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Government-Sponsored Health Insurance in India
Second, with the exception of TN, most schemes do not have longterm pricing contracts with insurers. Most contracts are annual. As suggested above, insurance companies will anticipate their rising costs and, in due course, quote progressively higher premiums for successive annual policy cycles, which the public budget will have to cover. Even in the case of multi-year contracts for state-managed RSBY policies, contractual terms stipulate that government and insurer have to mutually agree to renew the insurance annually.83 In effect, insurers can “re-price” their services for the next policy period whenever costs rise, which mitigates their incentive to make long-term investments in cost containment at the provider end. If they fail to break even at the quoted or prevalent premium, they may exit the contract and bid again at a higher price level for subsequent periods. Alternatively, they may decide to exit the GSHIS market altogether.84 Given the limited number of insurers in the market, 85 the continued willingness of insurers to prefer growth in revenues at the cost of bearing some losses is uncertain in the long run. Finally, most schemes are cashless to the beneficiary and thus do not use other direct forms of cost sharing such as copayments, deductibles, and coinsurance. Although such mechanisms can pose barriers to care, especially for the poor, not using them does eliminate an important form of utilization control.86 To summarize, GSHISs face a number of challenges to control cost escalation. Insurers have weak incentives to control costs, in part because they can “reprice” or rebid a higher premium for each annual policy cycle and therefore shift the medium-term (and long-term) financial risk back to the public budget. Provider competition is constrained by the high concentration of utilization in a relatively limited number of providers. Other measures such as package rates, preauthorization processes, provider competition, and use of gatekeepers can contribute to cost containment but will have to be significantly strengthened or introduced as a design feature.
Institutional Arrangements and Managerial Capacity Health insurance requires sound and reliable systems of governance and management to ensure the execution of key risk-management and administrative functions expected of the implementing agency. These include the enrolment of beneficiaries, collection of funds (where applicable), engaging intermediaries such as TPAs and service providers, rate setting, claims administration and analysis, selection and payment of