Health Insurance Models

Introduction & Principles - Coverage Kickstart

• Health Insurance: Mechanism pooling funds to finance healthcare costs, protecting against catastrophic health expenditure (CHE).
• Need: Reduce Out-of-Pocket Expenditure (OOPE), improve healthcare access & financial security.
• Core Principles:
  • Risk Pooling: Spreading financial risks.
  • Law of Large Numbers: Predictable losses for large groups.
  • Premium: Periodic payment for coverage.
  • Cost-sharing: Deductibles, co-payments, co-insurance.
• Key Challenges:
  • Adverse Selection.
  • Moral Hazard (e.g., overutilization of services).

⭐ Adverse selection is a major challenge where individuals with higher health risks are more likely to purchase insurance. oka

Government Schemes - Govt. Guardian Schemes

• Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY):
  • Targets >10.74 crore poor, vulnerable families (approx. 50 crore beneficiaries).
  • Coverage: ₹5 lakh/family/year for secondary & tertiary care hospitalization.
  • Cashless access to services; portable across the country.
  • Eligibility based on Socio-Economic Caste Census (SECC) 2011 data.

  ⭐ PM-JAY is the world's largest government-funded health assurance scheme.

• Central Government Health Scheme (CGHS):
  • Beneficiaries: Central Govt. employees (serving & pensioners) & their dependents.
  • Comprehensive healthcare: Allopathy & AYUSH systems.
  • Services: OPD, IPD, investigations, medicines from wellness centres/polyclinics & empanelled hospitals.
• Employees' State Insurance Scheme (ESIS):
  • For employees in factories/establishments with wages ≤ ₹21,000/month (₹25,000 for persons with disabilities).
  • Benefits: Medical care, sickness, maternity, disablement, dependent's benefits.
  • Contribution: Employee share 0.75%, Employer share 3.25% of wages.
• Ex-Servicemen Contributory Health Scheme (ECHS):
  • For Armed Forces veterans & their dependents.
  • Comprehensive medical care through a network of ECHS polyclinics, service hospitals, and empanelled private hospitals.

Private & Community Insurance - Market & Mates Models

• Private Health Insurance (Market Model):

  • Voluntary, individual-based, often profit-driven.
  • Premiums typically risk-rated (higher risk → higher premium).
  • Primarily serves the formal sector & higher-income groups.
  • Potential issues: Adverse selection, moral hazard, cream-skimming.

• Community-Based Health Insurance (CBHI) (Mates/Mutual Model):

  • Collective, non-profit, emphasizes community participation & solidarity.
  • Risk pooling within a defined community (often informal sector, rural).
  • Premiums often community-rated or subsidized; prepayment mechanism.
  • Aims to improve financial access & reduce out-of-pocket expenditure for underserved populations.
  • Challenges: Small risk pool size, financial sustainability, quality assurance.

  ⭐ CBHI schemes often target the informal sector, which constitutes a large part of the Indian workforce, by leveraging social capital.

• Micro-insurance:

  • Low premium, low coverage products for low-income populations, often linked with microfinance institutions (MFIs).

Key Terminology & Challenges - Jargon & Jolts

• Premium: Regular payment to maintain insurance coverage.
• Deductible: Amount insured pays before policy benefits begin.
• Co-payment: Fixed sum paid by insured for a specific service.
• TPA (Third-Party Administrator): Manages claims, network hospitals.
• Risk Pooling: Spreading financial losses of few over many.
• Moral Hazard: Insured's tendency for ↑ service use or riskier behavior.
• Adverse Selection: Disproportionate enrollment of high-risk individuals.
• Key Challenges (India):
  • Low insurance penetration & awareness.
  • High Out-Of-Pocket Expenditure (OOPE).
  • Operational issues: fraud, claim delays, information asymmetry.

⭐ Ayushman Bharat PM-JAY provides health coverage of ₹5 lakh per family per year for secondary and tertiary hospitalization.

High‑Yield Points - ⚡ Biggest Takeaways

• PM-JAY (Ayushman Bharat): World's largest government-funded health assurance; ₹5 lakh/family/year for secondary/tertiary care.
• RSBY: Key precursor to PM-JAY, targeted BPL families.
• CGHS: Comprehensive care for Central Govt. employees & pensioners; contributory scheme.
• ESIC Scheme: Social insurance for organized sector workers; tripartite contributions (employee, employer, govt.).
• Social Insurance: Compulsory participation, statutory backing, risk pooling (e.g., ESIC).
• Voluntary Private Insurance: Market-driven, risk-rated premiums, based on individual choice.
• CBHI: Community-managed risk pooling, often for informal sector, voluntary membership.