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NITI Aayog’s report on Health Insurance


NITI Aayog has released a comprehensive report titled Health Insurance for India’s Missing Middle recently, which brings out the gaps in the health insurance coverage across the Indian population and offers solutions to address the situation.


GS-II: Social Justice (Health related issues, Government Interventions and Policies, Issues arising out of the design and implementation of Government Policies)

Dimensions of the Article:

  1. Highlights of the Health Insurance for India’s Missing Middle report
  2. Why is health insurance important in India?
  3. Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY)
  4. Way forwards recommended in the report

Highlights of the Health Insurance for India’s Missing Middle report

  • According to the report, at least 30% of the population, or 40 crore individuals (referred as the missing middle in this report) are devoid of any financial protection for health.
  • Around the top 20% of the population – 25 crore individuals – are covered through social health insurance, and private voluntary health insurance.
  • In the absence of a low-cost health insurance product, the missing middle remains uncovered despite the ability to pay nominal premiums.
  • Affordable contributory products such as Employees’ State Insurance Corporation (ESIC), and Government subsidized insurance including AB-PMJAY are closed products. They are not available to the general population due to the risk of adverse selection.
  • The Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and various State Government extension schemes, provide comprehensive hospitalization cover to the bottom 50% of the population.

Why is health insurance important in India?

  • Health insurance is a mechanism of pooling the high level of Out of Pocket expenditure (OOPE) in India to provide greater financial protection against health shocks.
  • Pre-payment through health insurance emerges as an important tool for risk-pooling and safeguarding against catastrophic (and often impoverishing) expenditure from health shocks. Moreover, pre-paid pooled funds can also improve the efficiency of healthcare provision.
  • Expansion of health insurance coverage is a vital step, and a pathway in India’s effort to achieve Universal Health Coverage (UHC).
  • India’s health sector is characterized by low Government expenditure on health, high out-of-pocket expenditure (OOPE), and low financial protection for adverse health events. The private sector is characterized by high OOPE, leading to low financial protection.

Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY)

  • The Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) scheme offers a sum insured of Rs.5 lakh per family for secondary care (which doesn’t involve a super specialist) as well as tertiary care (which involves a super specialist).
  • It is an entitlement-based scheme that targets the beneficiaries as identified by latest Socio-Economic Caste Census (SECC) data. Once identified by the database, the beneficiary is considered insured and can walk into any empanelled hospital.
  • The funding for the scheme is shared – 60:40 for all states and UTs with their own legislature, 90:10 in Northeast states and Jammu and Kashmir, Himachal and Uttarakhand and 100% Central funding for UTs without legislature.
  • The National Health Authority (NHA) has been constituted as an autonomous entity under the Society Registration Act, 1860 for effective implementation of PM-JAY in alliance with state governments. The State Health Agency (SHA) is the apex body of the State Government responsible for the implementation of AB PM-JAY in the State.
  • Under PMJAY, cashless and paperless access to services are provided to the beneficiaries at the point of service.
  • Health Benefit Packages covers surgery, medical and day care treatments, cost of medicines and diagnostics.
    • Packaged rates (Rates that include everything so that each product or service is not charged for separately).
    • They are flexible, but they can’t charge the beneficiary once fixed by the hospitals.
    • The scheme also has prescribed a daily limit for medical management.

Way forwards recommended in the report

  • The report has recommended three models for increasing the health insurance coverage in the country:
    1. The success of a private voluntary contributory health insurance product requires creation of a large and diversified risk pool. For this to happen the Government should build consumer awareness of health insurance through Information Education Communication campaigns.
    2. The cost of health insurance i.e., the premium needs to come down, in line with the affordability of the missing middle.
    3. Government Subsidized Health Insurance models can be utilized for segments of the missing middle which remain uncovered, due to limited ability to pay for the voluntary contributory models outlined above. Government can provide public data and infrastructure as a public good to reduce operational and distribution costs of insurers.

-Source: PIB

December 2023