ASSESSING THE DEMAND FOR HEALTH INSURANCE IN THE MIDDLE AND THE UPPER MIDDLE CLASS POPULATION OF MUMBAI AND THE EXTENT TO WHICH THE EXISTING SCHEMES SATISFY IT
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- Title
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ASSESSING THE DEMAND FOR HEALTH INSURANCE IN THE
MIDDLE AND THE UPPER MIDDLE CLASS POPULATION OF
MUMBAI AND THE EXTENT TO WHICH THE EXISTING
SCHEMES SATISFY IT - extracted text
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ASSESSING THE DEMAND FOR HEALTH INSURANCE IN THE
MIDDLE AND THE UPPER MIDDLE CLASS POPULATION OF
MUMBAI AND THE EXTENT TO WHICH THE EXISTING
SCHEMES SATISFY IT
BY
DR. NEETA S. RAO
DEPARTMENT OF HEALTH SERVICES STUDIES
TATA INSTITUTE OF SOCIAL SCIENCES
DEONAR MUMBAI - 400088
2003
CM t
TATA INSTITUTE OF SOCIAL SCIENCES
Assessing The Demand For Health Insurance In The Middle And
The Upper Middle Class Population Of Mumbai And The Extent
To Which The Existing Schemes Satisfy It
A Project Report
Submitted to the Academic Council of the
Tata Institute of Social Sciences
Deonar, Mumbai - 400088
In Partial Fulfillment of the Requirement for the Masters of Health
Administration
By
Dr. Neeta S. Rao
Dr. Alka Parikh
[Research Guide]
Lecturer, Unit for Rural Studies
Signature
TISS
Abstract
The study endeavors to delve into the issue of demand for Health Insurance. As
a large potential for the Health Insurance market rests in the urban metropolis
like Mumbai, it was considered imperative to know the nature of requirements
and the need for Health Insurance. Thus, with an aim to assess the demand for
Health Insurance the study explores all the related determinants and tries to
establish a relationship between demand and these determinants. It further tries
to examine as to what extent these demands are satisfied, or remain unsatisfied.
For the study, the middle class and upper middle class people were selected and
interviewed to garner the required information. This information was analyzed
to achieve the objectives of the study.
The study reveals that the demand for Health Insurance is income elastic and
price inelastic to some extent, while numerous other factors have varying affect
on the demand for Health Insurance.
In the light of expert opinions, some feasible recommendations are also made
towards the end of the thesis.
Acknowledgements
First and foremost, I would like to express my heartfelt thanks to the Institute for having
given me this opportunity and my parents for their unflinching support.
I would like to express my indebtedness to Dr. C. A. K. Yesudian for being a constant
source of inspiration for all of us.
From the core of my heart, I would like to thank my guide, my mentor, Dr. Alka Parikh,
without whom this study could never have been accomplished. She played the role of a
sculptor, molding and shaping my study by providing timely guidance, as and when
required.
I would also like to express my gratitude to Dr. Sudhakar and the scores of officials from
the Insurance Company and Third Party Administration, chosen for the study for
providing all the prerequisite information needed for the study. Unfortunately, I cannot
thank all of them publicly for the sake of maintaining confidentiality.
It would be unfair if I failed to express my gratitude to all my colleagues and faculty of
HSS Department for their invaluable inputs.
Thanks to all the respondents who spared their invaluable time and responded to my
Interviews.
Neeta S. Rao.
Contents
Chapter
1. Introduction
Page Nos.
1
1.1 What is Health Insurance?
2
1.2 Importance of Health Insurance
3
1.3 Emergence of Health Insurance in India
5
1.4 Privatization and its Repercussions
7
1.5 Existing Scenario
8
1.6 Problems in the existing scenario
10
1.7 Need for Health Insurance in India
11
1.8 Other Studies on Health Insurance
12
1.9 Need for this study
16
2. Objectives and Methodology
18
2.1 Aim of the study
18
2.2 The objectives of the study
18
2.3 Why demand analysis?
20
2.4 Methodology
20
2.4.1 Study Design
21
2.4.2 Sampling
21
2.4.3 Approach for Analysis
24
2.5 Outline of the study
25
3. Contour of the Sample
27
3.1 Area of study
28
3.2 Why Mumbai suburbs?
28
33 Sample selection
29
3.4 Sample Profile
30
3.4.1 Gender specification
30
3.4.2 Age distribution
31
3.4.3 Educational Qualification
32
3.4.4 Socio economic status
33
3.4.5 Family Size
34
3.4.6 Occupational status
35
3.4.7 Insurance Schemes & TPA
36
3.4.7. IMediclaim
36
3.4.7.2 CGHS
38
3.4.73 TPA
39
3.5 Conclusion
4. Exploring the demand side of Health Insurance
40
41
4.1 Morbidity pattern in the respondents and their family members
42
4.2 Expenditure on Health Services-
44
4.3 Awareness about the Scheme-
48
4.3.1 How many have heard about how many schemes?
49
4.4 Concept of Health Insurance as conceived by respondents
53
4.5 Need
55
4.6 Demand for Health Insurance
57
4.6.1 Willingness to Pay
57
4.6.2 Utilization pattern-
63
4.6.3 Effect of changes in price
68
4.7 Conclusion
71
5. Exploring the supply side of Health Insurance
74
5.1 Principles of Health Insurance
74
5.2 Constraints
76
5.3 Consumer Satisfaction/ Experience
77
5.4 To what extent does the demand and the supply converge?
80
5.4.1 Period of coverage
80
5.4.2 Premiums
81
5.4.3 Medical Benefits
81
5.4.4 Non Medical benefits
83
5.4.5 In general about Health Insurance
84
5.5 Scaling the Demand for Health Insurance
84
5.6 Conclusion
90
6. Conclusions and Recommendations
92
6.1 Some Recommendations
95
6.2 Limitations of the study
98
List of Tables
Tables
Table 3.1: Gender distribution of the 65 respondents.
Page No.
30
Table 3.2: Age distribution in different genders.
31
Table 3.3: Educational qualification of the respondents as per gender
differentials. 32
Table 3.4: Socio-economic status of the respondents with gender differentials.
33
Table 3.5: Family size of the 65 respondents
34
Table 3.6: Occupational status of the respondents.
35
Table 4.1: Ailments reported by 65 respondents.
42
43
Table 4.2: Detailed classification of the above mentioned ailments.
Table 4.3: Frequency of the common ailments as reported by 64 respondents
45
Table 4.4: Frequency of visits to the physician for common ailments as reported
by 64 respondents.
46
Table 4.5: Exposure to the scheme as per age and gender differentials.
49
Table 4.6: Level of awareness about different insurance schemes in different
age groups along with gender differentials.
50
Page nos.
Table 4.7: Level of awareness about schemes as per the educational
qualification and gender differentials.
52
Table 4.8: Need as per the gender and age differentials.
56
Table 4.9: Need for Health Insurance in different Socio-economic class.
56
Table 4.10: Willingness to pay against Insurance status
58
Table 4.11: Willingness to pay in different socio-economic group.
59
Table 4.12: Willingness to pay as per the family size.
60
Table 4.13: Willingness to pay against Need for Health Insurance.
61
Table 4.14: Need for Health Insurance against willingness to pay
as per age differentials.
62
Table 4.15: Health Insurance Status as per gender differentials and age
distribution.
64
Table 4.16: Health Insurance Status as per family size of the respondents.
65
Table 4.17: Health Insurance Status against Socio-economic status.
66
Table 4.18: Coverage under Health insurance and Life Insurance.
70
Table 5.1: Changes demanded for Health Insurance by 65 respondents.
88
List of Graphs
Graphs
Page No.
Graph 4.1: Proportion of respondents aware and not aware of
Health Insurance.
48
Graph 4.2: Level of awareness in different genders.
51
Graph 4.3: Level of awareness in different age groups.
51
Graph 4.4: Concepts as understood by respondents.
54
Graph 4.5: Concepts as understood by respondents.
55
Graph 4.6: Willingness to pay for Health Insurance in 65 respondents.
58
Graph 4.7: Proportion of insured and uninsured in 65 respondents.
64
Graph 4.8: Annual premium in Rs. against Annual Health Expenditure
in Rs.
67
Graph 4.9: Affect on demand on change in price i.e. premium.
69
Graph 5.1: Satisfaction levels among the claimants.
78
Graph 5.2: Scaling of demand for Health Insurance.
89
Bibliography
Annexure
Acknowledgements
First and foremost, I would like to express my heartfelt thanks to the Institute for having
given me this opportunity and my parents for their unflinching support.
I would like to express my indebtedness to Dr. C. A. K. Yesudian for being a constant
source of inspiration for all of us.
From the core of my heart, I would like to thank my guide, my mentor, Dr. Alka Parikh,
without whom this study could never have been accomplished. She played the role of a
sculptor, molding and shaping my study by providing timely guidance, as and when
required.
I would also like to express my gratitude to Dr. Sudhakar and the scores of officials from
the Insurance Company and Third Party Administration, chosen for the study for
providing all the prerequisite information needed for the study. Unfortunately, I cannot
thank all of them publicly for the sake of maintaining confidentiality.
It would be unfair if I failed to express my gratitude to all my colleagues and faculty of
HSS Department for their invaluable inputs. I would specially like to thank my friends
Manjunath and Shilpa for their creative inputs and Yojana and Rupali for the moral
support, which kept me going.
Thanks to all the respondents who spared their invaluable time and responded to my
Interviews.
Neeta S. Rao.
Dedicated to my parents
for their incontestable faith in me.
Chapter 1
Introduction
Human life is said to acquire its real economic value from six basic factors, namelycharacter, health, willingness to work, desire to make an adequate investment in the mind
for career purposes, creative ability and determination and persistency to complete
thoughtful economic programs. Health is most important among these, for without health
none of the factors can generate economic goods. This drives to the economic admonition
- "keep the healthy person healthy."
This introductory chapter begins with introducing the reader to the concept of
economic value of human life, following which it gives a general idea about
Health Insurance, its importance to the health sector, individual and society. The
experience from other developing countries shows how the ideal mechanism
may always not work out. Its emergence in India, its existing scenario and its
need forms the subsequent part of this chapter.
Against the backdrop of other studies conducted, related to this subject, a more
detailed exploration on the demand side of Health Insurance was planned for the
study.
The economic value of an individual depends on how much others i.e. persons,
organization or the society at large, benefit from his/her existence. Thus, the
earning ability of a particular person makes him worth crores of rupees. Over a
period of time, the strengths of an individual are slowly converted into income; a
part of which is used on self-maintenance and the rest on the dependents and
savings for the whole family. 'Health' being a very critical component of keeping
1
one's earning ability intact, demand's for its preservation. The loss of health has
larger consequences not only on his/her earning capacity, but also on his/her
family and larger economy. The income dependency and wealth acquiring style
of people put them more at risk to external changes over which they have no
control and which cannot be forecasted. This very ability of health to generate
income and the need for its safe keep constitutes the basis of insurance.
Besides this, there is an emerging parallel trend of the recognition of basic health
care for all citizens as a right on one hand and difficulties faced by government in
developing and maintaining resources to provide health care through general
taxation revenues on the other. National health policies, conditions laid by
international and bilateral funding agencies stress upon the aim of equitable
distribution and access to health care. Governments are also forced to reduce
subsidization of basic goods and to decrease budgets for the provision of health
and social services.
All this and its implementation, places urgency on the
development of additional methods to finance the development of the health
services system and of the health care.
The new trend of private inputs into the health sector reflects an increase in
consumer involvement, through various cost sharing mechanisms like user
charges or regular prepayment viz. 'Health Insurance'.
1.2 What is Health Insurance?
Legally Insurance is defined as the contract between Insurance Company
(Insurer)
and the customer (Insured). In this legal contract, the insurer agrees to
2
indemnify (compensate) the insured in lieu of payment of premium, for any
financial loss due to risks covered in the Policy (Mahal, 2002).
HI rests on three grounds; that illness cannot be predicted, hospitalization costs
cannot be planned and the proportion requiring hospitalization in any large
population is small and therefore permits risk pooling (Cumber, 2000).
Although, the mechanism is simple, a more complex picture emerges, due to the
following reasons There are various players at each stage of the process, both Individual and
Institutions and Government and private.
Variations in the range of care provided like serious sickness; routine
treatments, private care.
It leads to expensive and complex administering functions, like- Contracts
between TPA and service providers, systems for assessing insurers and
collecting contributions, systems for making agreements with providers and
monitoring their performances, information system for recording payments,
details of including contributions and service providers and management of
insurance fund itself.
It is likely to experience more problems because of imperfection in the
insurance market.
1.2 Importance of Health Insurance
Besides the well known advantages of attracting additional money for health,
procuring better value for money by increasing efficiency, improving the quality
of health care and above all targeting health care; it benefits individual and the
society in various ways.
3
Benefits tp_individual - It makes savings achievable i.e. a saving program can
yield only a little in the beginning of saving, while the insurance policy
guarantees the full value and other benefits spelt out in the policy right from the
beginning. It develops a semi compulsory saving plan, which adds extra
efficiency to one's performance and enables him/her to generate extra wealth. It
also relieves the policyholder of all the worries and tensions and hence
contributes to his/her efficiency.
Benefits to the society - The pooled funds contributed by individual are lent to
government, business, etc. in the form of loans. It also facilitates economies of
scale in investment and ensures efficient use of the accumulated capital.
The most important advantage of Health Insurance is that it assures timely aid
for (hospitalized) treatment, to those who need it, using this mechanism. To
provide health facilities to all is one of the functions of a government. Health
insurance is one of the ways that helps in achieving it
However, actual experiences from different countries shows that -
gs It might be an unrealistic aim to attract additional money. Because of absolute
scarcity of resources people cannot afford to pay more towards their health
care.
The high cost of administration and the difficulty of collecting payments are
crucial issues in low-income countries, because there may be weaknesses in
the infrastructure and management capacity.
4
GQ A large population is often in informal employment sector (agriculture &
labour work) and scattered geographically. All this renders hindrances in
premium collection. Insurance also depends to a large extent on a number of
factors, viz. fluctuations in employment, the nature of labour market, the state
of economy in general, which are problematic in developing countries. Thus
it is difficult to universalize health insurance.
G8 Insurance tends to make health care expensive because of behavior of
providers leading to cost escalation and members leading to moral hazard
and adverse selection.
G8 It may encourage growth of hospital services and high technology care in
urban areas, as it would be more profitable and easier to manage. There may
be inappropriate use of these resources in low-income countries where basic
services for rural residents are still inadequate.
gs
As there are very few players, improved efficiency due to competitive
pressure is less likely.
1.3 Emergence of Health Insurance in India
Kautilya related the levels of risk and uncertainty to levels of profits and
interests. He had indicated that the higher levels of risk and uncertainty must
be compensated by the probability of receiving higher profits and interests
(Sarkar Sam).
Insurance business is not new to India. It finds mention in the writings of Manu,
Rishi Yagnavalkya, Kautilya and others, indicating that it has existed in India of
5
ancient times. It has evolved over time and has drawn heavily from the
experience of other countries specially England, where insurance companies
have a more than 500 years of history. Bombay Life Assurance Company was
established in Bombay on 1st May 1823. Europeans started Oriental Life
Assurance Company in Calcutta. The General insurance business in India, on the
other hand, can trace its roots to the Triton Insurance Company Ltd., the first
general insurance company was established in the year 1850 in Calcutta by the
British. The recorded history of Insurance business in India, however, began in
1914 when the Government of India started publishing returns of Insurance
Companies in India.
The Insurance Amendment Act of 1950 abolished Principal Agencies. However,
there were a large number of insurance companies and the level of competition
was high. There were also allegations of unfair trade practices. The Government
of India, therefore, decided to nationalize the insurance business. An Ordinance
issued on 19th January 1956 nationalized the Life Insurance sector and 'LIFE
INSURANCE CORPORATION OF INDIA1 (L.I.C.) came into existence in the
same year.
Before November 1972, a number of Indian and foreign companies were into
general insurance business in India, which was linked with their branches
abroad. Nationalization saw the business of all these organizations absorbed by
the GENERAL INSURANCE CORPORATION (G.I.C.) with its four subsidiaries,
viz. - The New India Assurance, The United Insurance, The Oriental Insurance
and The National Insurance.
General Insurance Corporation of India in the field of general insurance has
enjoyed absolute monopoly. However, the reforms in financial sector in the early
6
90s have since touched Insurance also. The Government of India set up a
committee with Shri R.N. Malhotra as the Chairman to recommend suitable
reforms in this sector. As a consequence of the recommendation of the Malhotra
Committee, the Government of India set up an Insurance Regulatory Authority.
On the 2nd December 1999, Indian Parliament passed, 'Insurance Regulatory and
Development Act', throwing open the Insurance sector to Banks and other
private parties. RBI then came out with draft guidelines for entry into this sector.
This is seen as a major step in financial sector reforms, which has introduced an
element of competition in this sector.
1.4 Privatization and its Repercussions
It is believed that privatization will bring customers into limelight and array 3
core features (Dasgupta, 1998)1. Relationship between Insurance companies and financial intermediary and
customers will be strengthened.
2. Services will be more flexible and innovative, tailoring to the needs of the
customers. Health insurance companies will design buyer friendly products
and customers will be able to choose from a wide range of services.
3. It will provide efficient and professional services.
The experiences in liberalizing the private health insurance suggest that it has
undesirable effects on the costs of health care. The Healthy Policy Development
Network at Indian Institute of Management, Ahmedabad, recognizes that health
sector policy formulation, assessment and implementation, is an extremely
complex
task
especially
in
a
changing
technological and political scenario.
7
epidemiological,
institutional,
Further, given the institutional complexity of our health sector programs and
pluralistic character of health care providers, health sector reform strategies that
have evolved elsewhere may have very little suitability to our country's
situation. 8
Cross-subsidy is the heart and soul of insurance, the well subsidizing the ill.
However, the logic of private enterprise is to maximize profit, which means
discriminating between risk categories, fragmenting the market into high risk
and low risk, like - insurance premium increases when one crosses the risk
threshold at the age of 40 and skyrockets when one enters 60's and excludes pre
existing conditions like chronic illness.
Thus social undertaking is being subverted by a process of fragmentation and
individualization of risk whose logical end point is its own antithesis: The sick to
bear their own cost burden of illness, the healthy to rejoice in their good fortune.
(ET, Sep 28, 2000; Existing problems and a new face for medical insurance)
The Blue Cross / Blue Shield was left carrying the baby i.e. elderly and sick
with high premium. The Blues eventually introduced the their own risk rating
to remain viable. (ET, Sep 28, 2000; Existing problems and a new face for
medical insurance)
1.5 Existing Scenario
"
------------------
The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market again.
Tracing the developments in the Indian insurance sector reveals the 360-degree
turn witnessed over a period of almost two centuries.
8
In India only about 2 per cent of total health expenditure is funded by
public/social health insurance while 18 per cent is funded by government
budget. In many other low and middle income countries contribution of social
health insurance is much higher.
It is estimated that the Indian health care industry is now worth of Rs. 96,000
crore and expected to surge by 10,000 crore annually. The share of insurance
market in above figure is insignificant. Out of one billion population of India, 315
million people are estimated to be insurable and have capacity to spend Rs. 1000
as premium per annum. Many global insurance companies have plans to get into
insurance business in India. Market research detailed planning and effective
insurance marketing is likely to assume significant importance. Given the health
financing and demand scenario, health insurance has a wider scope in present
day situations in India. However, it requires careful and significant effort to tap
Indian Health Insurance market with proper understanding and training.
There are various types of health coverage in India. Based on ownership the
existing Health Insurance schemes can be broadly divided into categories such
as; Government or State-based systems. Market-based systems (private and
voluntary). Employer provided insurance schemes. Member organization (NGO
or cooperative)-based systems.
Government or State-based systems include Central Government Health Scheme
(CGHS) and Employees State Insurance Scheme (ESIS). It is estimated that
employer managed systems cover about 20-30 million of population. The
schemes run by member-based organizations cover about 5 per cent of
population in various ways. Market-based systems (voluntary and private) have
Mediclaim scheme which covers about 2 million of population. However, many
private players have recently entered the market. There are many employers
9
who reimburse costs of medical expenses of the employees with or without
contribution from the employee. It is estimated that about 20 million employees
may be covered by such reimbursement arrangements. There are several
government and private employers such as Railway and Armed forces and
public sector enterprises that run their own health services for employees and
families. It is estimated that about 30 million employees may be covered under
such employer managed health services (Bhatt, 2002).
General Insurance Corporation (GIC) and its four subsidiary companies and Life
Insurance Corporation (LIC) of India has various health insurance products.
These are Ashadeep Plan II and Jeevan Asha Plan II by Life Insurance
Corporation of India and various policies by General Insurance Corporation of
India as under: Personal Accident Policy, Jan Arogya Policy, Raj Rajeshwari
Policy, Mediclaim Policy, Overseas Mediclaim Policy, Cancer Insurance Policy,
Bhavishya Arogya Policy and Dreaded Disease Policy. The health care demand is
rising in India now days. It is estimated that only 10 per cent of health insurance
market has been tapped till today. Still there is a scope of rise up to 35 per cent in
near future. The most popular health Insurance cover is Mediclaim Policy. Thus
the focus of this study has been on "Mediclaim/ 9
1.6 Problems in the existing scenario
Apart form the strict IRDA regulations the insurers face a number of problems in
India, which prevents them from entering the market. Absence of provider
network company, increasing trend in incurred claims ratio, inadequate pre
insurance health check up, provider malpractices, disparity in coverage of
seniors, patients psychology - specific to India are some of the problems
inhibiting the growing insurance sector. Even the insureds are not in a
10
comfortable position in India. They face few problems, which compels them to
think twice before going for Insurance. Absence of provider network, medical
assistance, viability to get admission in the hospital of choice, formalities of
admission, deposit payment, avoidable investigations are some of such
inconveniences faced by the insured. Anecdotal evidence from doctors also
indicates that charges are increased if patients are insured. This will tend to
increase the prices of private health care thus hurting the uninsured. With these
conditions existing, the responsibility lies both on the government and the
insurance regulatory authority to improve the health conditions in India and
Indian insurance sector respectively.
1.7 Need for Health Insurance in India
Today people are more at risk than their ancestors. The physical and economic
security provided by joint families is extinct. Moreover, people due to the fast
paced life are getting more vulnerable towards ill health, accidents, death,
desertion, social disruptions such as riots, loss of housing, job and other means of
livelihood. In such a changing scenario individuals and families need to be
prepared to face personal losses from incapacity.
The cost of medical care and treatment have also soared to new heights in recent
years and is expected to rise even further in the years to come. The introduction
of new technology has further added to the rising expenditures. Under the
present health care system even the families above the poverty line will be
pushed below the poverty line if a major illness occurs in a family. A Chinese
Health survey conducted three years ago revealed that 40% of entrants to the
poverty was attributed to illness 9. A substantial number of people have fallen
below poverty line due to catastrophic health expenditures in rural India.
11
Insurance provides defense against such disasters. Although, it cannot make up
for the potential loss caused due to health contingency, it can minimize the
financial losses due to such occurrences and thereby reduce tension and anxiety.
Besides, in recent years there has been tremendous increase in private health
expenditure. Studies have also indicated that the public prefers private health
care facilities than public hospitals. Mckinsey shortlisted 80.8 million households
primarily on their ability to pay insurance premia. Of this, 20.5 million
households are already insured in some form or the other leaving a market of
60.3 million households that can be insured. Thus, if this population is covered
by Private Health Insurance Schemes, the pressure on the social welfare system
will also be relieved, thereby allowing the government to put the saved resources
to a better use, especially for the poor.
____________________ ___________________________
“ Health Insurance is virtually the only practical instrument governments can
use to get out of the expensive business of providing across-the -board
subsidies for hospital care" (Shaw & Griffin, 1995)
1.8 Other Studies on Health Insurance
The various problems exclusive to Health Care Market, especially for Health
Insurance makes it essential to be explored both at macro level to study the
feasibility and viability of the Scheme and at micro level to understand the utility
and the demand by people. A number of studies have been carried out to explore
more about this field.
A WHO book, 'Co-operation in the development of Health Insurance', states that
the pressures generated by health, political, social and economic development
12
have stimulated interest in finding alternative ways to finance Health Care. A
macro level cross country analysis (Preker, 2002) explores potential policies for
tackling managerial, organizational and institutional weaknesses in community
financing, rather than trying to replace them with direct government
intervention, which has often proved unsuccessful. Some of the studies (WHO,
1993; Monash, 1998) examine various impacts on health financing, including
Health Insurance, which helps in gaining an insight into these contentious issues.
For instance (WHO, 1993) the political clout in China led to the development of
rural Health Insurance Scheme in order to replace the Co-operative Medical
Schemes. Similarly with the establishment of a multi party in Zambia, the
concern for Health Development was accelerated.
A WHO document (Monash, 1998) brings together and analyses 82 Schemes that
seek to promote risk sharing of the costs of health care for persons outside formal
sector employment. The document does not canvass any specific scheme, rather
suggests that what matters most is how well the design of a scheme responds to
the local conditions. It states that an understanding of the local, national,
economic, political and social context is fundamental to any analysis of the
purpose and performance of a risk sharing scheme and is essential to identify
barriers or opportunities for replicating that scheme elsewhere. The Health
Insurance Scheme in East & South East Asia and Taiwan emanated when the
economy was booming. The small size of local villages and their cohesiveness
due to opposition to colonial powers has been contributing to the success of
Health Insurance Scheme. In some instances (Monash, 1998), when NGO or the
government failed to consider the links to broader health care system, the
Insurance Schemes collapsed badly. Like the Bengali Scheme in India and the
NGO CIMIGEN in Mexico failed to generate the necessary and anticipated
demand for health services.
13
Experiences from other countries suggest that the entry of private firms into the
Health Insurance Sector if not properly regulated, does have adverse
consequences for the cost of care, equity, consumer satisfaction, fraud and ethical
standards (Razvi, 2001).
Health Insurance is not an easy panacea. International experience shows that
health insurance is a complex technical exercise with many pitfalls. States in
India need to be very careful about rushing into Health Insurance schemes
because in other parts of the world such as ex- USSR countries, Philippines,
etc., attempts to introduce US or Northern European style insurance schemes
have been very slow to operationalise.
- Dr. Christopher Potter, European Commission.
A World Bank publication by Bong-min Yang analyzes the efficacy of the
national health insurance (NHI) system in the Republic of Korea and the role
played by the private health sector in the provision of health care services. The
Korean example suggests that while private-sector participation in NHI is
important, appropriate institutional mechanisms should be put in place to
control system costs and to provide affordable access to low-income groups.
The various challenges, opportunities and concerns in Indian Health Insurance
market are explored in his article by Ramesh Bhatt (2000). An assessment of
private Health Insurance by Ajay Mahal (2002) states that the privatization of
Health Insurance could have adverse implications for some of the goals of health
policy, particularly for equity. However, an informed consumer and well-
defined and implemented insurance regulation regime could potentially address
many of the bad outcomes. Deepanjan Banerjee (2001) in his article emphasizes
on the need for privatization of the Insurance Sector and elucidates how the
14
Health Insurance policy in India has been a burden of inefficiency of a
government run system.
Some of the studies (Krishnan; Reddy, 1995) also suggest some alternatives; Prof.
K. N. Reddy examines the existing health care system, which he considers is
entangled in political and bureaucratic circles. He emphasizes on the need for
National Health Insurance to reform health care in terms of financing,
organization and delivery for speedy improvement in health status and to
increase human development index in the comity of nations. He proposes on the
urgent need for a detailed study on the feasibility of National Insurance.
Based on a study of rural India, T. N. Krishnan proposes a hospitalization
Insurance plan for people below poverty line. He estimated total cost of 900 crore
for hospitalization coverage for 300 million persons. This amount can be
provided by government as a part of anti-poverty program, which can be found
from unspent savings under anti-poverty programs currently in operation or by
a reallocation of expenditures. The protection provided to a poor family against
hospitalization will be far greater under an insurance scheme, than if the
calculated average premium were to be given directly to the family. It is pointed
that in anti-poverty program like Jawahar Rozgar Yojana the minimum leakage
is about 40%. In case of hospitalized insurance there will not be any such largescale leakage and the poor will benefit to the full extent.
Few micro level studies (Preker, 2002; Cumber, 2000) have also been conducted
to explore the demand side. Micro level household data analysis from Asian and
African regions indicates that community financing improves access by rural and
informal sector workers to needed health care and provides them with some
financial protection from the cost of illness (Preker, 2002).
15
As shown by the study of Cumber and Kulkarni (2000) among the members of
SEWA, ESIS and Mediclaim schemes, information, knowledge and awareness of
existing insurance plans is very limited 7. At the micro level there are few Case
studies done (Dave, 2000; Cumber, 2000); SEWA's Health Insurance Scheme for
women of rural Gujarat. The case study of Gujarat by Cumber shows that the
Insurance Companies are ill equipped to handle the present day complexities,
especially in the context of lower income groups. The bureaucratic rigidities and
poor monitoring mechanisms make it difficult for the poor to continue with these
schemes. However, the case study on SEWA Social Health Insurance Scheme
was successfully managed by the diligent efforts of the community and the
Insurance Company.
A micro level study to examine the willingness to pay in rural Karnataka by K.
Mathiyazhagan suggests an alternative framework for designing a viable rural
Health Insurance Scheme in India. A study conducted in Delhi City by Gupta
Indrani (2000) revealed that the willingness to participate in Health Insurance
Schemes differed according to the nature and period of their coverage, premium
for adults and children, withdrawal amounts and if the unused fund would be
returned in future.
1.9 Need for this study
A large number of studies are carried out at the macro level, while very few are
done at micro level. Most of the micro level studies are case studies. Even the
empirical studies based on survey design are focussed on rural areas and
community based social insurance. A huge potential for the Health Insurance
market lies in the cities. Around 50% of India's strong middle class of 27 crore
population can as well afford private health care 26. It is also seen that the
16
demand for quality health care is increasing due to increasing health awareness
as result of increased literacy levels, increasing economic activity and increasing
investments as a result of increased life expectancy. In this emerging picture
Health Insurance is seen as a potential area for high growth in the coming years.
Thus it becomes indispensable to know the relative importance given to Health
Insurance by this potential segment of the population.
Chapter 2
Objectives And Methodology
There is no short cut to truth, no way to gain knowledge of the universe except through
the gateway of scientific method.
Karl Pearson.
India has about 22% savings rate of which less than 5% is spent on insurance. Of
this 5% a very small proportion is spent on Health Insurance. As already
mentioned in Chapter 1, Health Insurance can be seen as a prospective tool to
address some of the crucial problems related to financing in health sector. With a
poor penetration of Health Insurance in India in comparison to other countries
and looking at the huge population of India and about a quarter of them being
17
viewed as potential consumers of Insurance, the curiosity of the researcher was
aroused to conduct a study assessing the demand for Health Insurance.
2.1 Aim of the study
"To Assess the demand for Health Insurance in the middle and the upper middle
class population of Mumbai suburbs and the extent to which the existing
schemes satisfy it."
2.2 The objectives of the study
1. To assess the awareness level regarding health insurance.
2. To study the nature of requirements of health insurance.
3. To assess the level of satisfaction among the claimants.
4. To study the existing popular health insurance schemes and their ability to
meet the demands of people.
Like any other product or service that is traded in the market, insurance besides
being influenced by the factors like economic security of human life, diminishing
nature of economic value is also subjected to the laws of supply and demand.
The higher the price lower the demand and higher the supply and vice-versa.
The behavior of buyers is based on the goal of maximizing the utility gained
from the purchase and consumption of the good. As prices fall, holding income
constant, the buyer finds that his/her purchasing power has increased allowing
for buying greater quantities of a particular good. For the consumer, additional
quantities of a good consumed provide less additional satisfaction relative to
previous units consumed, with the consecutive fall in price. This notion known
18
as diminishing marginal utility implies that the consumer is willing to pay less
for these additional units as it becomes more efficient to use his/her income for
the purchase of other goods. For the buyer, these types of behaviors typically
lead to a negative relationship between the market price and quantity
demanded. The increase in income however increases the demand. This is
known as demand analysis.
The quantity demanded is sum function of the price of the good, the prices of
other related goods, income and the organizational and institutional structure of
society and preferences and tastes of individual, which will depend on many
socio-economic factors and attitude.
2.3 Why demand analysis?
Demand reflects individuals' wants, backed by a willingness to pay for them.
However, in the health care sector, the consumer decisions are influenced by the
supplier's preferences. Moreover, the imperfections in the Health Insurance
market not only leads to the poor performance of the industry, but also poor
consumer satisfaction.
Maximum population must be covered under Health Insurance Scheme, so that
they have an access to medical care whenever they need it. If people are not
getting insured we need to know the reason behind it.
The Insurance Company may carry out consumer Analysis to tap the right
potential for the sale of their products. But, it is equally essential to know the
same thing from a buyer's perspective i.e. the need and want of people must be
known, without an underlying motive of selling the product. Thus the justifiable
19
and unjustifiable demand of people would be explored without trying to
manipulate them.
This chapter is divided in to 4 sections; the first one includes area of study,
sampling, data sources, data collection techniques, etc. The second section
describes the methodology. The third section discusses the approach to analysis,
while the fourth section gives a brief outline of the entire study.
2.4 Methodology
Western Mumbai Suburb is selected for the study. Mumbai houses a large
number of middle and upper middle class population, with specific pockets of
residential areas; which can be easily identified as middle class or upper middle
class sections of the society. As mentioned in the need for the study that the
affordable class of the society i.e. the middle and upper middle class have shown
an increased demand for health care services especially for private services; this
segment of the population, were considered as the target respondents.
2.4.1 Study Design
A Survey Design was adopted to collect all the relevant information. The middle
and the upper middle class people were interviewed to know the demand for
Health Insurance. From the initial survey it was revealed that the most popular
Health Insurance Scheme among people is Mediclaim and following it is CGHS
and ESIS. Due to time constraints and non-availability of key person who could
furnish the required information for ESIS, CGHS was chosen for study. Thus, it
was decided to study Mediclaim and CGHS, in order to know as to what extent
these schemes satisfy the needs of the people. The Third Party Administration is
20
playing a key role in Insurance Sector and hence a need was felt to study one of
them.
2.4.2 Sampling
49 respondents from different households, 16 claimants and 1 official each, from
CGHS and a subsidiary of Mediclaim, and 2 officials from a Mumbai based TPA
were interviewed.
The non-claimants were selected through snow ball sampling. A respondent is
first selected who gives references of others who might be interested in the
subject under study, who further gives more references. This is how the entire
sample is selected. 50 such samples were selected through this technique. As
already mentioned since each of the sample units was determined by the
previous respondent, the last respondent did not seem to be keen in the subject
and his responses were found to be invalid and hence is not included in this
study. Thus, the total number of respondents turned out to be only 49.
A list of around 20 claimants was taken form an insurance company, their phone
numbers were traced by telephone directory and a telephonic interview was
conducted. As all of them could not be traced and some refused to respond, only
16 of them were interviewed.
Since the idea of interviewing the representatives of the insurance companies
was just for understanding the supply side logic of the problem, it was not
considered essential to interview the officials from all the subsidiaries of the
General Insurance Corporation.
Thus, only one among the four of the
subsidiaries of General Insurance Corporation was selected. The rationale for
21
selection of CGHS and one TPA has already been mentioned. In order to garner
the prerequisite information, any official who could provide it, was approached.
The methodology for different objective is different. To achieve the first two
objectives of assessing the awareness about Health Insurance and the nature of
requirements of Health Insurance a wide range of information was needed. In
order to garner all the required information on demographic characteristics,
social environment, social influences, opinion and attitude influencing the
demand for Health Insurance, a general survey was conducted. Each of the
respondents was interviewed for about 30 to 40 mins, and a wide range of
questions were asked, the responses of which were elicited by probing. A
contingent valuation or hypothetical qualitative response was initially tried to
reveal the responses on the willingness to join and pay. However, it could not be
exercised as the respondent felt offended when offered with a hypothetical
situation of health emergency of their near and dear ones.
To achieve the third objective of assessing the satisfaction among the claimants, a
telephonic interview was conducted. Each of the claimants was interviewed on
the telephone for about 40 mins, and the same questionnaire was used as that for
the other respondents. Some responses pertaining to the settlement of the claims
were elicited more in details.
To collect the relevant information about the popular Health Insurance Schemes
and to understand the extent of their pliability, few officials from Insurance
Companies and TPAs were interviewed. Each of the officials was interviewed for
about 1 hr. to 4 hrs. They were asked not only about the schemes but also about
their general opinion about the schemes, the Health Insurance market and on the
recommendations suggested by the respondents. These interviews were
T1
preceded
by
the
survey
and
hence
it was
possible to
discuss the
recommendations of the respondents with the representatives of the Insurance
Companies and TPAs. The data thus obtained was analyzed both quantitatively
as well as qualitatively.
The Primary data comprises of all the information collected from the 65
respondents i.e. people from middle & upper middle class and few officials form
insurance companies and TPA's.
The Secondary data was collected form various manuals, write-ups of the
companies, general write-ups on health insurance sector and also from Internet.
These were the information about the Schemes under study in order to get a
holistic picture of the same; the Health Insurance Sector in general to gain an
understanding of the basic concept and principles of Health Insurance and also
to know about other relevant studies conducted and to know about the
experiences from other nations and schemes.
3 types of Interview Schedules were prepared -1 for the general respondents, 1
for the officials from the Insurance Company and 1 for the officials from TPA.
The interview schedule meant to elicit responses from a lay man was pre-tested
in order to ascertain the content and the validity of the questions asked. After
pre-testing, realizing the need to alter the questionnaire some changes were
made. The questionnaire, which was initially more semi-structured, was further
structured to facilitate probing and give directions to the interview. However
the schedule is not totally structured. As the study, is concerned with attitudes
and perceptions about Health insurance of a common man, enough space and
flexibility is rendered to elicit the responses.
23
The schedule designed for insurance companies and TPA's has slight variations,
as per the context in which they function. These are semi-structured with no
multiple-choice items.
They could not be pre-tested due to restrictions in
repeating the same interview in the same organization. However, the questions
were modified in the field, during the interview to suit the context.
2.4.3 Approach for analysis
The awareness level is assessed by using 2 parameters i.e. people have heard of
health insurance or not heard of it and how many schemes do they know. Each
of these parameters will be weighed against various variables like age, sex, socio
economic
status, employment status, education,
etc
and expressed in
percentages. To further explore what people understand by Health Insurance
they were asked about their basic understanding of the concept and these will be
clubbed and expressed in proportion of the total. Each of these categories would
reflect specific attitude towards Health Insurance.
The respondents were asked, if they would need Health Insurance and these
responses will again be compared with all the variables. The relation between
awareness and need will thus be examined.
The responses on the willingness and non-willingness to pay will again be
compared with all the variables and a relation between awareness, need and
willingness to pay and preference for Health Insurance will be explored to assess
the demand. The utilization pattern i.e. the coverage under Health Insurance by
different class, age group etc. further aids in assessment of demand for Health
Insurance. The annual expenditure on health services will further be examined
against the premium rates paid by the insured, in order to assess the effect of
24
prices of other products viz. expenditure on ambulatory care and medicines on
the demand for Health Insurance.
Each of the respondents was asked to express their opinions and suggest
recommendations as per their demand. The opinions will help in descriptive
analysis. The recommendations will be clubbed and the relative demand would
be assessed i.e. which of the components of Insurance Scheme are satisfying the
demand and the change in which component would bring a change in the
demand. The demand analysis will been aided by Scaling the demand with the
help of Bogardus Social Distance Scale.
2.5 Outline of the Study
Each characteristic of the 65 respondents are explained, which is followed by the
description of the scheme selected for the study. This information is collected
directly from the officials, while the sources are both primary and secondary.
Secondary information was obtained from manuals and write-ups. This is
covered in Chapter 3. This chapter helps the reader in understanding the sample,
under the study.
Chapter 4 covers demand side analysis. In order to logically analyze the demand
for Health Insurance initially the awareness level is assessed which follows the
morbidity pattern, health expenditure, health-seeking behavior among the
respondents. The awareness assessment is followed by need assessment, which
eventually leads to demand assessment. The utilization of services i.e. coverage
for Health Insurance and preference for Health Insurance in comparison with
Life Insurance further helps in demand analysis. This chapter focuses only on the
demand (justifiable, unjustifiable) of the people for Health Insurance.
25
Chapter 5 deals with Supply side Analysis, with a background of general
principles and constraints in Health insurance market. It describes the
satisfaction level in claimants (i.e. Consumer Satisfaction) which is followed by
the analysis of recommendations by the respondents. The chapter concludes by
mentioning as to what extent the schemes satisfy the demand of the people and
which components can bring about a change in the demand. The focus of this
chapter is on what demands can be met by the suppliers.
Chapter 6 presents summary and recommendations.
Chapter 3
Contour Of The Sample
The Sampling enquiry gives significantly correct results with much less time, money and
material.
S. R. Bajpai
Mumbai was founded as a trading town and it has remained focused on the
business of business ever since. As the country's busiest port and largest financial
centre, it effectively remains the commercial gateway between India and the rest
of the world. Parsis and Gujaratis dominate the city's economy and Gujarati is
the lingua franca of business. Marathi-speaking Maharashtrians traditionally
formed the bulk of the city's labour force, though today many are white-collar
workers and members of the growing middle class. Like most maturing cities,
over the past few decades Mumbai has shifted from its manufacturing base to
become a centre for financial and commercial services. Over two-thirds of the
city's workforce is now employed in the service sector and Mumbai is home to
the country's largest stock exchange as well as the Reserve Bank of India. A third
of the city's population still works in large-scale industries such as textiles,
engineering, petrochemicals and pharmaceuticals. The city's also renowned for
specialist fields such as film production, diamond cutting and computing.
26
Mumbai's economic muscle is backed by productive offshore oil fields, a nuclear
power station and several of the country's top research establishments. The
statistics trotted out to back up Mumbai's claim to be the centres of Indian
capitalism are rubbery but impressive. It's said to contribute nearly half of the
country's excise tax, a quarter of its income tax, and a fifth of its gross domestic
product and more than three-quarters of the country's stocks are listed on
Mumbai's Bourse. In 1998 Business Today, a leading business publication in
India ranked Mumbai as the second best city in India in which to do business.
In this fast growing city, the income dependency and wealth acquiring style of
people have put them more at risk to external changes over which they have no
control.
3.1 Area of study
Mumbai is divided into straight lines in terms of places starting from South
Mumbai to North Mumbai. Also Mumbai Suburbs are known as East or West as
per their location on either side of the railway tracks.
The Mumbai suburbs on the Western line begins from Mumbai Central, with the
'Queens of suburbs' - Bandra at it's heart, terminating at Dahisar for octroi
limits, beyond which the railway lines move on to Virar in Thane district; (which
covers almost a distance of 147 kms). The Central suburbs extend from Chembur
to Thane. The study area was however restricted to the Western suburb. The
Municipal Corporation of Mumbai for the convenience of administration has
divided the Mumbai district into 24 wards. The Western suburbs are represented
27
by the wards from F to R, excluding L, M & N, with approximately a total
coverage area of about 124 sq.km and population of 40,43,575 (Census, 1991).
3.2 Why Mumbai suburbs?
Mumbai suburbs contain large pockets of residential belts. The middle and
upper class conforms a large section of this society. The factors likely to affect
their perception like education and occupation are also variegated. The locale
ensured the availability of a heterogeneous group in one place, thereby allowing
the researcher to explore more varied responses in the limited time.
3.3 Sample Selection-
The voyage of exploratory study on the perception of Health Insurance began
from Mumbai suburb of Borivali and took its course through the western line to
Mumbai Central. As already mentioned in the Chapter 2, Snow Ball Sampling
technique was adopted to select the samples.
Criterion for selection of the sample unit
Selection of non-claimants - All those who are above the age of 20 yrs, who
are genuinely interested in the subject and from the middle or the upper
middle class family were selected for the study. 49 such respondents were
selected through snow ball sampling.
Selection of claimants - All those who have claimed for reimbursements of
hospitalization expenses, irrespective of whether their claims are settled or
not were selected for this study. 16 such claimants were selected through the
list obtained from the Insurance Company.
28
Selection of the officials from Insurance companies and TPA - Any official
willing to provide the required information and keen in discussing the
concerned issues were interviewed. According to the convenience of these
officials after fixing a prior appointment, all the needed information was
collected from 4 officials -1 from a subsidiary of G.I.C., 1 from CGHS and 2
from TPA.
As the sample size is not even an iota of the large population none of the above
mentioned samples are truly representative. However, within the constraints an
endeavor has been made to make the sample as representative as possible. The
sample is stratified based on different set of criteria like claimants/ non
claimants & based on organizations in which the respondents are employed. This
helps in getting a comprehensive picture, with high probability of eliciting varied
responses.
3.4 Sample Profile
3.4.1 Gender Specification
The proportion of gender was not predetermined, as all those available at home
within the purview of the inclusion criteria were interviewed irrespective of their
gender. Differences in perception and insured sum, as per gender differentials
needs to be explored, for which it becomes mandatory to know the proportion of
male and female respondents.
Table 3.1: Gender distribution of the 65 respondents.
29
Particulars
Gender
Male
No.
of 40
Female
Total
25
65
38.5%
100%
respondents
Percentage
61.5%
40 males and 25 females were interviewed who comprise 61.5% and 38.5%
respectively of the total. The interviews were conducted after fixing an
appointment. Thus all the men in the house could be interviewed. Some women
were reluctant to communicate, as they felt that they lack knowledge about
investments and it is the male folk who take such decisions. Some women
although keen in the subject could not spare time because of the household
chores, following hectic office work.
The sample is thus biased towards male.
3.4.2 Age distribution
The sample is confined with minimum age limit of 16 years, but with no upper
limit. A basic level of erudition in terms of experience, literary or maturity; was
identified as a prerequisite for the selection of the respondent. Although
schooling was not fixed as a criterion, the above mentioned age limit would
allow the individual substantial time to have gained wisdom.
Table 3.2: Age distribution in different genders.
Age in years
20-35
Gender
Male
Female
Total
12 (30%)
18 (72%)
30 (46.15%)
30
36-55
16 (40%)
6 (24%)
22 (33.85%)
56-75
12 (30%)
1 (4%)
13 (20%)
Total
40 (100%)
25 (100%)
65 (100%)
Of the total women interviewed, maximum 72% are from the younger age group
of 20 to 35 years; whereas the proportion of men in different age groups is
largely uniform. In the age group of 20-35 yrs., the proportion of men is 30%
while that of women is 72%; 40% of men and 24% of women fall in the age group
of 36-55 yrs.; and only 4% of women, while 30% of men are from the category of
56-75 yrs. of age.
The choice of making the groups is determined by the consideration of risk of
illness, involved in different age groups. The individuals in the age group of 2035yrs. are less vulnerable to ill-health, while those above 55 are more vulnerable
to ill-health. Moreover, the middle age is a more stable period when most of the
investments are made for future security, making headway towards old age i.e.
towards chronic ailments. Thus the propensity to utilize the health care services
increases in the later stage of life. All this is manifest in their perception.
As the proportion of women in the younger age group is larger, the sample is
biased towards young, which will have its implications in analysis. However,
this effect will be nullified to some extent through male responses.
31
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3.4.3 Educational Qualification
None of the respondents have less then secondary level of education. Albeit,
criteria of illiterate; primary, up to 4th std; secondary, up to HSC; graduate and
post graduate were made; the first two stand invalid.
Table 3.3: Educational qualification of the respondents as per gender differentials
Educational
Gender
Qualification
Male
Female
Secondary
2 (5%)
2 (8%)
4 (6.15%)
Graduate
23 (57.5%)
16 (64%)
39 (60%)
Post graduate
15 (37.5%)
7 (28%)
22 (33.85%)
Total
40 (100%)
25 (100%)
65 (100%)
Total
Of the total men, 57.5% are Graduates, while only 5% have only secondary
education. 64% of women are Graduates. The high level of education can be
attributed to the fact that the respondents are from middle and upper middle
class families.
3.4.4 Socioeconomic status
This is completely subjective, based on the discretion of the researcher, as it was
technically not feasible to elicit their exact income. Thus, those satisfying the
following criteria of1. Either serving as lower or middle level officials in private or public
organizations or retired from private or public service.
2. Living in 1 BHK flat in middle class societies, with any of the assets like
television, VCR, telephone, computer, refrigerator, 2 wheeler, etc.
32
3. Expenditures limited to basic requirements like education and health,
were clubbed as 'Middle income group'
Those satisfying the following criteria-
1. Businessmen or serving in public or private organizations as upper level
officials or retired as upper level officials.
2. Living in duplex 2 BHK flats in affluent societies, with assets as mentioned
above and car.
3. Spending on shares, lavish lifestyle like high expenditures on frequent
outings, were clubbed as 'Upper income group'
Table 3.4: Socio-economic status of the respondents with gender differentials.
Socio-economic
Gender
status
Male
Female
Total
Upper middle
15 (37.5%)
6 (24%)
21 (32.31%)
Middle
25 (62.5%)
19 (76%)
44 (67.69%)
Total
40 (100%)
25 (100%)
65 (100%)
32.31% of the total are from upper middle class and 67.69% are from the middle
class strata. More number of respondents of both the genders are from middle
class.
33
3.4.5 Family size
As the number of dependents increase in a family the income gets more widely
distributed, i.e. the expenditure increases; thereby affecting the attitude towards
insurance.
Maximum number of respondents i.e. 31% of the 65 respondents have 4 members
in their family (including themselves); while a very small proportion of
respondents, i.e.6.2% have a large family size of 6 members. Thus, it is very
obvious that the sample is biased towards smaller family size and more towards
those who have a family size of 4.
Table 3.5: Family size of the 65 respondents
Number
of
family Number of respondents
members
2
13
3
16
4_______________________ 20
5
12
6_______________________ 4
Total
65
of
Percentage
respondents
20_________
24.6_______
30.8_______
18.5_______
6.2________
100
3.4.6 Occupational status
The employment status manifests the ability to pay and to a great extent also affects their
perception. In order to ensure a proper representation of the sample from different
categories, the classification has been done as- unemployed, business, central government
employee, state government employee, Mumbai Municipal Corporation (MMC)
employee, private employee and retired. While selecting the sample a deliberate attempt
was made to ensure that all the categories would be covered. However, the categories do
not seem to be proportionately covered.
Table 3.6: Occupational status of the respondents.
Occupational status
Gender
Male
Female
Total
Unemployed
1 (2.5%)
4 (16%)
5 (7.69%)
Business
2 (5%)
2 (8%)
4 (6.15%)
Central government employee
11 (27.5%)
3 (12%)
14 (21.54%)
34
State government employee
2(2.5%)
2(8%)
4 (6.15%)
MCGM employee
3 (7.5%)
1 (4%)
4 (6.15%)
Private employee
17(42.5%)
13 (52%)
30 (46.15%)
Retired
4 (10%)
Total
40 (100%)
4 (6.15%)
25 (100%)
65 (100%)
The private employees are more in both the genders, summing to 46.15% of the total.
3.4.7 Insurance Schemes & TPA
The branch manager of a subsidiary of G.I.C., was interviewed more then once,
to collect the relevant data and to discuss on the various alternatives possible.
A Senior Medical Officer of Central Government Health Scheme (CGHS) was
interviewed to collect the relevant information.
2 Senior Medical Officers from a Third Party Administration were interviewed to
know more about their functions and prospective role in the market of Health
Insurance.
3.4.7.1 Mediclaim
It was realized that there are no schemes for a larger section of the population,
either employed in informal sector or private formal sector. Mediclaim was
introduced in 1986, with an objective of providing Health Insurance coverage to
this section of population.
Mediclaim is a reimbursement base insurance for hospitalization. It does not
cover outpatient treatments. First there used to be category-wise ceilings on
items such as medicine, room charges, operation charges etc. and later when the
policies were revised these ceilings were removed and total reimbursements
were allowed within the limit of the policy amount. The total limit for policy
coverage was also increased. Now a person between 3 months to 80 years of age
can be granted Mediclaim policy up to maximum coverage of Rs. 5 lakh against
accidental and sickness hospitalizations during the policy period as per latest
35
guidelines of General Insurance Corporation of India. This scheme is offered by
all the four subsidiary companies of GIC. Mediclaim scheme is also available for
groups with substantial discount in premium. To make the scheme more
acceptable government has exempted the premium paid by individuals from
their taxable income. This provides 20-40% subsidy on the premium to taxpayers.
However, as the Insurance Scheme would be available to anyone who is able to
pay the premium; the target population was too scattered and hence no market
surveys could be conducted.
Based on the general information about
demographic structure, morbidity pattern, hospitalization episodes, economic
condition, present expenditure on health, etc; the scheme was designed by few
experts based on mathematical model with premium rates calibrated according
to age of the individual. Different Group Insurance Schemes were designed with
expert opinion from the Insurance Company and from private firms. The benefits
provided and the beneficiaries covered i.e. spouse, family members, etc. in
Group Insurance is determined on the basis of contribution by the employers
and employees in private companies and the requirements of the Human
Resources Department of the firm. The strategy adopted is an outcome of mutual
consent. As the target population is too dispersed, it is difficult to monitor their
behavior or assess their level of satisfaction. However, as the profitability is
essential for the solvency of the Company, depending on the trends of the
previous claims made and profits/losses made, based on the actuarial system,
the premium rates with respect to age structure and conditionalities of the
scheme are revamped time and again. However, the Company has no specific
period in which the schemes have to be revised. Revamping of the schemes is
triggered by losses or by poor performance of the Company with respect to other
subsidiaries. The benefits were decided upon, based on segmented rates fixed on
per diem or per bed, per investigation, etc. But as hospital offer package deals,
these were conglomerated into package benefits, which is easy to manage. They
are also introducing various innovative schemes for confined target groups like
36
Raj Rajeshwari Mahila Kalyan Yojana, Overseas Mediclaim Policy, Personal
Accident Social Security Scheme, etc. All the Mediclaim subsidiaries are now tied
with TPA to provide more benefits to the insured and to introduce more
regulation into the field, for optimum utilization of resources.
3.4.7.2 Central Government Health Scheme
The Central Government Health Scheme (CGHS) was started in the year 1954 for
providing comprehensive medical facilities to the Central Government
employees and their family members. The scheme has since been extended to
cover other categories like Freedom Fighters, Central Government pensioners,
employees of semi-autonomous organizations and general public in Delhi.
The CGHS functions as a part of the Directorate General of Health Service. A
Committee known as Central Government Employees Co-ordination Committee
is formed which co-ordinates between all the departments and selects the panel
which would decide on the structure and design of the scheme. The Committee
also nominates doctors who are designated as AMA- Authorized Medical
Attendant. Based on the salary structure, the Scheme was categorized into 4
groups, viz.- A, B, C, D. The contribution to each of these groups would be Rs.
100, Rs. 80, Rs. 30, Rs. 15 per month, respectively.
Presently 40 Lacs beneficiaries are covered in 17 cities of India. There are 87
dispensaries in Delhi itself. There are 312 dispensaries including different
systems of medicine, viz. Homeopathy, Ayurvedic, Allopathic, Unani, Yoga &
Sidha till 31st March 1995. Doctors and staff are paid through salaries. General
physician refers cases to the specialist but there is also a direct consultation at
scale above Rs.4, 001/-Nursing home facility is also provided at scale of above
37
Rs. 2,501/-. CGHS provides outdoor treatment, necessary drugs, laboratory and
X-ray investigation at Dispensary/ Poly Clinic/Hospital. Domicilliary visits.
Ambulance services. Immunization facilities. Specialist services and referral
services of all Government hospitals are also recognized for consultation. By
order of 18th Sep., 1996, private hospitals have been recognized for specialized
and general purpose treatment and diagnostic procedures.
In order to prevent misuse and impose improved regulations all the beneficiaries
are provided a card which has a family photograph of the employee, stamped
and duly signed by the concerned employer. The reimbursement is directly
made by the Additional Divisional General of CGHS to the private hospital,
thereby avoiding cash transactions, a tight referral system is maintained, i.e.
patients cannot directly go to the hospital without a referral letter from the
physician at the dispensary and the beneficiaries are entitled to only certain
classes (like ordinary, deluxe, etc.) in the private hospitals depending on his/her
status.
Almost every year a survey is carried out for patient satisfaction. Only two patients are
interviewed in each dispensary and the data is sent to the head office of Mumbai from
where it sent to Delhi Head office. The method and the area of the study is decided at
Delhi by some officials and patients are interviewed by the doctors in the dispensary.
However no feed back is given or any changes brought about following the survey.
Strategies adopted in other countries are studied at present to bring about improvements
in the scheme.
3.4.7.3 Third Party Administration
In order to regulate the entire Health Insurance Sector, the TPA entered the
market with an objective to provide best health care, at best place and best cost.
In the wider sector with both the providers and the insurance schemes there was
a large gap that was realized and needed to be filled i.e. a gap of regulation.
38
standardization between the two. With insurance there was cost escalation of
health services and in the absence of regulating bodies or process, it would lead
to severe repercussions. To act as the mediator, to smoothen the process, as well
as to regulate the mechanism, which was the need of the hour, and seeing no
other potential players in the field, the organization felt the need to start such a
system. The numbers of beneficiaries are 2 lakhs and it has tied up with almost
900 hospitals spread out in 140 cities. It has recently tied up with the subsidiaries
of G.I.C. for Mediclaim. From its own previous experiences and others'
experiences, the Company devises new strategy and believes in continuous
learning and progression. It offers innovative, client focussed services dedicated
to developing creative, practical and customer benefit solutions for client's health
care requirements. The range of services that it offers are- Preferred Service
Provider Network, Cashless Medical Serivce Plan, Online Assistance Services,
Back office Services, etc.
3.5 Conclusion
Thus, of the total 65 respondents, 61.5% are men and 38.5% are women. A large
proportion of women are from the younger age group of 20 to 35 yrs., while the
proportion of men is evenly distributed in all the age groups. All the respondents
are educated, with maximum being graduates. 32.31% and 67.69% of the total
respondents are from the upper middle and the middle class group respectively.
Most of the respondents i.e. 31% are from nuclear family with the family size
being 4. The sample includes respondents employed in all the sectors, with a
majority of them (46.15%) being private employees.
39
Chapter 4
Exploring The Demand Side Of Health Insurance.
Life is said to be a process of change. Some even say that the only constant is "change".
Yet amidst this constant change, there are perhaps three things that are certain: death,
taxes and insurance.
Ever since the dawn of civilization, illness, chronic disability and death are perhaps the
most haunting elements of mankind. In the age of sky rocketing medical expenses more is
the anxiety, worry and fear.
The emphasis of this study is to assess the demand for Health Insurance in the
middle class and upper middle class population of Mumbai suburbs. Beginning
with the morbidity pattern and the health expenditures in the sample selected for
the study, the chapter accentuates the importance of Health Insurance in the
40
context. The demand for Health Insurance is assessed by establishing a
relationship between the need for Health Insurance and the willingness to pay.
The various factors affecting the need for Health Insurance and the willingness to
pay are analyzed in this chapter.
This has been achieved by gauging - the awareness about Health Insurance in the
target population, the general characteristics of the insured population and its
striking differences from the non insured, the perception regarding Health
Insurance and finally how all these influence the factors affecting the demand for
Health Insurance. The information on both utilization and need are analyzed to
assess demand for Health Insurance. Thus, the chapter can be divided into three
parts; 1) awareness about Health Insurance, 2) need for Health Insurance and 3)
demand for Health Insurance.
There has been a transition in the paradigm of health problems, especially in the
middle class population of a metropolitan city like Mumbai.
(NFHS
Maharashtra, 1998-1999). The communicable diseases are far yet from being
controlled and the 'Life style diseases' have already invaded the city dwellers.
This dual clout on the general public not only has an impact on their day to day
activities but also on the economic value of human life.
4.1 Morbidity pattern in the respondents and their family members
The health problems reported by the respondents including that of their family
members is more skewed towards common ailments, which seldom requires
hospitalization. On an average the annual expenditure on health
(excluding
hospitalization charges) is Rs. 2000 as reported by the respondents. As the
amount on health expenditure is too varied, the mean is affected by the extreme
41
values and hence, mode was taken into consideration for determining the
average health expenditure.
Table 4.1: Ailments reported by 65 respondents.
Sr. no
Health Problems*
of
No.
respondents
reporting it
1
Common ailments
2
Medical
54
which
problems
may
require 22
hospitalization
3
Gynecological problems
8
4
Ailments requiring minor surgical intervention
6
5
Geriatric problems
15
* For the sake of convenience the health problems have been classified into broad
categories.
Table 4.2: Detailed classification of the above mentioned ailments.
Categories
Health Problems*
Common ailments
Fever, cold, cough, acidity, skin ailments,
fatigue,
backache,
bodyache,
migraine,
gastro-intestinal problems like amoebiasis,
RTI.
Medical problems which may Dyspnoea,
Asthma,
Arthritis,
Hepatitis,
require hospitalization
Tonsillitis, UTI, Hypertension, Diabetes.
Gynecological problems
Menorrhagia, Metrorrhagia.
Ailments
requiring
minor Hemorrhoids, Gall stone.
42
surgical intervention
Geriatric problems
Osteoarthritis, Vascular disorders.
The above classification is based on the criteria - expenditure, continuity of the
problem and chances of hospitalization. However, these are not separated by
watertight compartments and most of the categories overlap with each other.
Life style and Geriatric problems require medication for a long time and hence
leads to a continuous and constant expenditure; whereas some medical,
gynecological
and
ailments
requiring
surgical
interventions,
need
hospitalization. Common ailments including skin ailments which although
might aggravate does not need hospitalization. Many of the ailments mentioned
above can be pooled down as life style diseases, like vascular disorders,
hypertension, etc. In order to avoid duplication and confusion, diseases are not
classified under this category.
4.2 Expenditure on Health Services
A 1991 national household expenditure survey carried out by the National
Council for Applied Economic Research estimated that per capita household outof-pocket spending in India was Rs. 240, which is about 75% of the total national
health expenditure. (Policy and Financing Health Strategies for Strengthening
Primary Health Care Services, 1995.)
Primary curative care-
Out of the sample of 65, the annual expenditure on primary curative care
including drugs is about Rs. 500 in 47% of the respondents, more then 500 Rs. but
43
less then 3000 Rs in 44 %, and more then 3000Rs in 9% of the respondents. As
already mentioned, the average expenditure is Rs 2000
The health expenditure being more commonly made on common ailments by a
large number of respondents, it's frequency of occurrence in all the family
members were recorded. However, this response is very specific to those
occurrences of common ailments, when expenditures are made. These
expenditures include expenditure on medicines by self-prescription or by
doctor's prescription, on investigations and consultation.
Table 4.3: Frequency of the common ailments as reported by 64 respondents -
Frequency of the ailments, Number
when
expenditures
of
respondents Percentage
are reporting it
made.
Once a month
8
12.5
Once in 6 months
41
64
Once in a year
15
23.5
Total
64
100
* One of the respondents did not answer this question and hence the total
number of respondents is reduced by one.
Maximum respondents, i.e. 64% of 64 respondents reported the occurrence of
common ailments once in 6 months, while the frequency of once a month was
reported by only 12.5% of the respondents. Thus, the average expenditure on
common ailments for a large number of respondents was made once in 6 months.
The respondents were asked about the frequency of visit to the physician to
know about their health-seeking behavior. This would include the expenditures
44
made only on consultation and medicines prescribed by the physician. As the
respondents could not recollect the exact number of visits, the responses were
classified under the broad categories of very often, sometimes and occasional
visits to the physician. Seeking medical advice from the physician for every
episode of common ailment was categorized as very often; seeking medical help
only after trying home remedies or self-medication was classified as sometimes
and seeking medical aid only in serious conditions, i.e. when the case requires
urgent medical attention was classified as occasional.
Table 4.4: Frequency of visits to the physician for common ailments as reported
by 64 respondents -
Frequency of visits to the Number of respondents reporting it
Percentage
physician
Very often
3
4.7
Sometimes
43
67.2
Occasionally
18
28.1
Total
64
100
* One of the respondents did not answer this question and hence the total
number of respondents is reduced by one.
67% of the 64 respondents, visit the physician sometimes, i.e. only after trying
self medication, while a very small proportion of respondents i.e. 4.7% seek
medical help without self medication.
Thus Table 4.1, 4.3, 4.4 shows that common ailments being most common in a
large number of respondents; the expenditures made on them by maximum
respondents is once in 6 months, which necessarily does not include visit to the
doctor. Thus, the visit to the doctor is rare by most of the respondents as even on
45
suffering from common ailments, most of them try self-medication first. This
reflects the health-seeking behavior of the respondents, which may have
implications on their attitude towards Health Insurance.
Hospitalization -
Overall inpatient expenditure accounts for one third of the total out-of-pocket
spending. About, 70% of In-patient care expenditure is estimated to go to non
government facilities. (Policy and Financing Health Strategies for Strengthening
Primary Health Care Services, 1995.) As already mentioned some studies
(Cumber, 2000; Indrani, 2000) also show that the public prefers private health
care facilities than the public ones.
20 of the 65 respondents, i.e. 31 % had a history of hospitalization in the family. 7
(35%) cases spent 10000 Rs. or less, 9 (45%) between 10000 Rs. to 40000 Rs. and 4
(20%) had spent more then Rs.40000 per episode. The maximum expenditure
made is 2 lakhs.
The ailments under all the categories mentioned in Table 4.1 may lead to
hospitalization on aggravation of the problems. Thus, although the number of
respondents reporting hospitalization is less, the probability of hospitalization is
more. Moreover, the expenditure on hospitalization is also more.
Thus, it is difficult, if not impossible, for a typical individual to find financial
resources to meet expenses in case of accidents or major illness. In such a
scenario, one of the financial security tool available to the individuals in terms of
timely treatment against maladies is Health Insurance.
46
Health Insurance provides security against uncertainties associated with ill
health and the consequent loss of earning ability and thereby eliminates worries,
anxieties, and facilitates saving habits. However, hardly 3% of the Indian
population are covered by some form of Health Insurance, either social or
private. Although, Social Insurance is provided by the employers. Individual
schemes are solely dependent on individual decision. It therefore becomes
essential to investigate the acceptance of the people, which is determined by their
awareness about insurance to some extent. Thus, the researcher attempts to delve
into this issue by unveiling the awareness level in the population.
4.3 Awareness about the Scheme
It is expected that the awareness about insurance would have its implications on
the felt needs and willingness to pay for the scheme. Thus, an attempt was made
to know how many respondents have heard about Health Insurance and how
many schemes do they know?
In a metropolitan city like Mumbai, the middle class population is exposed to all
the consumer products including Health Insurance and hence the awareness is
unregimented of educational qualifications and gender. Of the total 65
respondents interviewed, 58 i.e. 89.24% are aware of Health Insurance which, is
more popularly known as 'Mediclaim'. Of these 58 respondents; 95% are men
and 80% are women.
Chart 4.1: Proportion of respondents aware and not aware of Health Insurance.
11%
□ Aware
■ Not aware
89%
Among the 65 respondents interviewed 11%, i.e. 2 men and 5 women do not
know about the scheme, which is 25.57% and 74.43% of the total men and
women, respectively. Of these 7 respondents i.e. 10.76% unaware of Health
Insurance; both the men are postgraduates and, of the women 4 are graduates
and one is postgraduate. Thus, there is no relationship between educational
qualification of the respondents and their awareness about Health Insurance.
This implies that the media or peer communication plays an important role in
creating awareness regarding Health Insurance. In both the genders, all the
respondents of higher age group i.e. above 36 yrs. of age are aware of Health
Insurance. This is due to the fact that such investment schemes are more popular
in the middle and older age groups and the propensity to invest increases when
the income is more consistent.
Table 4.5: Exposure to the scheme as per age and gender differentials.
Sex
Age
Exposure to the scheme
Aware
Not aware
Total
20 -35
10 (83.33%)
2 (16.67%)
12 (100%)
36 -55
16 (100%)
qo%)
16 (100%)
56 -75
12 (100%)
^0%)
12 (100%)
38 (95%)
2 (5%)
40 (100%)
20 -35
13 (72.22%)
5 (27.78%)
18 (100%)
36 -55
6 (100%)
^0%)
6 (100%)
56 -75
1 (100%)
qo%)
1 (100%)
Total
20 (80%)
5 (20%)
25 (100%)
Grand Total
58 (89.23%)
7 (10.77%)
65 (100%)
Male
Total
Female
48
Thus, awareness about Health Insurance is independent of educational
qualification and is related to the exposure to the scheme, through various
medium of communication.
4.3.1 How many have heard about how many schemes?
Inevitably, a very large proportion of 89.23% of respondents know about
Mediclaim, i.e. all those who know about Health Insurance, know Mediclaim.
Only 12.3% of respondents know about all the schemes, 30.77% know about any
2 schemes and 46.15% know only Mediclaim. 31% and 36% of the respondents
have heard of ESIS and CGHS, respectively. However, the number of
beneficiaries under ESIS is 1 and CGHS is 2. Thus, not only the beneficiaries but
also others are aware of such Government provided Health Insurance Schemes.
Table 4.6: Level of awareness about different insurance schemes in different age
groups along with gender differentials.
Sex
Age
Awareness about the Health Insurance schemes
in
Lack
years
awareness
of Only
More
Mediclaim
Total
then All the well
one scheme*
known
schemes**
Male
20-35
2
6
3
1
12
(16.67%)
(50%)
(25%)
(8.33%)
(100%)
7
6
3
16
(43.75%)
(37.5%)
(18.75%)
(100%)
5
5
2
12“
(0%)
(41.67%)
(41.67%)
(16.67%)
(100%)
2
18~
6
40
(5%)
(45%)
(35%)
(15%)
(100%)
5“
8“
5
36-55
(0%)
56-75
Total
Female
20-35
49
(2778%)
36-55
(0%)
(44.44%)
(27.78%)
(0%)
(100%)
4
1
1
6
(66.67%)
(16.67%)
(16.67%)
(100%)
1
1
56-75
Total
Grand Total
(0%))
(0%)
(0%)
(100%)
(100%)
5
12
6
2
25
(20%)
(48%)
(24%)
(8%)
(100%)
7
30
20
8
65
(10.77%)
(46.15%)
(30.77%)
(12.3%)
(100%)
** - ESIS, CGHS, Mediclaim, Any other insurance schemes like Cancer
nsurance
Policy, etc.
* - Any two or more of the above schemes.
Chart 4.2: Level of awareness in different genders.
20
number of 15
respondent 10
s
5
0
II flI i
men
□ men
■ women
level of
awareness
More number of schemes are known to men than women.
Chart 4.3: Level of awareness in different age groups.
50
On the X-axis1- none of the schemes
2- only one scheme
3- more than one scheme
4- all the well known schemes
[The legend denotes age groups of the respondents in yrs.]
proportion
of
respondent
s
100%
80%
60%
40%
20%
0%
I
I f
■
□ 56-75
i ■
!
H 36-55
-■v
■
On the X-axis 1- none of the schemes
2- only one scheme
3- more than one scheme
4- all the well known schemes
-
'
□ 20-35
2
1
3
4
level of awareness
The respondents in the younger age group know less number of schemes, while
more number of schemes are known to respondents from the middle age group.
i.e. 36-55 yrs. This could be attributed to the fact that the number of women in
the younger age group are more and as seen from the chart 4.1, the level of
awareness in women is less.
Table 4.7: Level of awareness about schemes as per the educational qualification
and gender differentials.
Sex
Educationa
Awareness about the Health Insurance schemes
1
Lack
Qualificati
awareness
of Only
Mediclaim
on.
Male
Secondary
More then
All the well
one
known
scheme
schemes
1
1
2
(50%)
(0%)
(50%)
(100%)
11
9
3
23
(0%)
(47.83%)
(39.13%)
(13.04%)
(100%)
Post
2
6
5
2
15
Graduate
(13.33%)
(40%)
(33.33%)
(13.33%)
(100%)
2
18
14
6
40
(0%)
Graduate
Total
Total
51
Z*
*
M/1
]
p(
08/65
(5%)
Female
(45%)
Secondary
(35%)
(15%)
(100%)
I-
i-
2
(50%)
(100%)
(0%)
(0%)
(50%)
4
9
3
(25%)
(56.25%)
(18.75%)
(o%)
(100%)
Post
1
3
2
i
7
Graduate
(14.29%)
(42.85%)
(28.57%)
(14.29%)
(100%)
5
12
6
2
25
(20%)
(48%)
(24%)
(8%)
(100%)
7
30
20
8
65
(10.77%)
(46.15%)
(30.77%)
(12.3%)
(100%)
Graduate
Total
Grand Total
16
The level of awareness is independent of the educational qualification. 37.5% of
those, aware of all the schemes are post graduates, 37.5% are graduates and 25%
have secondary level education. And as already shown from Table 4.5, among
those unaware of Health Insurance; three respondents are postgraduates and, 4
are graduates. Thus, the awareness about Health Insurance schemes can be
attributed to the media or self-awareness,
through other modes like
communicating with people.
This shows that Health Insurance schemes are quite popular in the middle and
upper middle class society, irrespective of their educational qualifications.
Almost all of them have heard about Health Insurance Scheme. The level of
awareness i.e. the number of schemes known is slightly more in men and in the
middle age group.
4.4 Concept of Health Insurance as conceived by respondents
52
Health Insurance in general can be defined as "any form of insurance whose
payment is contingent on the insured incurring additional expenses or losing
income because of incapacity or loss of good health."
A detailed understanding of a scheme, its fundamental concept is required to be
known by the people. The viability of a scheme is dependent on the acceptance
of its basic concept. Thus, the survey tried to delve into people's notion about the
scheme. The responses of the people were descriptive and so the essence of it
was identified and clubbed under the broad categories of - prepayment to meet
contingencies related to health, reimbursement mechanism and financial security
against sudden crisis. Each of these reflects the focal point of attraction for the
respondents towards Health Insurance. As the responses were subjective some of
them could be included in more than one category.
Chart 4.4: Concepts as understood by respondents.
<2 80 1
5 70 ij
c 60 7
§■50-1
2 40 |
2 30
S’ 20 S 10
o 0
1
It
!
j___
Q-
Financial Security
Prepayment
Reimbursement
Concepts as explained by the respondents
Financial Security agajnst su_dden_cr_isi_s - A large number of about 74% of the 65
respondents expressed that it is a mechanism by which financial burden is borne
for the treatment by the insurance companies, in case of health emergencies, on
making regular payments. Thus, these are the individuals whose focus is on the
53
entire scheme, with an interest of acquiring financial security. A change in any
component of the scheme could effect their attitude.
Pr_ejiayment_to_meet_contir^encies- Almost 72% of 65 respondents felt that one
pays for his/her own health expenditures, in anticipation of future contingency.
These are the individuals whose focus is on premium rates, i.e. the change in
premium rates could effect their attitude towards Health Insurance.
.Reimbursement - Some respondents explained the concept as, the payment of
huge sum for hospitalization by the insurance company, when claims would be
made. These are the individuals whose focus is on the sum insured and their
attitude might be effected by change in the total insured sum. Some of these
might also be inclined towards more utilization of health services than needed,
termed as 'Moral Hazard.' These responses accounted to almost 36% of 65
respondents.
Although there exist ambiguity about the exact underlying mechanism by which
it conceptually operates, the concept is more or less known to people. It was also
shown from the survey that most people saw Health Insurance as a part of Life
Insurance Scheme.
4.5 Need for Health Insurance
The need for health Insurance is expected to be influenced by the awareness of
the respondents about Health Insurance and the concept perceived by them.
54
Chart 4.5: Need for Health Insurance in 65 respondents.
3%
*
□ Need
■ Do not need
97%
Out of the total 65 respondents, 63 i.e. 96.92% felt that there is a need to have
health insurance coverage, while 3.08% i.e. 2 respondents did not feel the need
for Health Insurance. These 2 respondents quoted that they found Health
Insurance to be worthless and would prefer to invest in some other saving
schemes, which would yield better returns. Incidentally, both of them
occasionally seek medical attention, and have never got any of their family
members (including themselves) hospitalized. This kind of health-seeking
behavior could also affect their attitude towards Health Insurance.
Table 4.8: Need as per the gender and age differentials.
Sex
Age
in Need for Health Insurance
years
Need
Do not need
20-35
11 (91.67%)
1 (8.33%)
12 (100%)
36-55
16 (100%)
-(0%)
16 (100%)
56-75
12 (100%)
- (0%)
12 (100%)
Total
39 (97.5%)
1 (2.5%)
40 (100%)
Women 20-35
17 (94.44%)
1 (5.56%)
18 (100%)
36-55
6 (100%)
- (0%)
6 (100%)
56-75
1 (100%))
^(0%)
1 (100%)
Men
55
I
Total
Total
24 (96%)
1 (4%)
25 (100%)
Grand Total
63 (96.92%)
2 (3.07%)
65 (100%)
The need for insurance is 100% in the higher age group. With the rise in age, the
tendency to fall ill and cater to the tertiary care services increases and so the need
for such a financial security is high.
Table 4.9: Need for Health Insurance in different Socio-economic class.
Socio-economic class
Need for health Insurance
Total
Need
Do not need
Upper middle class
21 (100%)
- (0%)
21 (100%)
Middle class
42 (95.45%)
2 (4.54%)
44 (100%)
Total
63 (96.2%)
2 (3.08%)
65 (100%)
100% of the respondents from the upper middle class expressed that they need
Health Insurance, while a major proportion of middle class group, i.e. 95.45%
also expressed the need for it. The higher level of income allows the upper
middle class people to invest in such schemes, which is also driven by the
incentive of tax rebates.
The need for a product is highly affected by one's level of awareness and
perception about the product. As seen above, the awareness being slightly more
in the higher age group and in men, the findings for need also corresponds with
it, i.e. the felt need for Health Insurance is little higher in men (by 1.5%) and in
higher age group (by approximately 7%).
56
Thus, a large number of respondents felt the need for Health Insurance, and this
felt need is influenced to some extent by age, the health seeking behavior and the
socio-economic status.
4.6 Demand for Health Insurance
The demand for health care is fundamentally different from the demand for
'supermarket' type goods. There are variety of characteristics that distinguishes
health care from other goods and there are number of failures specific to market,
the most significant of them being that the demand and the supply do not
interact in the conventional manner. Because of uncertainty and information
gaps, the supplier is also involved in the decision making. Thus, the demand gets
altered.
4.6.1 Willingness to Pay The demand for Health Insurance was elicited by 'willingness to pay', which also
includes implicitly the ability to pay.
The survey included direct questions on the willingness to pay for the schemes.
As the only Health Insurance scheme available is Mediclaim, the premium rates
of Mediclaim were quoted to the respondents. However, the willingness of those
who were already insured, pertains to the continuation of the scheme.
Chart 4.6: Willingness to pay for Health Insurance in 65 respondents.
43%
□ willing to pay
57%
■ notwilling to pay
37 of the total 65 respondents i.e. 57% are willing to pay for Health Insurance
(Mediclaim), while 43% i.e. 28 of them are not willing to pay. Both these
categories include both insured and non-insured.
Of the 37 respondents willing to pay, 30 respondents i.e. 81% of them are already
insured under some scheme, the remaining 7 i.e. 19% of the total respondents
have yet not been insured. This is the potential segment of the population that
can be insured. Some of these 7 respondents said that they were not approached
by any agent and did not even feel like taking an initiative; while some kept
procrastinating. This shows the low preference given to health and hence, the
low preference given to the need to have an insurance for health contingencies.
Table 4.10: Willingness to pay against Insurance status
Willingness to pay
Insurance status
Total
Individual
Group
Mediclaim
Mediclai
ESIS
CGHS
None
2
7
37
21
28
28
65
m
Willing to pay
20
8
Not willing to pay
1
5
1
Total
21
13
1
2
Of the 28 respondents not willing to pay, 7are already insured under employer
provided Insurance Schemes, as it included in the benefit package provided by
the employers.
2 respondents insured under CGHS and 8 insured under Group Mediclaim, were
also willing to pay, if they had not been provided any coverage by their
employers, while 1 respondent who had already subscribed for Mediclaim
58
wanted to discontinue as her claim was rejected. Thus it becomes indispensable
to know the factors like socio-economic status, family size, employment status,
felt need of people for Health Insurance, etc. that influences their willingness to
pay.
Table 4.11: Willingness to pay in different socio-economic group.
Socio-economic status
Willingness to pay
Total
Willing to pay
Not willing to pay
Upper middle class
15 (71.42%)
6 (28.58%)
21 (100%)
Middle class
22 (50%)
22 (50%)
44 (100%)
Total
37 (56.92%)
28 (43.08%)
65 (100%)
71.42% of the upper middle class respondents are willing to pay, while only 50%
of the middle class people are willing to pay. Of the 6 respondents not willing to
pay from the upper middle class, 5 are men. This could be attributed to the fact
that they must be financially secure to manage with emergency health cost. In
both the classes 50% of respondents, not willing to pay for Health Insurance are
from the younger age group. This is again, in consonance with the lower
awareness level for Health Insurance expressed by the younger respondents and
can also be attributed to the lower health risk in younger individuals. Some of
these respondents are in the early ages of earning and hence may find it difficult
to save money for investment on Health Insurance.
All those respondents employed under state government are unwilling to pay for
Health Insurance, while only 1 out of 4 BMC employees i.e. 25% is willing to pay.
This is due to the health benefits available to them, through their employers.
However, for minor ailments they too cater to private services. 66.67% of private
employees are willing to pay. Of these 66.67% of respondents, 80% are already
59
insured, which implies that most of them are willing to continue the schemes,
while the target new consumers form a very small proportion of 20% of private
employees. However, of the 80% of the private employees insured, 56% are of
potential significance for the Insurance Companies as these respondents are
insured under Individual Mediclaim and intend to continue with the scheme.
Table 4.12: Willingness to pay as per the family size.
Willingness
to Number of family members
Total
pay
2
3
4
5
6
Willing to pay
8
9
9
7
4
37
(61.5%)
(56.3%)
(45%)
(58.3%)
(100%)
(56.5%)
5~
7
TT
(38.5%)
(43.7%)
(55%)
(41.7%)
(0%)
(24.5%)
13~
16-
20
vT
4~
65
(100%)
(100%)
(100%)
(100%)
(100%)
(100%)
Not willing to pay
Total
28
Except in those respondents with a family size of 4, the willingness to pay in all
the remaining respondents is more than the non-willingness to pay. However,
the willingness to pay does not show any relationship with family size.
Table 4.13: Willingness to pay against Need for Health Insurance
Need for Health Willingness to pay
Total
Insurance
Willing to pay
Not willing to pay
Need
37 (58.73%)
26 (41.27%)
63 (100%)
Do not need
40%)
2 (100%)
2 (100%)
Total
37 (56.92%)
28 (43.08%)
65 (100%)
60
Of the total 65 respondents 56.92% were ready to pay as per the quoted
premiums. However, of the 63 respondents who feel that there is a need for
health insurance only 58.73% are willing to pay the premiums. Thus, it is
obvious that although people feel the need for Health Insurance, they are not
ready to pay for the premiums. One of the reasons cited by people are that they
believe that they are in relatively good health condition and by following healthy
life style they shall maintain it. Some felt that in the age of rising costs and rising
demand for other items, they could not think of a new investment, whose returns
are uncertain. Some respondents stated that they were unwilling to pay for the
premiums, because they could not afford double expenditures on health, i.e. for
drugs and minor ailments and on premiums. Although, various factors, like
earning capacity, attitude, socio-economic status; may affect the willingness to
Pay/ uncertainty in returns was found to be a major detrimental factor.
The willingness to pay is maximum in the age group of 36 to 55 yrs. which is
68.18% of the total respondents in this age group. This is due to the fact that at
the middle age, individuals have a more stable source of income and tend to
invest in some saving schemes. The rising age not only increases the
susceptibility to illness and in a sequel which might lead to hospitalization, but
also spawns the desire to be financially secured against such contingency.
61
Table 4.14: Need for Health Insurance against willingness to pay as per age
differentials.
Need
for
Health Age in years
Insurance
Willingness to pay
Willing to pay Not
Total
willing
to pay
Need
20-35
16 (57.14%)
12 (42.86%)
28(100%)
36-55
15 (68.18%)
7(31.81%)
22 (100%)
56-75
6 (46.15%)
7 (53.85%)
13 (100%)
37 (58.73%)
26 (41.27%)
63 (100%)
20-35
^0%)
2 (100%)
2 (100%)
36-55
^0%)
^(0%)
- (100%)
56-75
-(0%))
^0%)
- (100%)
Total
^0%)
2 (100%)
2 (100%)
Grand Total
37 (56.92%)
28 (43.08%)
65 (100%)
Total
Do not need
However, a remarkable finding has been that with increasing age beyond 55 yrs.,
the willingness to pay reduces. Only 46.15% of respondents in this age group are
willing to pay. This can be attributed not only to the high premium rates for the
aged but also to the frail financial condition towards the old age. Old people
living a self-sustained life with minimal requirements and desires; seem to be
least concerned of their health need. Some stated that since they are too aged
they would die any day and did not want to waste money on such schemes.
Some from the middle class section also said that although they wanted to avail
for such schemes they could not afford it, as they were already spending huge
sum on regular medicines and check up for chronic ailments, which were not
covered by any health insurance schemes.
As shown in Table 4.15, almost 83% of men above the age group of 56 yrs. are
insured. 50% of them are insured by their employers, while 50% are insured
62
under Individual Mediclaim. Although a large chunk from this age group are not
willing to pay, such a large coverage implies that the premium of those who are
insured under Individual Mediclaim must be paid by their children.
There was no conditional willingness to pay. When asked for the various
conditions under which they would be willing to pay, the respondents expressed
their despondency, stating their lack of faith in the entire system, it's
management, lack of good quality and apt curative services, large distances to be
traveled to seek health services, etc.
Thus, it is seen that more number of individuals from upper middle class and
from middle age group i.e. 36 to 55yrs. are willing to pay. Private employees
form a major chunk of those, willing to pay. The difference in the willingness to
pay in both the genders is negligible. Therefore, Individual schemes must be so
designed that it attracts both the genders from the upper middle class group,
while the private employees can be taken care of by well-designed Group
Insurance Schemes.
This certainly does not mean that the young and the middle class population
have to be neglected, but separate scheme must be designed to target them.
As already mentioned the data on utilization aids in assessing the demand and
also in determining the factors influencing demand. The analysis of the data on
coverage of the respondents under various insurance schemes helps in
cataloging the characteristics exclusive to insured and non-insured.
63
4.6.2 Utilization pattern
McKinsey, a management consultancy firm, estimates that there are some 315
million potential insurable lives in the country. 20.5 million households are
already insured, leaving a market of 60.3 million households (or 315 million
lives.) (based on data from NCAER).
Of the 65 respondents, 56.92% are insured under some or other form of Health
Insurance. Of the 56.92% insured, maximum are insured under Individual
Mediclaim, which is 56.75%, the second largest insurance is under Group
Mediclaim, while a very small segment is covered by CGHS and ESIS of 5.41%
and 2.7% respectively.
Chart 4.7: Proportion of insured and uninsured in 65 respondents.
43%
□ insured
57%
■ uninsured
Table 4.15: Health Insurance Status as per gender differentials and age
distribution.
Sex
Age
years
in Insurance status
Total
Insured under any Not insured
scheme
under any scheme
64
I
Male
20-35
8 (66.67%)
4 (33.33%)
12 (100%)
36-55
8 (50%)
8 (50%)
16 (100%)
56-75
10 (83.33%)
2 (16.67%)
12 (100%)
26 (65%)
14 (35%)
40 (100%)
20-35
7 (38.89%)
11 (61.11%)
18 (100%)
36-55
4 (66.67%)
2 (33.33%)
6 (100%)
56-75
^0%jj
1 (100%)
1 (100%)
Total
11 (44%)
14 (56%)
25 (100%)
Grand Total
37 (56.92%)
28 (43.07%)
65 (100%)
Total
Female
Of the 56.92% insured only 30% of women, while 70% of men are insured. This
gender difference is due to the fact that men pay for their wives, especially if she
is a house- wife. Some men do not insure their wives under such schemes.
implying the low preference of women's health concerns in Indian society.
Among women, only one insured respondent (insured under Individual
Mediclaim) belonging to the age category of 36 to 55yrs. is unemployed, rest all
are employed. This suggests that women are insured either through their
employers or pay from their self earned income. However, as seen from the
previous explanation, the proportion of women willing to pay is almost the same
as the proportion of men willing to pay. Thus, to attract this segment of
population towards Health Insurance market. Health Insurance packages with
different benefits and lower premium rates must be provided.
65
■
Table 4.16: Health Insurance Status as per family size of the respondents
Insurance Status
Insured
Not insured
Total
Family size
Total
2
3
4
5
6
8
10
11
6
2
37
(61.5%)
(62.5%)
(55%)
(50%)
(50%)
(56.92%)
5
6
9
6
2
28
(38.5%)
(37.5%)
(45%)
(50%)
(50%)
(43.08%)
13
16-
20
12~
(100%)
(100%)
(100%)
(100%)
65
(100%)
(100%)
The maximum insured respondents are from the households with a family size
of 3. The insurance status shows a relationship with the family size, i.e. as their
family size increases, the number of respondents getting insured seems to be less.
However, as the difference in the proportion of respondents getting insured,
with respect to their family size is too less, this could just be a probability.
Of those insured 32.31% are from upper middle class; 67.69% are from middle
class. This is due to the bias of the sample towards middle income group.
In the upper middle class group, of the 15 respondents insured only 1
respondent is insured under Group Insurance, rest all have taken Individual
policy. While in the middle class group 15 out of 22, i.e. 68.18% are covered by
employer provided scheme (Group Insurance, ESIS, and CGHS). It is due to the
higher paying capacity of the upper middle class respondents that most of them
are insured; while the middle class respondents have not consciously chosen to
get insured, but have got insured through their employers. This shows that
demand for health Insurance is Income elastic. Thus, the upper middle class
66
people should be the main target of the Insurance companies. For middle income
group, more attractive schemes with lower premiums can be designed.
Table 4.17: Health Insurance Status against Socio-economic status
Socio-economic
Insurance Status
Total
status
Insured under any Not Insured under
scheme
any scheme
Upper middle
15 (71.43%)
6 (28.57%)
21 (100%)
Middle
22 (50%)
22 (50%)
44 (100%)
Total
37 (56.92%)
28 (43.08%)
65 (100%)
From Table 4.11 and Table 4.17, it is evident that the proportion of middle class
group insured and not willing to pay i.e. wanting to discontinue the scheme is
equal to the proportion of the those who are uninsured and are willing to pay i.e.
are prospective customers of the insurance company. The first category includes
all those who are provided insurance by their employers and this may influence
their attitude and thus their demand for Health Insurance. However, in the
second category of middle class people who are uninsured and are willing to
pay, 4 respondents are private employees. These are the potential customers
from the middle class population, who constitute only 9% of the total middle
class population.
Thus, the characteristics of the insured are that all of them feel the need for
Health Insurance and a large proportion among them are willing to pay i.e. are
willing to continue the scheme. Most of them are men, from higher age group
and from upper middle class.
67
As demand is also influenced by price of the product and prices of other
products; a comparison of annual health expenditure (price of other products)
with premium payment (price of the product) will aid in demand analysis.
However, the limitation of this analysis is that only the annual health
expenditure cannot be considered as the prices of other products; which must
include prices of all the other commodities, including health and non-health
components.
Chart 4.8: Annual premium in Rs. against Annual Health Expenditure in Rs.
[Legend - annual health expenditures in Rs.]
100% n
42
5
■a
c
o
CL
W
a>
a>
O)
43
c
Q
O
Q.
90% II
HI
III
1
80% H
70% M
60% U
50% J
40%
30%
Hl 4501 -6000
f
'I
less
then
500
■ 501-2500
□ 500 or below
■ I
20% L|
10% L
I
o% L-i
□ 2501-4500
s
501- 1501- 2501- 3501- 45011500 2500 3500 4500 6000
annual premium
The graph shows the respondents spending more then Rs 4500. for their annual
premium payment are the ones who have an annual health expenditure of less
then Rs. 2500. This indicates that those who spend less on ambulatory care and
medications throughout the year have a greater inclination towards insuring
themselves against a higher amount by paying higher premium. Inductive logic
can suggest that, as the annual health expenditure reduces the amount of
premium payment increases. However, as the other categories (of annual Health
expenditure, as seen from the graph) do not satisfy this, it is refuted. Thus, no
68
relationship can be developed between annual health expenditure and premium
rates.
4.6.3 Effect of changes in price
During the course of the study, the premium rates were revised; thereby not only
increasing the premium rate but also changing the age structure for the premium
rates, (for details refer to the appendix) These were quoted to those respondents
who were insured under Individual Mediclaim and asked if they would still
continue with the same amount insured, or would reduce the sum insured or
discontinue.
Chart 4.9: Affect on demand on change in price i.e. premium.
9% 0°/o
□ continue with
the same
sum insured
■ change the
sum insured
□ discontinue
91%
Of the 22 respondents insured, 20 respondents i.e. 90% said that they would
continue for the same sum insured, a very small proportion of 10% of the insured
i.e. only 2 of them said that they would want to reduce the insured amount,
while none of them wanted to discontinue. Those who wanted to change the sum
69
insured in order to bring down their expenditure on premium were both from
middle class group. Both these respondents had insured all their family members
and hence expressed that the increase in premium rate would increase their
cumulative expenditure on Insurance.
Thus the demand for Health Insurance is price inelastic to a great extent, as the
change in price does not change the demand considerably. However, the
demand for Health Insurance is affected to some extent in the middle class
group with the change in price.
As the source of income in the middle and the upper middle class households is
relatively more consistent, it is expected that the propensity to invest in various
schemes would be greater. In this study, the propensity to save is estimated by
examining the coverage under Life Insurance and Health Insurance.
The awareness regarding Life Insurance is almost 100%. This is not of much a
difference from the awareness of Health Insurance, which is 89%. The coverage
also does not show much variation. 64.62% have subscribed to Life Insurance,
against 56.92% covered under Health Insurance Scheme. Thus, this implies that
the coverage has a direct relation with awareness of the scheme. However,
practically this is not found to be true.
Table 4.18: Coverage under Health insurance and Life Insurance.
Health Insurance Status
Life Insurance Status
Total
Insured
Not Insured
Insured under any scheme
27 (54.29%)
10 (43.48%)
37 (56.92%)
Not Insured under any scheme
15 (35.71%)
13 (56.52%)
28 (43.08%)
Total
42 (100%)
23 (100%)
65 (100%)
70
23.08% are insured only under Life Insurance; 15.38% only under Health
insurance; 41.54% are insured under both; while 20% under none. There are
various factors influencing the preference of Life Insurance over Health
Insurance. As expressed by the respondents, the returns of investment in Life
Insurance are indubitable. It ensures financial support to the family after the
death of the breadwinner and hence warrants security to the dependents.
Moreover, there are various innovative schemes designed to cater to the tastes of
the consumers. It also provides other benefits like, claim free monetary bonus,
dividends, etc. On the other hand Health Insurance does not guarantee return,
i.e. if the insured does not get hospitalized in the insured period, he is not
entitled to any monetary benefits. The Health Insurance Schemes do not even
grant non-monetary benefits like preference in treatment or loan for major
ailments, requiring huge sum for treatment. It even does not secure against total
monetary loss caused due to illness, i.e. the loss caused due to loss in
productivity.
Thus, it is obvious that the preference for Life Insurance is more then for Health
Insurance, even if the propensity to save is more.
4.7 Conclusion
Health Insurance schemes are quite popular in the middle and upper middle
class society, irrespective of their educational qualifications. Awareness is
slightly more in men and in the middle age group. The findings for the need for
Health insurance also corresponds with the awareness, i.e. the felt need is higher
in men and in higher age group, albeit this finding is insignificant. The
willingness to pay is seen to be more in the upper middle class group, middle
71
age group i.e. 36 to 55 yrs. and in the private employees. More number of
individuals from the upper middle class group and higher age groups are
covered under Health Insurance.
The differences in the age group for coverage and willingness to pay, reflects that
the individuals from the higher age groups are covered by employer provided
scheme or they are paid for by their children. Similarly, the gender bias becomes
explicit as the willingness to pay is almost the same in both the genders, while
the level of awareness and coverage is less in women than in men.
Health seeking behavior, need, willingness to pay, preference and perception of
people about Health Insurance is also shown have its influence on the demand
for Health Insurance.
The demand for health insurance is sum function of the price of the product, the
prices of other goods, income, preference and taste of individuals, perception
and attitude towards the product; which in all depends on the societal structure
and socio economic factors.
As shown from the survey, the change in the premium rate did not change the
demand to much an extent. The demand for Health Insurance is therefore price
inelastic. However, the demand for Health Insurance is affected to some extent
in the middle class group with the change in price.
The demand for Health Insurance is more in upper middle class income groups.
And hence change in income alters the demand. Thus, the demand for Health
Insurance is income elastic.
72
Thus, the main findings for the demand for Health Insurance are Higher income status is associated for greater demand for health insurance.
Price do not determine the demand for Health insurance to a great extent, but
the demand may be affected to some extent in middle income groups than in
upper income groups.
Demand for Health Insurance is affected by the age of the individual, his/her
socio-economic status and employment status; while it largely remains
unaffected by certain variables like gender and educational qualification.
Individuals from higher and middle age group and those employed in
private firms demand more for Health Insurance.
Demand is also affected by the level of awareness, the felt need for health
insurance and the preference of the respondents for Health Insurance; while it
is not much affected by other health expenditures. More the awareness and
more the felt need for Health Insurance; more is the demand for Health
Insurance.
The demand would change with a change in the package of Health Insurance
offered, as per the requirements of the people.
Chapter 5
Exploring The Supply Side Of Health Insurance
"Yogakshemam Vahamyaham"; "We aim to provide a high quality service"; "All claims
falling within policy terms will be paid fairly and promptly" and so goes on the mission
statements of most of insurance companies all over the globe. However, does this mean,
"You lodge a claim, we pay it?"
73
This chapter attempts to achieve the aim of assessing the extent to which the
existing schemes satisfy the demands of people. It begins with a brief mention of
the fundamental principles and constraints under which Health Insurance
functions in Indian market. In the light of these principles and constraints and
the opinion sought from the representatives of the Insurance Company and
Third Party Administration, the recommendations made by people and its
feasibility are examined.
The objective of Health Insurance is to efficiently use the society's resources.
maximizing consumer value and choices.
5.1 Principles of Health Insurance
Health Insurance basically rests on the principle of pooling risks associated with
the same cause i.e. health, to share losses on some equitable basis. The risk
sharing is either based on horizontal equity with the entire insured group cross
subsidizing the cost of hospitalization of each other known as "mutual
insurance" or based on vertical equity, where the cost of hospitalization is
transferred to an organization constituted privately that is willing to assume the
risks and pay the resulting losses for a consideration, called premium. 'Mutual
Insurance',
which
ensures
horizontal
equity
is
reflected
in
Group
Insurance/Social Insurance. The second principle of loss sharing, which ensures
vertical equity is reflected through 'Private Individual Insurance.'
A technique is used to determine whether a person is qualified or not for
insurance and if so, what is the premium rate that he/she should pay for the
insurance. This is known, as 'Underwriting' which is the backbone of insurance
business. This technique aims at finding the future loss potential and choosing
the price that exactly matches with it. Thus insured having identical risk ratings
(equal loss potentials) are classified equally and charged same premiums and
those, whose expected loss potentials are different, are classified differently and
74
charged different premiums. This method helps to attain actuarial fairness
charging rates that exactly align with the probable loss potential of every
proposed insured so that "cross-subsidization" of different risk categories can be
reasonably eliminated.
The technique of underwriting is extremely important for financial sustainability
of the insurance company. The companies cannot remain solvent all the times
unless government subsidizes their business. The main purpose of insurance is to
help the insured in covering his losses, but not give him/her a chance to make
profit. If the insured gets profit out of the policy he/she holds then the whole
mechanism of the insurance will collapse down. On the other hand the insurer
must be in a position to recover the operating expenses with desired profit
margin. Hence the premium rates should be justified both for the insured and the
insurer.
For the calculation of Health Insurance rates based on the information available,
assumptions have to be made regarding - the probability of insured event
occurring; the time value of money; the benefits promised; loadings to cover
expenses, taxes, profits and contingencies. Based on these assumptions,
appropriate methods are employed for risk classification and premium
calculation.
Like any other financial services, insurance production greatly relies on financial
and human capital. Financial capital underpins all operations by providing a
cushion against the probability of actual expenses deviating negatively from the
underlying assumptions. Thus the insurance companies insure themselves and
transfer the risk of insured to the reinsurer by giving a part of their premium to
them.
75
5.2 Constraints
A major constraint in Health Insurance market is information asymmetry. A
market is competitive, only when the buyers and sellers are both well informed.
However,
In Health Insurance, the insurance contracts being considered complex and
technical, the buyers tend to know less then the sellers. . This problem is
termed as 'lemon problem.' As the provider has more technical expertise the
insurer may mislead the customers, leading to adverse selection problems,
wherein an individual with already some pre-existing conditions may be
motivated to get insured. However at the time of emergency the Insurance
Company may not reimburse on the grounds of exclusion of pre-existing
conditions.
&
The buyer knows more about his/her health conditions then the seller and
hence may not disclose all the required information. This may lead to
coverage of high risk individuals, who pays premium lower then the
expected values of their losses, which imposes cost on other insured and
distorts pricing. This is known as 'adverse selection problem.'
&
'Moral Hazard' is the tendency of the people (both provider and consumer) to
change their behavior, to extract maximum benefits from the insurance
company.
The insurance agent's aim is to maximize his/her own personal gains, which
is not always proportional to the principal's gain (Insurance Company's).
This is known as Principal agent problem.
76
Besides all this, there is a non-existing information problem; i.e. neither the buyer
nor the seller has complete information due to the fact that the required
information does not exist. Both the insurer and the insured individual face
uncertainty. Prices are set by the insurance company before the cost of
production is known and individual too cannot have a complete knowledge
about the consequences of their choices.
Environmental factors like the economy, inflation, new laws and regulations,
changing consumer needs, attitudes and preferences, present great uncertainties
to both buyers and sellers.
The strategy adopted by Insurance Company is already mentioned in Chapter 3,
which shows that neither the private Insurance Scheme nor the government
provided Scheme follow the market strategy of conducting an initial market
survey to design a scheme, which is not only feasible but also acceptable. Thus it
is obvious to find gaps between the consumer demand and supply.
5.3 Consumer Satisfaction/ Experience
16 claimants i.e. those who are insured and have made claims for reimbursement
of hospitalization costs, were interviewed to assess the consumer satisfaction
about the services provided by Mediclaim.
The satisfaction is assessed on the parameters of -
-
Status of claim settlement, i.e. whether claim is already settled, rejected or
awaited.
Time taken to settle the claims.
77
Kind of procedures involved, in terms of paper work, number of visits or
phone calls made.
Problems encountered in terms of making arrangements for the money
needed to pay for the hospital charges,
Problems faced in settling the claims including mental tension and time and
efforts spent.
Graph 5.1: Satisfaction levels among the claimants.
19%
□ satisfied
19%
■ not satisfied
F62%
□ un decided
Out of 16 claimants 10 i.e. 62% of the total are satisfied, 3 i.e. 19% are not
satisfied and 3 i.e. 19% are undecided i.e. they are not able to decide whether
they are satisfied or not. These categories are predominantly influenced by their
reimbursement status, i.e. all the claimants whose claims are completely settled,
are satisfied; those who are awaiting the settlement are in dicey situation and are
yet not able to decide and those whose claims have been rejected are unsatisfied.
All the 3 claims were rejected on the basis of pre-existing conditions. 2 of the
rejected claims are awaiting justice in the consumer court.
78
Those who were satisfied expressed that the premium amount is almost
negligible when compared to the catastrophic medical cost arising out of
hospitalization and in the hour of high uncertainty. On an average the time taken
for settlement of claims was 2 months ranging from minimumlS days to
maximum 4 months. Only 2 claimants had problems with arranging money for
the hospitalization costs. They had to borrow money from their kin /friends. 5
i.e. 31% of the claimants had their claims settled through agents and hence the
procedure was smoother for them. Even for those who personally underwent the
process, the average number of visits or phone calls made were 2. However,
those claimants whose claims were not settled had to make more than 4 visits to
the Insurance office. Those, whose claims were rejected, accused the insurance
company of not providing adequate information to them, at the time of getting
insured. As a consequence, they had to suffer monetary losses and also mental
stress. One of the claimants stated that she feels 'humiliated' and 'cheated'.
The claimants who were satisfied with the schemes were all willing to continue.
Of the 3 claimants who were unsatisfied, two were prepared to continue the
scheme as they felt that there are no other options available for them.
Incidentally, both of them happen to be from higher age group and hence this
attitude could be attributed to their susceptibility to illness or hospitalization.
The decision to continue of the remaining claimants depends on the settlement of
their claims.
5.4 To what extent does the demand and the supply converge?
5.4.1 Period ofcoverage -
Instead of having an annual premium payment which, has to be renewed every
year, 10% of the respondents suggested that it should be for more then a year's
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period so that the insured is free of the responsibility of renewing the scheme
every year.
The scheme can be designed as per this recommendation but the uncertainty due
to non-existent information for both the insurer and the insured as mentioned
above, would increase. Moreover, the premium rate would also increase; not
only to cover the time value of money, but also to encompass the greater
ambiguity created due to longer time period.
About 8% of the 65 respondents also suggested that it should be for less then a
year, to enable those insured to discontinue in the face of financial constraints.
The premium rates in this case would reduce and hence in case of any
emergency the loss borne by the insurance company will increase. Thus, even if
this recommendation is accepted the sum insured will be reduced.
About 10% of the respondents recommended the flexibility of the period of
coverage i.e. different scales of premium for different time period of coverage
must be available, from which the individuals can select a desirable package.
As already evident for the above made explanation, tailor made schemes are
possible but will require a lot of effort from the Insurance Company to design
different models using different mathematical models.
5.4.2 Premiums -
15% of the 65 respondents recommended that premium structure must be on a
sliding scale of income, while 14% of the respondents suggested that premium
structure must be tailor made considering occupation, income, health condition.
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age, etc. However, both the above recommendations are not feasible, as in India
there is a dearth of information on different variables like occupation, income,
etc. Even if one tries to conduct a survey and collect the data, the income can
never be truly estimated, due to multiple sources of income that an individual
has. Types of occupation are so varied that it will lead to more then 1000
categories, thereby increasing the complexity of premium calculation.
26% of the respondents suggested higher premiums to be charged from elderly
individuals and those already suffering from illness, instead of excluding them.
On this, the representative from the Insurance Company expressed that if such
high risk groups are included; the premium rate of all the insured would
increase. And if a separate scheme is designed for them, the premium rate would
be so large that it would be deterrent for anyone to get insured. The risk involved
in susceptible individuals and older people is almost 100%. Thus the total
amount as per the principles of insurance, has to be recovered from the total
contributions, which eventually will lead to propelling of the premium rates
tremendously beyond the paying capacity.
5.4.3 Medical Benefits-
68% of the 65 respondents feel primary care must be included, 19% of
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respondents expressed the need to cover even the cost on ophthalmic treatment,
dental treatment and charges on dentures, spectacles, etc. If all these are to be
included in the existing Health Insurance in India no private Insurance Scheme
would remain viable. However, a system of co-payment as suggested by few
(12%) can be adopted which will not only reduce the abuse of the system, but
also provide additional finance to the Insurance Company. However, the
representative of the Insurance Company felt that it would be difficult to manage
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and once implemented may not be even easily acceptable by all. The above
mentioned 12% of the respondents represent those people who would accept the
system of co-payments.
14% of the respondents wanted maternity benefits and 8% wanted only first
Cesarean Section to be covered, while some even suggested co-payments or user
fees to be charged in case of Cesarean Section. This recommendation was refuted
on the grounds of tremendous cost escalation, as every insured pregnant woman
would definitely claim for Cesarean Section. This would also lead to the
termination of all the pregnancies into Cesarean Section; i.e. no one will go for
normal delivery. Besides, every woman will get insured to avail this benefit. This
might also have a tremendous impact on the number of Cesarean Section
recommended by the Obstretician, as the coverage by Insurance Company will
further motivate them to increase their earnings through this surgical procedure.
The recommendation of 24% of the respondents to include certain expensive
Investigations like CAT Scan and MRI was turned off on the basis of 'Moral
Hazard', leading to increased demand for such Investigations. This was included
in Health Insurance Schemes some years back and was ceased due to the above
mentioned problem.
29% of the respondents emphasized the need for mandatory health check up at
the nodal point of entry and periodical medical examination to seek medical
advice and take appropriate preventive measures. This suggestion was although
appreciated, was not considered to be feasible as medical examination with
investigation would incur a large amount of money and if people are rejected at
the point of entry after charging for medical examination, it would lead to
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discrepancies between the public (especially those refused) and the Insurance
Company. However, on a pilot basis this can be tried out.
5.4.4 Non medical benefits-
Npn_moneta:iy benefits2
Some (9%) suggested non monetary benefits to be provided to the insured like
preference in treatment or consultation, thereby avoiding waiting time. This
recommendation can be adopted by meticulously planning with the hospital.
However, if not planned adequately would lead to discrimination of patients (i.e.
insured and non insured), especially where waiting time is more. Other non
monetary benefits like credit card seemed to be feasible.
Mpjietary_benefH:s-
In order to attract more people towards Health Insurance, 28% of the
respondents recommended promotion of claim free bonus, while 14%
recommended other benefits like free passes for dramas, tours, etc. This is
against IRDA rules and hence is ruled out at present. It may be possible in
coming years if the rules are amended.
Easy loans on medical treatments and some investigative techniques were
suggested by 10% of the respondents. This was completely ruled out by stating
that it is not within the scope of Insurance business.
5.4.5 In general about Health Insurance
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33% of the respondents suggested stringent regulations to be enforced in order to
prevent false claims and 22% of the respondents demanded cash less transaction.
Both the above mentioned objectives would soon be achieved with the advent of
TPA in the Insurance Sector.
Almost none of the respondents were aware of the TPAs and when explained
55% of the respondents agreed that it is a good scheme and were hopeful that it
would bring a change in the existing system. However few of them were
skeptical. 15% of the respondents felt that this might lead to further increase in
premiums as the new party is also a private entity and will also function for
profit, while 5% of the respondents felt that they might tie up with the hospitals
and Insurance Company with some hidden motives which might be harmful to
the insured.
A very large number of respondents i.e. almost 68% of 65 respondents demanded
comprehensive coverage to all i.e. all kinds of services should be available to all,
irrespective of their income, age, occupation, etc. However, with the backdrop of
all the above made explanations this suggestion is not feasible in any way for a
larger mass. As seen in some Group Insurance Schemes, by designing an
appropriate scheme for a community or a smaller section of society, this could be
achieved.
5.5 Scaling the Demand for Health Insurance
"When inherent factors have been measured, the measurement of the whole
phenomenon does not remain an impossibility."
In order to capture the entire findings on demand in one snapshot and to verify
as to what extent they are being satisfied and would further be satisfied, based
on "Bogardus Social Distance Scale', a scale has been devised.
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The demand made for Health Insurance by people is scaleable, as they are
logically interrelated and are in a form of continuum along a scale of complexity
i.e. one end of the continuum denotes the existing benefit provided, while along
the scale to the other end the feasibility of implementation becomes more and
more difficult.
To attain this logical flow, the opinion of the people and the recommendations
made about various components of Health Insurance were first quantified in
terms of percentage. Each of these were discussed with the experts to assess the
feasibility of its implementation. Based on certain criterias, the complexities of
each of these elements were decided. These criterias are
1. Can be satisfied but difficult to manage.
2. Difficult to satisfy.
3. Almost not possible to be satisfied.
The most prominent demands are classified in to 5 categories as mentioned
below. The recommendations made under each of these categories have been
rated from number 2 to 4. Number 1 denotes the existing clause -
Period of coverage 1- The premium has to be paid annually thereby providing coverage only
for a year, after which the scheme has to be renewed.
2- The coverage period must be increased to more then a year.
This can be satisfied by increasing the premium rate exorbitantly, considering
various factors that are already mentioned in the preceding part of this
chapter. However this could affect the demand and hence could be a threat to
the viability of the scheme.
3- The coverage period must be reduced to less then a year.
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As most of the financial estimates are made on annual basis, the calculation of
premium rates would be more difficult. Moreover, the risk borne by the
insurance company would also increase, as already mentioned.
4- Enough flexibility must be provided, such that the consumer gets an
opportunity to select among a range for the period of coverage.
As already mentioned due to the non-availability of adequate data this is
almost impossible.
Premium structure
1- The existing scheme gives a standard or universal premium tariff, which
depends on age.
2- More premium must be collected for the one's with pre-existing conditions
instead of excluding them.
As this entails almost 100% risk the financial sustainability and viability of the
scheme would be questionable.
3- Premium structure to be based on sliding scale of income.
Very difficult to obtain such data.
4- Premium must be tailor made considering income, occupation, age, health
status, susceptibility to occupational hazards, location of residence, etc.
Almost impossible to design taking into consideration the minute details
about each individual in such populous nation with huge variations.
Primary Care1- The primary care service is totally excluded in the existing Health Insurance
Scheme.
2- Co-payment for primary services including for drugs, spectacles, etc.
Experts anticipated that it is difficult to be managed and demand may reduce.
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3- Certain benefits like ophthalmic care, dentures, drugs, spectacles, etc. must be
provided free under the scheme.
Although, it is included in other countries the Indian system is not geared to
fulfill this demand.
4- Comprehensive care i.e. all types of health services to be made available
under Health Insurance Scheme.
The viability of the scheme would be threatened.
Other Medical Benefits -
1- Cost of health check up at the end of a block of 4 claim free years.
2- Annual Medical Check up and Medical Check up at the entry point of getting
insured.
This would lead to difficulty in financial management. However it is being
tried out on pilot basis in small population.
3- Investigations like MRI and CAT scan to be included.
As already mentioned this was included and has been curbed out due to
undesirable consequences.
4- Reimbursement for Maternity Benefits and first Caesarian Section
As already mentioned the problem of moral hazard, adverse selection and
cost escalation almost rules out this option.
Non monetary benefit -
1- Cumulative bonus like increase in the sum insured by 5% for each claim free
year and 10% discount on spouse and dependents.
2- Preference to be given to the insured in consultation and hospitalization.
It can be satisfied but has to be well planned.
3- Other benefits like credit card, free passes, concessions, etc.
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Difficult but not impossible to be implemented.
4- Claim free monetary bonus and loans for medical expenses.
It is beyond the scope of Health Insurance as these violate the IRDA rules.
Table 5.1: Changes demanded for Health Insurance by 65 respondents.
Category
Percentage of responses in different category
1
2
3
4
Period of coverage
85
10
8
10
Premium Structure
62
26
15
14
Primary Care
60
12
19
68
Other medical benefits
70
29
24
14
medical 72
9
14
28
non
Other
benefits
Graph 5.2: Scaling of demand for Health Insurance
period
covered
90
80
I 70
-a— premium
O 60
w
2 50 J
primary care
?
40
0)
□)
5 30
c
<D
O
k.
—>— other medical
benefits
20
Q- 10 1
2
categories of responses
9K— other non
medical
benefits
The study of this graph shows that a large number of provisions provided under
the scheme are satisfactory. The graph immediately falls after 1 which shows that
the number of respondents demanding a change in the existing provisions are
very few. However, the line graph of primary care does not confirm with this
finding. A large number of respondents have demanded comprehensive care to
be made available under Health Insurance.
The downward trend of the line representing premium structure indicates that
the changes demanded, with the increasing complexity is less.
The constant change in the upward and the downward trend of the line graph
representing primary care, period of coverage, other medical benefits, and other
non medical benefits; show that the demand is made irrespective of its feasibility
to be implemented, for instance some demanded loans to be provided for health
care which is beyond the ambit of Health Insurance.
Thus, to a large extent the demand for Health Insurance is being met by the
existing schemes, while some can be met further on with innovations in the
scheme and some are beyond the purview of being implemented.
5.6 Conclusion
The services provided by the Insurance Companies are commendable to a great
extent as most of the claimants were satisfied and did not face any difficulty in
settling their claims. However, as suggested by some of them, especially by those
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whose claims were rejected; the Insurance Company must maintain transparency
providing all the requisite information to their clients.
Considering the principle of Health Insurance and the constraints of the Health
Insurance Market, the recommendations of the respondents were analyzed.
Some of these recommendations are acceptable, while some are just not feasible.
The recommendation of tailor made schemes; co-payments for some health
benefits like Investigations and dentures, etc.; monetary benefits like claim free
bonus, non monetary benefits like credit card and preference in consultation;
were acceptable, although it would need further reshaping of the entire system.
The recommendations of various health benefits like primary care, maternity
benefits, reimbursements for Cesarean Section; restructuring of premium rates
based on income, occupation, etc; inclusion of pre-existing conditions and
availability of loans for medical treatment could not be accepted on any grounds
as these would pose a threat to the solvency/financial sustainability of the
company.
A well planned and detailed market survey for the consumer analysis can further
explore the consumer behavior and the capacity of the supplier to innovate and
provide new packages of insurance schemes to the middle class population.
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Chapter 6
Conclusions and Recommendations
"One of the greatest investments which we can make is to invest in health, for
there is no other investment like it.... Health is life insurance, success and
happiness insurance".
-Mahatma Gandhi.
The awareness regarding Health Insurance in general is high among the middle
and the upper middle class urbanites. However, the knowledge regarding Health
Insurance and various schemes is inadequate. Moreover, the study shows that
the knowledge or awareness regarding the scheme is unregimented to
educational qualification, as there is no direct relationship between awareness
and educational qualification of the respondents. This implies that the awareness
is through peer communication and mass media exposure. Hence is a need for
greater publicity. The level of knowledge and the curiosity to know about Health
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Insurance is considerably less in younger population. Gender difference is
evident in the level of knowledge and coverage. Thus, the marketing strategy
adopted must be such that the product appears simple i.e. easy to understand
and attractive.
The need for Health Insurance is almost absolute and the willingness is nearly
equal in both the genders. Thus there is a potential market untapped which can
be covered. Moreover, the need as well as the coverage is found to be higher in
the higher age group although the willingness to pay is less in this age group.
This implies that their kins must be paying for their premiums and hence a
strategy to attract such groups must be adopted. A scheme, which would include
the aged at high premium and also provide incentives for the kins to be a part of
it, can well serve the purpose.
However, in general the willingness to join (felt need) is much more than the
willingness to pay. The willingness to pay is seen to be more in upper middle
class group than in the middle class group. More number of respondents from
the middle age group and those employed in private firms are willing to pay.
Thus, although almost everyone feels the need for Health Insurance, the
propensity to get insured depends on a number of factors like- Socio-economic
factors, attitude, preferences, health seeking behavior, etc.
Although, the coverage of Health Insurance in middle and especially upper
middle class group is reasonably good, much more potential remains untapped
in these classes. This is manifest in the finding that many uninsured are willing
to pay, but have been procrastinating, due to lack of any incentive. This again
indicates the need for a better marketing strategy.
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It has not been possible to establish a concrete relationship between family size
and demand for Health Insurance and total expenditure and demand for Health
Insurance.
Most of those who have claimed for reimbursement for hospitalization costs are
satisfied with the services rendered, except for few whose claims have been
refused. Thus in all, the claim settlement does not take much time, but more
transparency is required such that people do not unnecessarily undergo stress.
Thus comprehending the demand analysis, the study at large shows that with
increase in income and increased awareness the demand for Health Insurance is
rising. The demand for Health Insurance is price inelastic, i.e. even a change in
the premium rate did not change their demand. However, the demand is ensued
with few conditionalities, like modification in some services, in order to make it
more acceptable and attractive. The consumer is ready to pay more but demands
a wider range of services and pliability in the services provided. However for
operationalization of these demands the existing schemes and the suppliers'
perspective also needs to be understood.
Most of the respondents are satisfied with the provisions of Mediclaim, like the
period of coverage, the premium structure and the promptness in the
reimbursement of the claims. However, few demands, which are crucial for the
people to decide whether to take up the schemes or not, are not being fulfilled,
like coverage for ambulatory care, inclusion of pre-existing conditions, claim free
monetary benefit, etc.
Besides these, Mediclaim is also infested with inherent problems like, it is most
primitive kind with no innovations to attract customers. This is because of the
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procedure used to fix the premium, and the kind of benefits provided, which has
remained the same since many years. Regulations are also poor encouraging
expensive corporate hospital treatment by not giving enough attention to the
appropriateness of claims. The existing Mediclaim policy does not properly serve
a large proportion of the population engaged in low paid informal activities.
Pricing of the product is very important, when benefits to cover an event are
predetermined. In Mediclaim, pricing of products is most non-scientific, has an
arbitrary loading a pattern, even more arbitrary discount pattern b, adjustment of
premia is non-existent and bonus clause is outdatedc.
However, the policy is now tied up with TPAs and hence most of these
problems, except for the coverage of individuals from low-income groups can be
solved. The new tariff with revised premium rates is an outcome of this tie up
with the TPAs.
a - loading are amounts to cover expenses of insurer in selling, issuing and
maintenance of policy, taxes, contingencies and its profits.
b - the amount subtracted by the insurance company from the covered expenses
to determine recovery.
c - cumulative bonus is the same since the inception of Mediclaim.
The Central Government Scheme is meant for the Central Government
Employees and their families. It thus belongs to the middle and high-income
categories and they use more health service than average. People use the services
disproportionately for access to specialist consultants, and problems include long
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waiting periods and significant out-of pocket expenses on treatment, inadequate
supplies of medicines, equipment, inadequate staff and unhygienic conditions.
Literatures on CGHS show that the beneficiaries do not get appointment with the
specialist immediately. Visits of the specialists to the dispensaries are limited and
hence the beneficiaries are required to travel considerable distances for
examination by the specialists at the hospital to which they are attached. There
appears a lack of co-ordination and desired level of feedback in so far as
interaction of the dispensary doctor and the specialist is concerned. Patients also
complain regarding delay of 7 to 8 days in issue of medicines procured through
the chemists and delay in reimbursement of the amount spent by beneficiaries on
purchase of medicines from the open market. At times beneficiaries are
handicapped for procuring medicines against the authorization slips as some
chemists are closed at times.
For many of the problems in Health Insurance Sector, TPA is seen as solution,
which not only imposes fair means of regulations on the insured and hence
prevents its abuse, but will also augment the efficiency of the services. Most of
the respondents were in favor of this and it has already become an integral part
of all Health Insurance Schemes.
6.1 Some Recommendations-
There has been a huge gap between the supply and demand for health Insurance.
On one hand the supplier intends to supply huge amount for rare incidences,
while on the other hand the consumer demands smaller sum for frequent
occurrences.
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However with the changing scenario this gap is being narrowed down. The
consumer is getting more prudent and hence feels the need to secure
himself/herself against huge monetary losses in case of contingency; while on
the other hand with privatization more number of suppliers are planning to take
a plunge into the market and provide a wide variety of innovative services.
Thus considering the demand for Health Insurance and the extent to which the
components needs to be changed as to further increase demand, few feasible
options are recommended here-
An accurate analysis of the market demand is essential before the development
of a new product or any changes in the existing product. A consumer can never
be completely satisfied. As shown in the study even those who appear to be
satisfied have some suggestions, which would further satisfy their needs. These
unsatisfied needs, needs to be explored and addressed.
In order to ascertain the customer satisfaction, the insurance company must
undertake market survey and the information so collected must be analyzed
logically and the product features to be subsequently improved.
An expert can only analyze the features of the product and recommend changes
as per its feasibility. However a lay man who lacks expertise can give crucial
inputs as per his felt needs which would increase the acceptability of the
product. Thus designing of a product should not be confined to the creativity of
the designer, but must also extend to the customer. A periodical market survey
of the product will complement the above-mentioned process.
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A general belief is that with increasing longevity the demand for Health
Insurance is expected to move up. However, this study reveals that although the
awareness and need for Health Insurance is more, the number of aged
individuals insured does not conform with it. Thus, need for Health Insurance of
this segment needs to be addressed. A product with low premium would attract
this segment of the population, while as the risk entailed is more, this would
pose threat to the viability of the scheme. Thus a proper balance needs to be
struck between the two. The young populations are highly important as they are
less susceptible to illness and hence are a good risk, who in the long run can
boost the insurance business. As the study reveals that the awareness is less in
this group, the emphasis on the normative need for Health Insurance for such
groups and marketing of the products to attract them is extremely essential.
The security provided by the joint family is at decline due to emerging nuclear
family structure. Strategies to attract small families like better benefits for
spouses or children can be adopted.
Consumers should be given a time schedule so that uncertainties about
reimbursement and arbitrary denial of claims are minimized and better
monitored.
There is also a need to cover the growing cost of out patient costs. The insurance
plan can provide incentive to those depending on referral, by giving lower
reimbursement to those who by pass it.
The changes in the technological aspects are continuously influencing customs,
beliefs, habits, level of education, preferences, standard of living etc. thereby
changing the views of the people towards risk and uncertainty of life and health.
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These also influence the emotional and mental capacity of individual. In the fast
paced life one feels threatened even at the mere thought of illness due to
incapacity which eventually leads to loss of earning capacity. Thus Health
Insurance Scheme would relieve them of stress and tension, hence it needs to be
propagated with proper message.
Thus, if a well developed private Health Insurance covers the affluent class.
Social Insurance covers smaller groups through Community based Insurance
and Group Insurance, the remaining vulnerable and most unaffordable class of
people below poverty line can avail to quality services provided by the
government. Thus, even in the pluralist nature of health care services optimal
utilization of resources can be achieved.
6.2 Limitations of the study
Time, money, personnel have been the major constraints in this study leading to
numerous limitationsThe sample size is too small and hence none of the findings can be
generalized.
S Demand is determined by many determinants like tastes, preferences,
expenses on other goods, etc. Some of these like tastes and preferences are too
subjective and hence could not be quantified or accurately measured. It was
not possible due to time constraints to assess the expenditure on every
goods/services.
S Due to the reluctance of the respondents to reveal their income, the exact
income could not be assessed and hence for income elasticity of demand the
over all socio-economic status based on some specific criteria was considered.
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