Understanding the Context: The Development of Health Insurance in India
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The first, known as Mediclaim, and launched by four public non-life insurance companies,18 covered inpatient care up to a defined annual cap. This feature was also adopted by most GSHISs.19 Although subsequent versions of this Mediclaim product continue to dominate the PVHI market, more than 30 insurers (mostly non-life and some life insurers) now offer more than 300 mostly indemnity products.20 Another variant of the Mediclaimtype coverage, which was introduced by private insurers, is known as the “family floater.” It covers the entire family and was an additional design feature incorporated by a number of GSHISs analyzed in this book. During its early years of development, the private insurance industry’s influence on hospitals was minimal. At the turn of the century, the private health insurance system was small and insignificant relative to total hospital revenues (about 2 percent of India’s total spending on hospitalization). Like uninsured patients, the insured paid their bills in cash but subsequently sought reimbursement from their insurers. This meant that patients not only had to arrange substantial funds upfront, but also suffer losses due to deductions and delays during claim processing by the insurer. By 2008–09, however, health insurance companies were paying claims amounting to about 10 percent of all hospitalization expenditure in the country.21 This proportion was much higher for hospitals located in larger cities where insurers and third-party administrators (TPAs) were contributing 30 percent or more to total hospital revenues. In the 2000s, the number of “networked hospitals” rapidly expanded, and is currently estimated at about 10,000 hospitals across the country. By the late 2000s GSHISs were able to tap into this large hospital network for access to treatment for their beneficiaries (and indeed augmented it further), which facilitated GSHIS expansion. With the rapid growth of private insurance and the introduction of TPAs in the 2000s, the concept of “cashless” hospitalization emerged, and was subsequently adapted by all GSHISs. TPAs (and insurers) entered into agreements with networked hospitals to treat the beneficiaries. Claims were settled between the TPA or insurer and the hospital, and patients were charged only for copayments or services not covered by insurance. This is a far cry from the early days of the system, when hospitals were wary of joining the cashless networks—a new, untested concept for most hospitals before the mid-2000s. Based on discussions with TPAs and insurers, the share of cashless hospitalization is currently estimated at more than 60 percent of the PVHI market. The remainder of the market still relies on paper-based reimbursement.