Understanding the Context: The Development of Health Insurance in India
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mandated to contribute 15 percent of total NRHM spending (GOI contributes 85 percent), but many states have not fulfilled this mandate. For example, in 2007–08 only four states complied with the 15 percent contribution (MOHFW 2009a). Nevertheless, nominal state government spending increased by an annual 17 percent between 2005–06 and 2008–09, 10 percent per annum in real terms.10 The third segment consists of social insurance schemes for formal private sector workers, civil servants, and military and railway employees (4.1 percent of spending). These schemes are mandatory, and most are financed through employee and employer contributions via a payroll tax, but also receive partial government subsidies. Others are fully subsidized by the government (e.g., military, railways) or public corporations (e.g., coal and petroleum parastatals). Beneficiaries seek care in facilities owned and operated by the schemes or contracted out to the private sector. The fourth segment is private voluntary health insurance (PVHI), which emerged in the late 1980s but has grown rapidly in the 2000s. In 2004–05, PVHI accounted for 1.6 percent of total health expenditure but, by 2008–09, reached an estimated 3 percent.11 Private insurance companies’ health products emphasize inpatient coverage provided in networked private hospitals. The market consists of two, roughly equal size components: a group market (catering to employers) and a retail market comprising individual and family plans. In 2010, PVHI covered about 60 million people or 5 percent of the population. A large number of community-based microinsurance schemes also exist, but their coverage is small and was estimated at about 5-6 million persons in the early years of this decade (Devadasan et al. 2004).12 However, a small portion of this coverage may overlap with the PVHI market: some CBHI schemes buy group insurance from private insurance companies. A fifth segment, not depicted in figure 2.2 and the subject of this book, appeared in the second half of the 2000s. Unlike their social insurance counterparts described above, these new government-sponsored schemes are fully subsidized, mass-coverage programs that target the poor. Private firms, external agencies, and others make up the remaining share of India’s health expenditure. Although firms represent a fairly significant source of financing, in India, unlike in other countries, these funds are not always directed to health insurance (PVHI and SHI). Rather, they are often used to fund on-site health facilities or to reimburse employees’medical care expenses.13