy of health insurance for all, at subsidized premiums and comprehensive health benefits.

NHP will also result in crystallizing the legal framework for healthcare and improving governance by standardization of fee structure and quality of clinical training in urban areas. This may also impact current health insurance pricing, making it affordable for all. In India, Stents where sold at price between INR 25,000 to INR 200,000. But after government’s intervention by standardizing, Stent prices have been slashed by as much as 85%. This will eventually aid in making health insurance premium more affordable and healthcare accessible to a wider population base.

We look forward to more guidelines that will help synergise relationship between public and private sectors as the NHP advocates the positive and proactive engagement with the private sector at every step.

What are some of the enabling Government policies that could improve the penetration of health insurance in India? How can private health insurance providers complement the mandate of state sponsored insurance schemes?

As things stand, less than one fifth of Indians are covered under health insurance. Further, even those covered by some form of health insurance scheme are inadequately insured. Data shows that households are increasingly relying on their incomes to fund health care expense which can lead to financial distress.

While the government supported initiatives like National Rural Health Mission (NRHM) and health insurance schemes like Rashtriya Swasthya Bima Yojana (RSBY), Rajiv Gandhi Jeevandayee Arogya Yojana (RGJAY) and others launched by Central and State Governments have played a big role in making health care accessible to millions, but they have limitations.

The Government spending on healthcare in India is only 1.15% of GDP while the target is to be at least 3 percent of GDP by 2022. The failure to attain threshold minimum levels of public health expenditure remains the single most important constraint. 

In order to promote health insurance penetration in India and provide financial security which will help create financial inclusion, the government should increase spends and mandate health insurance by sponsoring more such schemes for the underprivileged sections.

Private health insurers can support the schemes by providing quality secondary and tertiary care services by increasing their rural reach and participate in state sponsored health insurance schemes. Private sector players can also leverage CSR for filling health infrastructure gaps in public health facilities across the country.

What is the scope for private health insurers to engage with the healthcare sector and achieve Universal Healthcare Coverage for India?

In compliance with the United Nations Sustainable Development Goals, India has agreed to achieve Universal Health Coverage (UHC) by the year 2030. UHC will be a government sponsored scheme that is funded by tax payments and increased spending on public health. UHC follows a model which is already prevalent in many geographies globally, where every citizen is to be covered for basic healthcare services.

The goal of universal coverage can be achieved through partnering with private insurers. The current government budget allocation towards health is not sufficient to finance healthcare needs comprehensively for the entire population.

There is an opportunity for private players to offer low cost health insurance products. Government can do part funding and provide subsidy to the needy class.

Insurers may need to innovate the products to cover benefits that are not offered by UHC. Also, government can allow public health facilities to be used for these schemes, which will help in reducing the cost of treatment and contribute to funding public health facilities. Private health insurers can partner with micro finance institutions and healthcare players to provide financial coverage to populations living in underserved geographies across the country. This will promote health sector and help expand health insurance penetration in smaller locations across the country.

Insurance cover enables the demand which in turn incentivise suppliers to provide healthcare. It has been seen in case of many govt. schemes where particularly low-cost healthcare service models have come up like e.g.: Narayana Health, Glocal and Vatsalya, etc.