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Saturday, Aug 17, 2019

Taking a cue out of health insurance schemes down south

Yeshasvini, a health insurance scheme for rural farmers and peasants, was initiated on a modest scale in Karnataka in 2003. During its first year, the scheme covered about 1.6 million rural poor with a premium as low as Rs 90.

india Updated: Sep 13, 2018 00:13 IST
Srinath Reddy and Sakthivel Selvaraj
Srinath Reddy and Sakthivel Selvaraj
IIPHG-trained community health officer Abid Mansuri, 32, at the Health and Wellness Centre in Raslod village in Gujarat’s Sabarkantha district.
IIPHG-trained community health officer Abid Mansuri, 32, at the Health and Wellness Centre in Raslod village in Gujarat’s Sabarkantha district.(HT Photo)

Ayushman Bharat, the government’s flagship health insurance scheme, has rekindled the hope for moving towards universal coverage of hospitalisation costs in India, but the initial spark was ignited by Yeshasvini, the health insurance scheme for rural farmers and peasants, initiated on a modest scale in Karnataka in 2003.

During its first year, the scheme covered about 1.6 million rural poor with a premium as low as Rs 90.

In 2007, the then undivided Andhra Pradesh launched an ambitious health insurance programme paid by the government, covering over 70 million people or nearly 70% of the state population, and became the first state to move towards universal coverage.

In Tamil Nadu, a similar approach was followed where 42 million people (more than 55% of the population) were covered by a scheme where the government paid the premium for hospitalisation for medical procedures and clinical interventions.

Recognising the limitations of targeting, Kerala initiated its own Chief Minister’s Comprehensive Health Insurance Scheme, besides the centrally initiated Rashtriya Swasthya Bima Yojana (RSBY).

Karnataka, which initiated the first state-funded health insurance scheme in India, had to gradually accommodate three other similar schemes, administered and paid for by different units of its government.

Political commitment

The political commitment demonstrated in these health insurance schemes is clearly reflected in the annual allocation of funds. The Tamil Nadu health insurance scheme spent about Rs 225 per enrollee in 2016, while Andhra Pradesh and Telangana spent an average of Rs 140 per enrollee, as against the Centre’s RSBY, which spent about Rs 80 per enrollee.

The health insurance provided by Tamil Nadu, Andhra Pradesh and Karnataka’s Vajpayee Aarogyasree schemes essentially covers tertiary-care medical procedures and interventions, which are considered catastrophic in nature if the families have to pay on their own.

The Tamil Nadu and Andhra Pradesh medical insurance schemes cover about 1,016 and 1,044 medical procedures respectively, with 56 and 133 high volume medical procedures reserved for provision only in public healthcare facilities respectively.

Unlike RSBY or the other southern schemes, beneficiaries in Tamil Nadu and Kerala utilised public facilities to a large extent. Available evidence suggests that over 43% of all hospitalisation, under the health insurance scheme in Tamil Nadu, took place in government hospitals in 2016.

Hospitals often complain that a pan-India package rate for similar procedures is irrational since it doesn’t take into account quality and cost variation in providing hospital services. A distinguishing feature of the Tamil Nadu scheme is that hospitals in the higher-grade categories have higher package rates for similar procedures. Such variation in package rates creates an incentive for hospitals to fulfil the criteria for moving up to higher grades.

Stopping fraud, ensuring quality

The southern states, especially Tamil Nadu, Andhra Pradesh and Karnataka, were the early ones to establish mechanisms for effective control of fraud and abuse of the insurance system. Cost containment measures and fraud control were achieved through pre-authorisation of procedures, pre-agreed package rates according to hospital categories, surveillance and medical vigilance teams for fraud control. These schemes extensively utilised information technology (IT) applications, beginning from application of biometric smart cards for enrolment and identification of beneficiaries.

Routine disempanellment of hospitals involved in fraud acted as a deterrent for other hospitals to avoid performing unnecessary procedures. In order to reduce potential uncertainty in payment to hospitals, claims are settled within one week of claim submission from the hospital, making it attractive from the perspective of private healthcare providers.


A key feature of government supported health insurance scheme has been the involvement of health insurance companies as financial intermediaries to pool risk and purchase health care services from both government and private health care facilities. Experience of the last one decade demonstrates that risk bearing capacity of the financial intermediary has remained low as it raised the yearly premium rate when claims ratio rose over 100%, as in Kerala. The Tamil Nadu scheme managed to circumvent this scenario by negotiating a stable premium rate, set for four years.

In the southern states, the utilisation of health services has been high and increasing over the years. This has resulted in the claims ratio breaching the 100% mark. Multiple administrative machineries, including health insurance companies and third party agencies have added to the administrative cost, besides profits made by insurance companies.

Karnataka and Andhra Pradesh were the pioneers in moving towards a Trust Model of administering the scheme, avoiding or removing the role of insurance companies. This achieved cost savings by keeping administrative costs at the minimum. Recent reports suggest that most states are moving towards a Trust Model for administering the national health protection mission (Pradhan Mantri Jan Arogya Yojana) under Ayushman Bharat.

As these newly formed Trusts look to design their administrative framework, they can learn from the experience of Karnataka, Andhra Pradesh and Telangana. Their experience offers valuable lessons for Ayushman Bharat that go beyond financing mechanism. While hospitalisation costs were partially or substantially covered, financial burden of out-of-pocket expenditure was not significantly dented since outpatient care and long-term medication was not covered. Strengthening primary care and provision of free drugs and diagnostics in public facilities must accompany cost coverage of hospitalised care.

(Dr Srinath Reddy is the president, Public Health Foundation of India (PHFI), and Dr Sakthivel Selvaraj is director, health economics, financing and policy, PHFI.)

Views expressed are personal

First Published: Sep 13, 2018 00:12 IST

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