Emerging trends in the Indian health insurance marketplace

This is an exciting time: The Indian insurance industry and its regulators are currently undertaking a number of actions to further India’s goal of developing a strong health insurance market, which would improve the general health status of Indians, ease the government burden of public care, help families avoid catastrophic financial losses, and improve the overall quality of healthcare in India.

Here are some of the special issues ahead for two big stakeholders—Indian consumers and Indian regulators.

Consumers

Indian culture traditionally emphasizes a philosophy of building personal financial security, placing particular importance on the well-being of one’s family. Indian consumers want “well-designed” health insurance plans with reasonably comprehensive coverage—and without unnecessary or counterproductive gaps. Indian Mediclaim policies typically cover only medical services rendered in an inpatient hospital setting. Given today’s changing world of medical delivery, Indian health insurers would be well served to cover a broader set of services that encourage preventive “well” care and healthy behaviors as well as avoid inappropriate financial incentives. When only inpatient hospital services are covered, insured individuals have an incentive to seek inpatient hospital care, when lower cost treatment settings (e.g., a physician’s office) may be more appropriate. Additionally programs aimed at changing unhealthy behaviors could be considered. Programs such as smoking cessation and weight control have been shown to have some success in lowering a person’s future risks in some markets.

For consumers to purchase health insurance, several things need to exist:

• Financial incentives–While the desire to protect savings by itself is a strong motivator, India may well consider proposing enhanced tax treatment of insurance costs for individuals (some of which exists.) Another path not currently present in India is structuring financing alternatives such as medical savings accounts, which combine higher-deductible insurance coverage with money set aside in tax-favored accounts for future health costs.
• Competitively priced products with choice–To make prudent purchases, consumers should be able to choose among hospitals and other healthcare providers, along with coverage scope and insurers. Not every family situation is the same, nor does every person need or want the same coverage. Likewise, providing for non-inpatient services encourages smarter buying: Fairly priced, affordable products will ensure accessibility to the greatest number of people.
• Understandable information–Educating consumers about health insurance, in general, will be extremely important. Beyond awareness of insurance coverage, information on disease, cost of treatments, alternative treatment options, and the quality of the treatments provided must be available to consumers to make informed choices.
• Employer-sponsored programs–Financing of health insurance through employer-sponsored programs is likely to improve access to insurance for some. Employers would have to be motivated to provide such coverage; again, more favorable tax treatment might be a motivating force.

While it is important that health insurance provide sufficient protection to make it attractive to the buying public, care must be taken to design coverages that sufficiently involve the consumer in the cost of care, so that individuals are encouraged to behave in a cost-conscious way. A health insurance policy that provides 100% coverage for all services removes the patient entirely from the economic consequences of his course or place of treatment. The patient, then, has no incentive to pursue cost-effective treatment options.

Historically (and internationally) this almost always leads to the over-utilization of services and very high costs, which in turn leads to high premium rate increases and, ultimately, to an unstable health insurance market. Relevant here is the big lesson from the U.S.: Individuals must remain responsible for their health and care treatment. Notions of paternalism and entitlement do not work well in a private, voluntary health insurance market.

This feeling of responsibility could easily be overlooked in a rush to create broad coverage for today’s Indian health insurance policies.

Government and regulators

During this time of high growth and de-tariffing, the insurance industry will need to be monitored closely especially if (and as) new insurance companies enter the Indian market. Solvency plus financial and operational performance monitoring will be essential as the failure of just one health insurance company to pay its claims could damage the entire health insurance industry and limit its growth.

The Ministries of Health and Finance may wish to consider new healthcare provider regulations and monitoring. Requiring hospitals, physicians, and other providers to submit the necessary data (e.g., claim information) in a form that meets the desired standards is a first step. Also, the government may wish to require the publishing of meaningful provider charge (fee) information so that consumers can begin to better understand the cost of care. Access to charge data will be needed for all products and services purchased by consumers.

Regulators must also assure providers and suppliers of healthcare products and services that any changes that occur as a result of health insurance industry growth and regulation will not affect them unfairly. (That is not to say that they won’t be affected). For example, if it is determined that hospitals must report information in new standardized formats, then ideally this would be done so that all hospitals are equally burdened, recognizing the various levels of sophistication that exist in the provider community.

Or, if it is determined that medical records should be kept in electronic form, then all providers deemed capable should be required to do so. When quality measures are introduced, all providers should be evaluated using them, ideally both public and private. (Private hospitals will quickly come under pressure once health insurance begins to grow.)

With all these possible options, it will be virtually impossible to anticipate every downstream interaction and outcome of such actions, but taking incremental steps that balance all the stakeholder interests will likely yield the best long-term results.

Moving toward “best case”

As suggested above, the force of a fully open marketplace will have a huge effect on the Indian health insurance market. Data is becoming more available and a great deal of pressure is being exerted on the care and insurance providers and Third Party Administrators (TPAs) to capture and report more complete information on the claims that are paid.

Already, the regulators are pushing—and insurance consumers will likely soon join them—for broader coverage. These combined forces will have a direct effect on the actuary. Given that, actuaries will need to be data-savvy and up-to-the-minute regarding actuarial techniques to respond to this changing environment. This bodes well for the consumer and surely will make the actuaries’ job far more challenging and interesting in the future. It also speaks to the essential role the actuary will play in the health insurance business.

Defining the “best-case” scenario for the Indian health insurance marketplace is a matter of opinion, but we would suggest that more coverage at more competitive rates comes very close to fitting that definition.