Health Insurance Systems

Health Insurance Basics - Policy Puzzles

• Health Insurance: Risk pooling & prepayment for healthcare. Protects against high medical costs.
• Core Terms:
  • Premium: Regular payment for coverage.
  • Deductible: Out-of-pocket sum before insurance pays.
  • Co-payment: Fixed fee per service (e.g., consultation).
  • Co-insurance: % of costs insured pays after deductible.
  • Sum Insured: Max insurer payout per policy period.
  • Exclusions: Services/conditions not covered by policy.
  • Waiting Period: Duration before specific coverage begins.
• Policy Puzzles:
  • Moral Hazard: Insured may use more services or take more risks.
  • Adverse Selection: High-risk individuals more likely to buy insurance.

⭐ Adverse selection: Higher-risk individuals disproportionately seek insurance, potentially increasing overall premium costs.

Indian Health Schemes - Bharat's Health Shield

• Ayushman Bharat PM-JAY (Pradhan Mantri Jan Arogya Yojana):
  • World's largest government-funded health assurance scheme.
  • Provides health cover of ₹5 lakh per family per year.
  • For secondary and tertiary care hospitalization.
  • Targets over 12 crore poor and vulnerable families (approx. 55 crore beneficiaries).
  • Cashless and paperless access to services; portable across India.
• Rashtriya Swasthya Bima Yojana (RSBY):
  • Earlier scheme for BPL families, largely subsumed by PM-JAY.
  • Smart card-based, offered cashless health insurance of ₹30,000.
• Central Government Health Scheme (CGHS):
  • Comprehensive healthcare for Central Govt. employees, pensioners, and their dependents.
  • Covers Allopathy and AYUSH systems of medicine.
• Employees' State Insurance Scheme (ESIS):
  • Social security for organized sector employees and their dependents.
  • Provides medical care, plus cash benefits for sickness, maternity, disablement.

⭐ PM-JAY uses Socio-Economic Caste Census (SECC) 2011 data to identify beneficiaries.

Insurance Mechanics - Premium Ponderings

• Risk Pooling: Spreads financial risk among a large group.
• Premium: Periodic payment by insured; based on risk profile.
• Key Challenges:
  • Moral Hazard: Insured takes more risks/overuses services. 📌 My Health, My Habits change.
    • Mitigation: Co-payments, deductibles.
  • Adverse Selection: High-risk individuals likelier to enroll. 📌 All Sick ones Sign up.
    • Mitigation: Group policies, mandatory coverage.
  • Risk Selection (Cream Skimming): Insurers enroll healthier individuals.
• Cost-Sharing:
  • Deductible: Initial out-of-pocket amount by insured.
  • Co-payment: Fixed fee per service.
  • Co-insurance: % of cost paid by insured.

⭐ Moral hazard occurs when insurance coverage leads to increased utilization of healthcare services because the insured party does not bear the full cost.

Regulation & Roadblocks - System's Check-Up

• Governance & Regulation:
  • IRDAI (Insurance Regulatory and Development Authority of India): Apex body.
  • Key Acts: Insurance Act, 1938; IRDAI Act, 1999.
  • Focus: Policyholder protection, insurer solvency, market conduct.
• Major Roadblocks:
  • Low penetration; high Out-of-Pocket Expenditure (OOPE).
  • Moral hazard & adverse selection.
  • Fraud, abuse, & information asymmetry.
  • Lack of standardization in claims & treatment protocols.
  • Operational hurdles & poor consumer awareness.
  • Rising healthcare costs impacting affordability.

⭐ IRDAI periodically reviews and mandates guidelines for standardization of health insurance products (e.g., Arogya Sanjeevani Policy).

High‑Yield Points - ⚡ Biggest Takeaways

• Health insurance pools risk, offering financial protection against catastrophic health expenditure.
• Ayushman Bharat PM-JAY is the largest government-funded health assurance scheme globally.
• PM-JAY offers ₹5 lakhs per family per year for secondary and tertiary care.
• ESIS covers organized sector workers; CGHS serves central government employees.
• Key challenges include moral hazard (overuse) and adverse selection (high-risk enrollment).
• RSBY was a key precursor to PM-JAY, targeting BPL families.