Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health careexpenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity.[1]

Contents

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1 Background2 Comparisono 2.1 Australiao 2.2 Canadao 2.3 Chinao 2.4 Franceo 2.5 Germany

2.5.1 Insurance systemso 2.6 Japano 2.7 Netherlandso 2.8 Rwandao 2.9 United Kingdomo 2.10 United States

2.10.1 History and evolution 2.10.2 Health plan vs. health insurance 2.10.3 Comprehensive vs. scheduled 2.10.4 Factors affecting insurance prices 2.10.5 Military 2.10.6 California

3 Standards of hospitals and clinics used by insurance companies4 See also5 Notes and references

[edit]Background

A health insurance policy is:

1) a contract between an insurance provider (e.g. an insurance company or a government) and an individual or his sponsor (e.g. an employer or a community organization). The contract can be renewable (e.g. annually, monthly) or lifelong in the case of private insurance, or be mandatory for all citizens in the case of national plans. The type and amount of health care costs that will be covered by the health insurance provider are specified in writing, in a member contract or "Evidence of Coverage" booklet for private insurance, or in a national health policy for public insurance.

2) Insurance coverage is provided by an employer-sponsored self-funded ERISA plan. The company generally advertises that they have one of the big insurance companies. However, in an ERISA case, that insurance company "doesn't engage in the act of insurance", they just administer it. Therefore ERISA plans are not subject to state laws. ERISA plans are governed by federal law under the jurisdiction of the US Department of Labor (USDOL). The specific benefits or coverage details are found in the Summary Plan Description (SPD). An appeal must go through the insurance company, then to the Employer's Plan Fiduciary. If still required, the Fiduciary’s decision can be brought to the USDOL to review for ERISA compliance, and then file a lawsuit in federal court.

The individual insured person's obligations may take several forms:[2]

Premium: The amount the policy-holder or his sponsor (e.g. an employer) pays to the health plan to purchase health coverage.

Deductible : The amount that the insured must pay out-of-pocket before the health insurer pays its share. For example, policy-holders might have to pay a $500 deductible per year, before any of their health care is covered by the health insurer. It may take several doctor's visits or prescription refills before the insured person reaches the deductible and the insurance company starts to pay for care however, most policies do not apply co-pays for doctor's visits or prescriptions against your deductible.

Co-payment : The amount that the insured person must pay out of pocket before the health insurer pays for a particular visit or service. For example, an insured person might pay a $45 co-payment for a doctor's visit, or to obtain a prescription. A co-payment must be paid each time a particular service is obtained.

Coinsurance : Instead of, or in addition to, paying a fixed amount up front (a co-payment), the co-insurance is a percentage of the total cost that insured person may also pay. For example, the member might have to pay 20% of the cost of a surgery over and above a co-payment, while the insurance company pays the other 80%. If there is an upper limit on coinsurance, the policy-holder could end up owing very little, or a great deal, depending on the actual costs of the services they obtain.

Exclusions: Not all services are covered. The insured are generally expected to pay the full cost of non-covered services out of their own pockets.

Coverage limits: Some health insurance policies only pay for health care up to a certain dollar amount. The insured person may be expected to pay any charges in excess of the health plan's maximum payment for a specific service. In addition, some insurance company schemes have annual or lifetime coverage maximums. In these cases, the health plan will stop payment when they reach the benefit maximum, and the policy-holder must pay all remaining costs.

Out-of-pocket maximums: Similar to coverage limits, except that in this case, the insured person's payment obligation ends when they reach the out-of-pocket maximum, and health insurance pays all further covered costs. Out-of-pocket maximums can be limited to a specific benefit category (such as prescription drugs) or can apply to all coverage provided during a specific benefit year.

Capitation : An amount paid by an insurer to a health care provider, for which the provider agrees to treat all members of the insurer.

In-Network Provider: (U.S. term) A health care provider on a list of providers preselected by the insurer. The insurer will offer discounted coinsurance or co-payments, or additional benefits, to a plan member to see an in-network provider. Generally, providers in network are providers who have a contract with the insurer to accept rates further discounted from the "usual and customary" charges the insurer pays to out-of-network providers.

Prior Authorization: A certification or authorization that an insurer provides prior to medical service occurring. Obtaining an authorization means that the insurer is obligated to pay for the service, assuming it matches what was authorized. Many smaller, routine services do not require authorization.[3]

Explanation of Benefits : A document that may be sent by an insurer to a patient explaining what was covered for a medical service, and how payment amount and patient responsibility amount were determined.[3]

Prescription drug plans are a form of insurance offered through some health insurance plans. In the U.S., the patient usually pays a copayment and the prescription drug insurance part or all of the balance for drugs covered in the formulary of the plan. Such plans are routinely part of national health insurance programs. For example in the province of Quebec, Canada, prescription drug insurance is universally required as part of the public health insurance plan, but may be purchased and administered either through private or group plans, or through the public plan.[4]

Some, if not most, health care providers in the United States will agree to bill the insurance company if patients are willing to sign an agreement that they will be responsible for the amount that the insurance company doesn't pay. The insurance company pays out of network providers according to "reasonable and customary" charges, which may be less than the provider's usual fee. The provider may also have a separate contract with the insurer to accept what amounts to a discounted rate or capitation to the provider's standard charges. It generally costs the patient less to use an in-network provider.

[edit]Comparison

See also: Health care systems

The Commonwealth Fund, in its annual survey, "Mirror, Mirror on the Wall", compares the performance of the health care systems in Australia, New Zealand, the United Kingdom, Germany, Canada and the U.S. Its 2007 study found that, although the U.S. system is the most expensive, it consistently under-performs compared to the other countries.[5] One difference between the U.S. and the other countries in the study is that the U.S. is the only country without universal health insurance coverage.

The Commonwealth Fund completed its thirteenth annual health policy survey in 2010.[6] A study of the survey "found significant differences in access, cost burdens, and problems with health insurance that are associated with insurance design".[6] Of the countries surveyed, the results indicated that people in the United States had more out-of-pocket expenses, more disputes with insurance companies than other countries, and more insurance payments denied; paperwork was also higher although Germany had similarly high levels of paperwork.[6]

[edit]Australia

Main article: Health care in Australia

The public health system is called Medicare. It ensures free universal access to hospital treatment and subsidised out-of-hospital medical treatment. It is funded by a 1.5% tax levy on all taxpayers, an extra 1% levy on high income earners, as well as general revenue.

The private health system is funded by a number of private health insurance organisations. The largest of these is Medibank Private, which is government-owned, but operates as a government business enterprise under the same regulatory regime as all other registered private health funds. The Coalition Howard government had announced that Medibank would be privatised if it won the 2007 election, however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that it would remain in government ownership.

Some private health insurers are 'for profit' enterprises such as Australian Unity, and some are non-profit organizations such as HCF and theHealth Insurance Fund of Australia (HIF). Some have membership restricted to particular groups, but the majority have open membership. Membership to most health funds is now also available through comparison websites like moneytime, iSelect or the decision assistance sites HelpMeChoose and the latest entry YouCompare. These comparison sites operate on a commission-basis by agreement with their participating health funds. The Private Health Insurance Ombudsman also operates a free website which allows consumers to search for and compare private health insurers' products, which includes information on price and level of cover. [7]

Most aspects of private health insurance in Australia are regulated by the Private Health Insurance Act 2007. Complaints and reporting of the private health industry is carried out by an independent government agency, the Private Health Insurance Ombudsman.[8] The ombudsman publishes an annual report that outlines the number and nature of complaints per health fund compared to their market share [9] [ The private health system in Australia operates on a "community rating" basis, whereby premiums do not vary solely because of a person's previous medical history, current state of health, or (generally speaking) their age (but see Lifetime Health Cover below). Balancing this are waiting periods, in particular for pre-existing conditions (usually referred to within the industry as PEA, which stands for "pre-existing ailment"). Funds are entitled to impose a waiting period of up to 12 months on benefits for any medical condition the signs and symptoms of which existed during the six months ending on the day the person first took out insurance. They are also entitled to impose a 12-month waiting period for benefits for

treatment relating to an obstetric condition, and a 2-month waiting period for all other benefits when a person first takes out private insurance. Funds have the discretion to reduce or remove such waiting periods in individual cases. They are also free not to impose them to begin with, but this would place such a fund at risk of "adverse selection", attracting a disproportionate number of members from other funds, or from the pool of intending members who might otherwise have joined other funds. It would also attract people with existing medical conditions, who might not otherwise have taken out insurance at all because of the denial of benefits for 12 months due to the PEA Rule. The benefits paid out for these conditions would create pressure on premiums for all the fund's members, causing some to drop their membership, which would lead to further rises in premiums, and a vicious cycle of higher premiums-leaving members would ensue.

There are a number of other matters about which funds are not permitted to discriminate between members in terms of premiums, benefits, or membership – they include racial origin, religion, sex, sexual orientation, nature of employment, and leisure activities. Premiums for a fund's product that is sold in more than one state can vary from state to state, but not within the same state.

The Australian government has introduced a number of incentives to encourage adults to take out private hospital insurance. These include:

Lifetime Health Cover: If a person has not taken out private hospital cover by the 1st July after their 31st birthday, then when (and if) they do so after this time, their premiums must include a loading of 2% per annum for each year they were without hospital cover. Thus, a person taking out private cover for the first time at age 40 will pay a 20 per cent loading. The loading is removed after 10 years of continuous hospital cover. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover.

Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (currently $70,000 for singles and $140,000 for couples) and who do not have an adequate level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The rationale is that if the people in this income group are forced to pay more money one way or another, most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event that they need private hospital treatment –

rather than pay it in the form of extra tax as well as having to meet their own private hospital costs. The Australian government announced in May 2008 that it proposes to

increase the thresholds, to $100,000 for singles and $150,000 for families. These changes require legislative approval. A bill to change the law has been introduced but was not passed by the Senate.[10] An amended version was passed on 16 October 2008. There have been criticisms that the changes will cause many people to drop their private health insurance, causing a further burden on the public hospital system, and a rise in premiums for those who stay with the private system. Other commentators believe the effect will be minimal.[11]

Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 30%, 35% or 40%, depending on age. The Rudd Government announced in May 2009 that as of July 2010, the Rebate would become means-tested, and offered on a sliding scale. While this move (which would have required legislation) was defeated in the Senate at the time, in early 2011 the Gillard Government announced plans to reintroduce the legislation after the Opposition loses the balance of power in the Senate. The ALP and Greens (which currently combine in Australia to form a minority government) have long been against the rebate, referring to it as "middle-class welfare".[12]

[edit]Canada

Main article: Health care in Canada

Health care is mainly a constitutional, provincial government responsibility in Canada (the main exceptions being federal government responsibility for services provided to aboriginal peoples covered by treaties, the Royal Canadian Mounted Police, the armed forces, and members of parliament). Consequently each province administers its own health insurance program. The federal government influences health insurance by virtue of its fiscal powers – it transfers cash and tax points to the provinces to help cover the costs of the universal health insurance programs. Under the Canada Health Act, the federal government mandates and enforces the requirement that all people have free access to what are termed "medically necessary services," defined primarily as care delivered by physicians or in hospitals, and the nursing component of long term residential care. If provinces

allow doctors or institutions to charge patients for medically necessary services, the federal government reduces its payments to the provinces by the amount of the prohibited charges. Collectively, the public provincial health insurance systems in Canada are frequently referred to as Medicare. This public insurance is tax-funded out of general government revenues, although British Columbia and Ontario levy a mandatory premium with flat rates for individuals and families to generate additional revenues – in essence a surtax. Private health insurance is allowed, but in six provincial governments only for services that the public health plans do not cover, for example, semi-private or private rooms in hospitals and prescription drug plans. Four provinces allow insurance for services also mandated by the Canada Health Act, but in practice there is no market for it. All Canadians are free to use private insurance for elective medical services such as laser vision correction surgery, cosmetic surgery, and other non-basic medical procedures. Some 65% of Canadians have some form of supplementary private health insurance; many of them receive it through their employers.[13] Private-sector services not paid for by the government account for nearly 30 percent of total health care spending.[14]

In 2005, the Supreme Court of Canada ruled, in Chaoulli v. Quebec, that the province's prohibition on private insurance for health care already insured by the provincial plan violated the Quebec Charter of Rights and Freedoms, and in particular the sections dealing with the right to lifeand security, if there were unacceptably long wait times for treatment, as was alleged in this case. The ruling has not changed the overall pattern of health insurance across Canada but has spurred on attempts to tackle the core issues of supply and demand and the impact of wait times.[15]

[edit]China

Main articles: Healthcare reform in the People's Republic of China and Pharmaceutical industry in the People's Republic of China

[edit]France

Main article: Health care in France

The national system of health insurance was instituted in 1945, just after the end of the Second World War. It was a compromise betweenGaullist and Communist representatives in the French parliament. The

Conservative Gaullists were opposed to a state-run healthcare system, while the Communists were supportive of a complete nationalisation of health care along a British Beveridge model.

The resulting programme is profession-based: all people working are required to pay a portion of their income to a not-for-profit health insurance fund, which mutualises the risk of illness, and which reimburses medical expenses at varying rates. Children and spouses of insured people are eligible for benefits, as well. Each fund is free to manage its own budget, and used to reimburse medical expenses at the rate it saw fit, however following a number of reforms in recent years, the majority of funds provide the same level of reimbursment and benefits.

The government has two responsibilities in this system.

The first government responsibility is the fixing of the rate at which medical expenses should be negotiated, and it does so in two ways: The Ministry of Health directly negotiates prices of medicine with the manufacturers, based on the average price of sale observed in neighboring countries. A board of doctors and experts decides if the medicine provides a valuable enough medical benefit to be reimbursed (note that most medicine is reimbursed, including homeopathy). In parallel, the government fixes the reimbursment rate for medical services: this means that a doctor is free to charge the fee that he wishes for a consultation or an examination, but the social security system will only reimburse it at a pre-set rate. These tariffs are set annually through negotiation with doctors' representative organisations.

The second government responsibility is oversight of the health-insurance funds, to ensure that they are correctly managing the sums they receive, and to ensure oversight of the public hospital network.

Today, this system is more-or-less intact. All citizens and legal foreign residents of France are covered by one of these mandatory programs, which continue to be funded by worker participation. However, since 1945, a number of major changes have been introduced. Firstly, the different health-care funds (there are five: General, Independent, Agricultural, Student, Public Servants) now all reimburse at the same rate. Secondly, since 2000, the government now provides health care to those who are not covered by a mandatory regime (those who have never worked and who are not students, meaning the very rich or the very poor). This regime, unlike the worker-financed ones, is financed via general taxation and reimburses at

a higher rate than the profession-based system for those who cannot afford to make up the difference. Finally, to counter the rise in health-care costs, the government has installed two plans, (in 2004 and 2006), which require insured people to declare a referring doctor in order to be fully reimbursed for specialist visits, and which installed a mandatory co-pay of 1 € (about $1.45) for a doctor visit, 0,50 € (about 80¢) for each box of medicine prescribed, and a fee of 16–18 € ($20–25) per day for hospital stays and for expensive procedures.

An important element of the French insurance system is solidarity: the more ill a person becomes, the less the person pays. This means that for people with serious or chronic illnesses, the insurance system reimburses them 100% of expenses, and waives their co-pay charges.

Finally, for fees that the mandatory system does not cover, there is a large range of private complementary insurance plans available. The market for these programs is very competitive, and often subsidised by the employer, which means that premiums are usually modest. 85% of French people benefit from complementary private health insurance.[16][17]

[edit]Germany

Main article: Health care in Germany

Germany has Europe's oldest universal health care system, with origins dating back to Otto von Bismarck's Social legislation, which included the Health Insurance Bill of 1883, Accident Insurance Bill of 1884, and Old Age and Disability Insurance Bill of 1889. As mandatory health insurance, these bills originally applied only to low-income workers and certain government employees; their coverage, and that of subsequent legislation gradually expanded to cover virtually the entire population.[18]

Currently 85% of the population is covered by a basic health insurance plan provided by statute, which provides a standard level of coverage. The remainder opt for private health insurance[citation needed], which frequently offers additional benefits. According to the World Health Organization, Germany's health care system was 77% government-funded and 23% privately funded as of 2004.[19]

The government partially reimburses the costs for low-wage workers, whose premiums are capped at a predetermined value. Higher wage workers pay a premium based on their salary. They may also opt for private insurance, which is

generally more expensive, but whose price may vary based on the individual's health status.[20]

Reimbursement is on a fee-for-service basis, but the number of physicians allowed to accept Statutory Health Insurance in a given locale is regulated by the government and professional societies.

Co payments were introduced in the 1980s in an attempt to prevent over utilization. The average length of hospital stay in Germany has decreased in recent years from 14 days to 9 days, still considerably longer than average stays in the United States (5 to 6 days).[21][22] Part of the difference is that the chief consideration for hospital reimbursement is the number of hospital days as opposed to procedures or diagnosis. Drug costs have increased substantially, rising nearly 60% from 1991 through 2005. Despite attempts to contain costs, overall health care expenditures rose to 10.7% of GDP in 2005, comparable to other western European nations, but substantially less than that spent in the U.S. (nearly 16% of GDP).[23]

[edit]Insurance systems

Germany has a universal multi-payer system with two main types of health insurance. Germans are offered three mandatory health benefits, which are co-financed by employer and employee: health insurance, accident insurance, and long-term care insurance.

Accident insurance (Unfallversicherung) is covered by the employer and basically covers all risks for commuting to work and at the workplace.

Long term care (Pflegeversicherung[24]) is covered half and half by employer and employee and covers cases in which a person is not able to manage his or her daily routine (provision of food, cleaning of apartment, personal hygiene, etc.). It is about 2% of a yearly salaried income or pension, with employers matching the contribution of the employee.

There are two separate systems of health insurance: public health insurance (Gesetzliche Krankenversicherung) and private insurance(Private Krankenversicherung). Both systems struggle with the increasing cost of medical treatment and the changing demography. About 87.5% of the persons with health insurance are members of the public system, while 12.5% are covered by private insurance (as of 2006).[25]There are many differences between the public health

insurance and private insurance. If people change once in private insurance, there is no way back in public health insurance. In general the benefits and costs in the private insurance are better for young people without family. There are hard salary requirements to join the private insurance because it´s getting more expensive advanced in years.[26]

[edit]Japan

Main article: Health care in Japan

There are two major types of insurance programs available in Japan – Employees Health Insurance (健康保険 Kenkō-Hoken), and National Health Insurance ([国民健康保険 Kokumin-Kenkō-Hoken). National Health insurance is designed for people who are not eligible to be members of any employment-based health insurance program. Although private health insurance is also available, all Japanese citizens, permanent residents, and non-Japanese with a visa lasting one year or longer are required to be enrolled in either National Health Insurance or Employees Health Insurance.

[edit]Netherlands

Main article: Health care in the Netherlands

In 2006, a new system of health insurance came into force in the Netherlands. This new system avoids the two pitfalls of adverse selection and moral hazard associated with traditional forms of health insurance by using a combination of regulation and an insurance equalization pool. Moral hazard is avoided by mandating that insurance companies provide at least one policy which meets a government set minimum standard level of coverage, and all adult residents are obliged by law to purchase this coverage from an insurance company of their choice. All insurance companies receive funds from the equalization pool to help cover the cost of this government-mandated coverage. This pool is run by a regulator which collects salary-based contributions from employers, which make up about 50% of all health care funding, and funding from the government to cover people who cannot afford health care, which makes up an additional 5%.

The remaining 45% of health care funding comes from insurance premiums paid by the public, for which companies compete on price, though the variation between the various competing insurers is only about 5%. However, insurance companies are free to sell additional policies to provide coverage beyond the national minimum. These policies do not receive funding from the equalization pool, but

cover additional treatments, such as dental procedures and physiotherapy, which are not paid for by the mandatory policy.

Funding from the equalization pool is distributed to insurance companies for each person they insure under the required policy. However, high-risk individuals get more from the pool, and low-income persons and children under 18 have their insurance paid for entirely. Because of this, insurance companies no longer find insuring high risk individuals an unappealing proposition, avoiding the potential problem of adverse selection.

Insurance companies are not allowed to have co-payments, caps, or deductibles, or to deny coverage to any person applying for a policy, or to charge anything other than their nationally set and published standard premiums. Therefore, every person buying insurance will pay the same price as everyone else buying the same policy, and every person will get at least the minimum level of coverage.

[edit]Rwanda

Rwanda is one of a handful of low income countries that has implemented community-based health insurance schemes in order to reduce the financial barriers that prevent poor people from seeking and receiving needed health services. This scheme has helped reach 90% of the country's population with health-care coverage.[27][28]

[edit]United Kingdom

Main article: National Health Service

The UK's National Health Service (NHS) is a publicly funded healthcare system that provides coverage to everyone normally resident in the UK. It is not strictly an insurance system because (a) there are no premiums collected, (b) costs are not charged at the patient level and (c) costs are not pre-paid from a pool. However, it does achieve the main aim of insurance which is to spread financial risk arising from ill-health. The costs of running the NHS (est. £104 billion in 2007-8)[29] are met directly from general taxation. The NHS provides the majority of health care in the UK, including primary care, in-patient care, long-term health care, ophthalmology, and dentistry.

Private health care has continued parallel to the NHS, paid for largely by private insurance, but it is used by less than 8% of the population, and generally as a top-up to NHS services. There are many treatments that the private sector does not

provide. For example, health insurance on pregnancy is generally not covered or covered with restricting clauses. Typical exclusions for Bupa schemes (and many other insurers) include:

ageing, menopause and puberty; AIDS/HIV; allergies or allergic disorders; birth control, conception, sexual problems and sex changes; chronic conditions; complications from excluded or restricted conditions/ treatment; convalescence, rehabilitation and general nursing care ; cosmetic, reconstructive or weight loss treatment; deafness; dental/oral treatment (such as fillings, gum disease, jaw shrinkage, etc); dialysis; drugs and dressings for out-patient or take-home use† ; experimental drugs and treatment; eyesight; HRT and bone densitometry; learning difficulties, behavioural and developmental problems; overseas treatment and repatriation; physical aids and devices; pre-existing or special conditions; pregnancy and childbirth; screening and preventive treatment; sleep problems and disorders; speech disorders; temporary relief of symptoms.[30] († = except in exceptional circumstances)

There are a number of other companies in the United Kingdom which include, among others, AXA, Aviva, Bupa, Groupama Healthcare, WPAand PruHealth. Similar exclusions apply, depending on the policy which is purchased.

Recently (2009) the main representative body of British Medical physicians, the British Medical Association, adopted a policy statement expressing concerns about developments in the health insurance market in the UK. In its Annual Representative Meeting which had been agreed earlier by the Consultants Policy Group (i.e. Senior physicians) stating that the BMA was "extremely concerned that the policies of some private healthcare insurance companies are preventing or restricting patients exercising choice about (i) the consultants who treat them; (ii) the hospital at which they are treated; (iii) making top up payments to cover any gap between the funding provided by their insurance company and the cost of their chosen private treatment." It went in to "call on the BMA to publicise these concerns so that patients are fully informed when making choices about private healthcare insurance."[31] The NHS offers patients a choice of hospitals and consultants and does not charge for its services.

The private sector has been used to increase NHS capacity despite a large proportion of the British public opposing such involvement.[32]According to

the World Health Organization, government funding covered 86% of overall health care expenditures in the UK as of 2004, with private expenditures covering the remaining 14%.[19]

[edit]United States

Main articles: Health insurance in the United States and Health care in the United States

The United States health care system relies heavily on private health insurance, which is the primary source of coverage for most Americans. According to the CDC, approximately 58% of Americans have private health insurance.[33] Public programs provide the primary source of coverage for most senior citizens and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families, and SCHIP, also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public programs include military health benefits provided through TRICARE and the Veterans Health Administration and benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals.[34]

In the late 1990s and early 2000s, health advocacy companies began to appear to help patients deal with the complexities of the healthcare system. The complexity of the healthcare system has resulted in a variety of problems for the American public. A study found that 62 percent of persons declaring bankruptcy in 2007 had unpaid medical expenses of $1000 or more, and in 92% of these cases the medical debts exceeded $5000. Nearly 80 percent who filed for bankruptcy had health insurance.[35] The Medicare and Medicaid programs were estimated to soon account for 50 percent of all national health spending.[36] These factors and many others fueled interest in an overhaul of the health care system in the United States. In 2010 President Obama signed into law the Patient Protection and Affordable Care Act. This Act included a main provision which the American medical insurance lobby group America's Health Insurance Plans had called for, namely, a mandate that every American must have medical insurance (or pay a fine) as a quid pro quo for "guaranteed issue", i.e. the dropping of unpopular features of America's

health insurance system such as premium weightings, exclusions for pre-existing conditions, and the pre-screening of insurance applicants. The Patient Protection and Affordable Care Act is pending review for constitutionality by the United States Supreme Court. On March 26-28, the Supreme Court will hear arguments regarding the validity of the Act. Within the next few months, a final Supreme Court ruling is expected.

[edit]History and evolution

Main article: History of insurance

In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance.[37][38] This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance.[39]

Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the U.S. by 1866, but the industry consolidated rapidly soon thereafter. While there were earlier experiments, the origins of sickness coverage in the U.S. effectively date from 1890. The first employer-sponsored group disability policy was issued in 1911.[40]

Before the development of medical expense insurance, patients were expected to pay health care costs out of their own pockets, under what is known as the fee-for-service business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and most prescription drugs, but this is not always the case.

Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations.[40] The predecessors of today's Health Maintenance Organizations (HMOs) originated beginning in 1929, through the 1930s and on during World War II.[41][42]

[edit]Health plan vs. health insurance

Historically, HMOs tended to use the term "health plan", while commercial insurance companies used the term "health insurance". A health plan can also refer to a subscription-based medical care arrangement offered through HMOs, preferred provider organizations, or point of service plans. These plans are similar to pre-paid dental, pre-paid legal, and pre-paid vision plans. Pre-paid health plans typically pay for a fixed number of services (for instance, $300 in preventive care, a certain number of days of hospice care or care in a skilled nursing facility, a fixed number of home health visits, a fixed number of spinal manipulation charges, etc.). The services offered are usually at the discretion of autilization review nurse who is often contracted through the managed care entity providing the subscription health plan. This determination may be made either prior to or after hospital admission (concurrent utilization review).

[edit]Comprehensive vs. scheduled

Comprehensive health insurance pays a percentage of the cost of hospital and physician charges after a deductible (usually applies to hospital charges) or a co-pay (usually applies to physician charges, but may apply to some hospital services) is met by the insured. These plans are generally expensive because of the high potential benefit payout — $1,000,000 to 5,000,000 is common — and because of the vast array of covered benefits.[43]

Scheduled health insurance plans are not meant to replace a traditional comprehensive health insurance plans and are more of a basic policy providing access to day-to-day health care such as going to the doctor or getting a prescription drug. In recent years in the USA, these plans have taken the name mini-med plans or association plans. The term "association" is often used to describe them because they require membership in an association that must exist for some other purpose than to sell insurance. Examples include the Health Care Credit Union Association. These plans may provide benefits for hospitalization and surgical, but these benefits will be limited. Scheduled plans are not meant to be effective for catastrophic events. These plans cost much less than comprehensive health insurance. They generally pay limited benefits amounts directly to the service provider, and payments are based upon the plan's "schedule of benefits". Annual benefits maximums for a typical scheduled health insurance plan may range from $1,000 to $25,000.[44]

[edit]Factors affecting insurance prices

A recent study by PricewaterhouseCoopers examining the drivers of rising health care costs in the U.S. pointed to increased utilization created by increased consumer demand, new treatments, and more intensive diagnostic testing, as the most significant.[45] However, Wendell Potter, a long-time PR representative for the health insurance industry, has noted that the group which sponsored this study, AHIP, is a front-group funded by various insurance companies.[46] People in developed countries are living longer. The population of those countries is aging, and a larger group of senior citizens requires more intensive medical care than a young, healthier population. Advances in medicine and medical technology can also increase the cost of medical treatment. Lifestyle-related factors can increase utilization and therefore insurance prices, such as: increases in obesity caused by insufficient exercise and unhealthy food choices; excessive alcohol use, smoking, and use of street drugs. Other factors noted by the PWC study included the movement to broader-access plans, higher-priced technologies, and cost-shifting from Medicaid and the uninsured to private payers.[45]

Other researchers note that doctors and other healthcare providers are rewarded for merely treating patients rather than curing them and that patients insured through employer group policies have incentives to go to the absolute best HCPs rather than the most cost-effectiveones.[47]

[edit]Military

The price of health insurance for retired and active duty military personnel has gone up from $19 billion just a decade ago to $49 billion in the last year. Now, TRICARE, the government health insurance program, makes up nine percent of the total budget for the Pentagon.[48]

[edit]California

In 2007, 87% of Californians had some form of health insurance.[49] Services in California range from private offerings: HMOs, PPOs to public programs: Medi-Cal, Medicare, and Healthy Families (SCHIP).

California developed a solution to assist people across the State and is one of the only States to have an Office devoted to giving people tips and resources to get the best care possible. California's Office of the Patient Advocate was established July 2000 to publish a yearly Health Care Quality Report Card[50] on the Top HMOs, PPOs, and Medical Groups and to create and distribute helpful tips and resources to give Californians the tools needed to get the best care.[51]

Additionally, California has a Help Center that assists Californians when they have problems with their health insurance. The Help Center is run by the Department of Managed Health Care, the government department that oversees and regulates HMOs and some PPOs.

[edit]Standards of hospitals and clinics used by insurance companies

A key factor in patient safety is that the health care providers should be safe and fit for purpose.

In the USA, insurers will often only make use of health care providers that are independently surveyed by a recognized quality assurance program, such as being accredited by accreditation schemes such as the Joint Commission and the American Accreditation Healthcare Commission.[52]

In the UK and some other countries, such safeguards are not as yet consistently in place, and health insurers do not look for independent assessment of the quality and safety of hospitals or clinics before allowing patients to make use of their services.

[edit]

Health insurance

1. Introduction

Over the last 50 years India has achieved a lot in terms of health improvement. But still India isway behind many fast developing countries such as China, Vietnam and Sri Lanka in healthindicators (Satia et al 1999). In case of government funded health care system, the quality andaccess of services has always remained major concern. A very rapidly growing private healthmarket has developed in India. This private sector bridges most of the gaps between whatgovernment offers and what people need. However, with proliferation of various health caretechnologies and general price rise, the cost of care has also become very expensive andunaffordable to large segment of population. The government and people have started exploringvarious health financing options to manage problems arising out of growing set of complexities of private sector growth, increasing cost of care and changing epidemiological pattern of diseases. The new economic policy and liberalization process followed by the Government of India since1991 paved the way for privatization of insurance sector in the

country. Health insurance, whichremained highly underdeveloped and a less significant segment of the product portfolios of thenationalized insurance companies in India, is now poised for a fundamental change in itsapproach and management. The Insurance Regulatory and Development Authority (IRDA) Bill,recently passed in the Indian Parliament, is important beginning of changes having significantimplications for the health sector.The privatization of insurance and constitution IRDA envisage to improve the performance of the state insurance sector in the country by increasing benefits from competition in terms of lowered costs and increased level of consumer satisfaction. However, the implications of theentry of private insurance companies in health sector are not very clear. The recent policychanges will have been far reaching and would have major implications for the growth anddevelopment of the health sector. There are several contentious issues pertaining to developmentin this sector and these need critical examination. These also highlight the critical need for  policy formulation and assessment. Unless privatization and development of health insurance ismanaged well it may have negative impact of health care especially to a large segment of  population in the country. If it is well managed then it can improve access to care and healthstatus in the country very rapidly.Health insurance as it is different from other segments of insurance business is more complex because of serious conflicts arising out of adverse selection, moral hazard, and information gap problems. For example, experiences from other countries suggest that the entry of private firmsinto the health insurance sector, if not properly regulated, does have adverse consequences for the costs of care, equity, consumer satisfaction, fraud and ethical standards. The IRDA wouldhave a significant role in the regulation of this sector and responsibility to minimise theunintended consequences of this change.

Health sector policy formulation, assessment and implementation is an

extremely complex task especially in a changing epidemiological, institutional,

technological, and political scenario.Further, given the institutional complexity

of our health sector programmes and the pluralisticcharacter of health care

providers, health sector reform strategies in the context of health  

insurance that have evolved elsewhere may have very little suitability to our country situation.Proper understanding of the Indian health situation and application of the principles of insurancekeeping in view the social realities and

national objective are important.This paper presents review of health insurance situation in India - the opportunities it provides,the challenges it faces and the concerns it raises. A discussion of the implications of  privatization of insurance on health sector from various perspectives and how it will shape thecharacter of our health care system is also attempted. The paper following areas:•Economic policy context•Health financing in India•Health insurance scenario in India•Health insurance for the poor •Consumer perspective on health insurance•Models of health insurance in other countriesThis paper is partly based on a deliberations of a one day workshop (IIMA 1999) and aconference held at 11M Ahmedabad (IIMA 2000) in 1999-2000 on health insurance involving practicing doctors, representatives from government insurance companies, medical associations,training institutes, member-based organizations and health policy researchers. Workshop andconference were part of the activities of Health Policy Development Network (HELPONET) andis supported by the International Health Policy Program. The paper also draws on several published and unpublished papers and documents in the area of health insurance.

2. Economic policy context and imperatives of liberalization of insurance sector 

There are several imperatives for opening of the insurance and health insurance

sector in Indiafor private investment. Here we review some of these

imperatives.Economic policy reforms started during late eighties and speeded up

in nineties are the contextin which liberalization of insurance sector happened in

India. It was very obvious that theliberalization of the real (productive) and

financial sector of the economy has to go hand in hand.It is imperative that these

sectors are consistent with policies of each other and unless bothfunction

efficiently and are in equilibrium, it would be difficult to ensure appropriate

economicgrowth. Given these facts liberalization of both sectors has to proceed

simultaneously.Indian economic system has been developed on paradigm of

mixed economy in which publicand private enterprises co-exist. The past

strategies of development based on socialistic thinkingwere focusing on the

premise of restrictions, regulations and control and less on incentives andmarket

driven forces. This affected the development process in the country in serious

way. After the economic liberalization the paradigm changed from central

planning, command and controlto market driven development. Deregulation,

decontrol, privatization, delicensing, globalization became the key strategies to

implement the new framework and encourage competition. Thesocial sectors did

not remain unaffected by this change. The control of government

expenditure,which became a key tool to manage fiscal deficits in early 1990s,

affected the social sector spending in major way. The unintended consequences

of controlling the fiscal deficits have beenreduction in capital expenditure and

non-salary component of many social sector programmes.This has led to severe

resource constraints in the health sector in respect of non-salaryexpenditure and

this has affected the capacity and credibility of the government health

caresystem to deliver good quality care over the years. Given the increasing

salaries, lack of effective monitoring and lack of incentives to provide good

quality services the provides in thegovernment sector became indifferent to the

clients. Clients also did not demand good qualityand better access, as

government services were free of cost.

Under this situation more and more clients turned to the private sector health

providers and thusthe private sector healthcare has expanded. Given the

socialistic political thinking and populist policy it has been generally difficult for

any government to introduce cost recovery in publichealth sector. Given that

government is unable to provide more resources for health care, andinstitute cost

recovery, one of the ways to reduce the under-funding and augment the

resourcesin the health sector was to encourage the development health

insurance.

Another imperative for liberalization of the insurance sector was the need for

long-term financialresources on sustainable basis for the development of

infrastructure sector such as roads,transports etc. It was realized that during the

course of economic liberalization, the funds todevelopment the infrastructure

also became a major constraint. Country certainly neededinfrastructure

development. For this the finances are major constraint. In these investments

the benefits are more social than private. The major concern was how these

finances can be madeavailable at low costs. In past the development of social

sector were financed using governmentchanneled funds through various semi-

government financial institutions. Under the liberalizedeconomy this may not be

possible. One hope is that if the insurance sector develops rapidlyunder

privatization then it can provide long-term finance to the infrastructure sector.

The financial sector, which consists of banks, financial institutions,

insurance companies, provident funds schemes, mutual funds were all under

government control. There was lesscompetition across these units. As a result

these institutions remained significantly lessdeveloped in their approach and

management. Insurance sector has been most affected by thegovernment

controls. Government had significant control on the policies these

insurancecompanies could offer and utilization of the resources mobilized by

insurance companies. Onecan see that most of the insurance products (e.g., life

insurance products) were promoted asmechanisms to improve the savings and

tax shelters rather as risk coverage instruments. Other segments of the insurance

products grew because of the statutory obligations (e.g., Motor Vehicle, Marine

and Fire) under various acts. The management and organization of

insurancesector companies remained less developed and they neglected new

product development andmarketing. Thus one of the hopes in opening of the

insurance sector was that the private andforeign companies would rapidly

develop the sector and improve coverage of the populationwith insurance using

new products and better management.

Last imperative for opening of the insurance sector was signing the WTO India.

After this therewas little choice but to open the entire financial sector - including

insurance sector to private andforeign investors. (Dholakia 1999).

3. Health sector and its financing: present scene and issues for the futureDuring the last 50 years India has developed a large government health

infrastructure with morethan 150 medical colleges, 450 district hospitals, 3000

Community Health Centers, 20,000Primary Health Care centers and 130,000

Sub-Health Centers. On top of this there are largenumber of private and NGO

health facilities and practitioners scatters though out the country.Over the past

50 ears India has made considerable progress in improving its health status.

Deathrate has reduced from 40 to 9 per thousand, infant mortality rate reduced

from 161 to 71 per thousand live births and life expectancy increased from 31 to

63 years. However, manychallenges remain and these are: life expectancy 4

years below world average, high incidence of communicable diseases,

increasing incidence of non- communicable diseases, neglect of women's health,

considerable regional variation and threat from environment degradation. It

isestimated that at any given point of time 40 to 50 million people are on

medication for major sickness in India. About 200 million workdays are lost

annually due to sickness. Survey dataindicate that about 60% people use private

health providers for outpatient treatment while 60 %use government providers

for in-door treatment. The average expenditure for care is 2-5 timesmore in

private sector than in public sector.

India spends about 6% of GDP on health expenditure. Private health care

expenditure is 75% or 4.25% of GDP and most of the rest (1.75%) is

government funding. At present, the insurancecoverage is negligible. Most of

the public funding is for preventive, promotive and primary care programmes

while private expenditure is largely for curative care. Over the period the

privatehealth care expenditure has grown at the rate of 12.84% per annum and

for each one percentincrease in per capital income the private health care

expenditure has increased by 1.47%. Number of private doctors and private

clinical facilities are also expanding exponentially. Indianhealth financing scene

raises number of challenges, which are:

•increasing health care costs,•high financial burden on poor eroding their incomes,•increasing burden of new diseases and health risks and•neglect of preventive and primary care and public health functions due to under funding of the government health care.Given the above scenario exploring health-financing options becomes critical. Health Insuranceis considered one of the financing mechanisms to over come some of the problems of our system.

4. Health Insurance scene in IndiaHealth insurance can be defined in very narrow sense where individual or group purchases inadvance health coverage by paying a fee called "premium". But it can be also defined broadly byincluding all financing arrangements where consumers can avoid or reduce their expenditures attime of use of services. The health

insurance existing in India covers a very wide spectrum of arrangements and hence the latter- broader interpretation of health Insurance is moreappropriate.Health insurance is very well established in many countries. But in India it is a new conceptexcept for the organized sector employees. In India only about 2 per cent of total healthexpenditure is funded by public/social health insurance while 18 per cent is funded bygovernment budget. In many other low and middle income countries contribution of socialhealth insurance is much higher (see Table I). Table 1Percentage of total health expenditure funded through public/socialinsurance and direct government revenueCountry Social Health Insurance  Government BudgetAlgebra 37 36 Bolivia 20 33China 31 13 Korea  23  10 Vietnam  2  20 India  2 18

Source: As cited inNaylor et al. 1999.It is estimated that the Indian health care

industry is now worth of Rs. 96,000 crore and expectedto 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 havecapacity 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 effectiveinsurance marketing is likely to assume

significant importance. Given the health financing anddemand 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 coverages in

India. Based on ownership the existing healthinsurance schemes can be broadly

divided into categories such as:Government or state-based systemsMarket-based

systems (private and voluntary)Employer provided insurance schemesMember

organization (NGO or cooperative)-based systemsGovernment or state-based

systems include Central Government Health Scheme (CGHS) andEmployees

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 about5 per cent of population in various ways. Market-based

systems (voluntary and private) haveMediclaim scheme which covers about 2

million of population. There are many employers whoreimburse costs of medical

expenses of the employees with or without contribution from theemployee. It is

estimated that about 20 million employees may be covered by

suchreimbursement arrangements. There are several government and private

employers such asRailway 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 (Ellis et al. 1996).General Insurance Corporation (GIC) and its

four subsidiary companies and Life InsuranceCorporation (LIC) of India have

various health insurance products. These are Ashadeep Plan IIand Jeevan Asha

Plan II by Life Insurance Corporation of India and various policies by

GeneralInsurance Corporation of India as under: Personal Accident Policy, Jan

Arogya Policy, RajRajeshwari Policy, Mediclaim Policy, Overseas Mediclaim

Policy, Cancer Insurance Policy,Bhavishya Arogya Policy and Dreaded Disease

Policy (Srivastava 1999).The health care demand is rising in India now days. It

is estimated that only 10 per cent of healthinsurance 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. This policy is

discussed below.

5. Mediclaim schemeThe government insurance companies started first health insurance in 1986, under the namemediclaim; thereafter Mediclaim has been revised to make it attractive product. Mediclaim is areimbursement base insurance for hospitalization. It does not cover outpatient treatments. Firstthere is used to be category-wise ceilings on items such as medicine, room charges, operationcharges etc. and later when the policies were revised these ceilings were removed and totalreimbursements were allowed with in the limit of the policy amount. The total limit for policycoverage was also increased. Now a person between 3 months to 80 years of age can be grantedmediclaim policy up to maximum coverage of Rs. 5 lakh against accidental and sicknesshospitalisations during the policy period as per latest guidelines of General InsuranceCorporation 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.The current statistics on health insurance indicate that out of 1 billion population only about 2million of population is covered by Mediclaim scheme. The reason for lack of popularity of thisscheme could be several. The health insurance products are generally complicated and it issuggested that GIC and its subsidiary companies who deal in non-life insurance market which isdominated by mandated insurance such as accident, fire and marine, do not have expertise inmarketing health insurance and therefore this scheme is not popular. Health insurance alsorepresents very small percentage of overall business of GIC

and its subsidiaries hence they havealso not focused their attention in this area. The GIC companies have little interest and means tomonitor the scheme. It should also be recognized that because of technicalities of health service business there are number of cumbersome rules which have hampered the acceptance of thescheme. It is also reported that in number of cases the applicants of older ages have been refusedto become member of mediclaim scheme due to unnecessary conservatism of the companies.Another area of less popularity of the. Mediclaim is the lack of appropriate marketing efforts inselling these products. To popularize the schemes It IS Important that proper marketing is done.To make the scheme more acceptable government has exempted the premium paid byindividuals from their taxable income. This provides 20-40% subsidy on the premium totaxpayers.Mediclaim has provided a model for health insurance for the middle class and the rich. It covershospitalization costs, which could be catastrophic. But given the the premium is on higher side itas remained limited to middle class, urban tax payers segment of the population. There are also problems and negative unintended consequences of this scheme. There are reported fraud andmanipulation by clients and providers, which have implications for the growth and developmentof this sector. The monitoring systems are weak and there are chances that if the doctor and patient collude with each other, they can do more harms to the system. There is also element of adverse selection problem as the scheme is voluntary. As the scheme reimburses charges withoutlimit it also will pushed up the prices of services in the private sector. Our analysis of mediclaimdata from one center indicates wide variation of charges for same operation in the same city.Anecdotal evidence from doctors also indicates that charges are increased if patients are insured.All these effects will tend to increase the prices of private health care thus hurting the uninsured.

6. Employee State Insurance (ESI) SchemeUnder the ESI Act, 1948 ESI Scheme provides protection to employees against loss of wagesdue to inability to work due to sickness, maternity, disability and death due to employmentinjury. It also provides medical care to employees and their family members without fee for service. When implemented for the first time in India at two centres namely Delhi and Kanpur simultaneously in February 1952, it covered about 1.2 lakh employees. Presently the scheme isspread over 22 states and Union territories across India covering 91lakh employees and morethan 350 lakh beneficiaries. The Act compulsorily covers: (a) all power using non-seasonalfactories employing 10 or more persons; (b) all non-power using factories employing 20 or moreemployees and (c) service establishments like shops, hotels restaurants, cinema, road transportand news papers are covered. ESIC is a corporate semi-government body headed by UnionMinister of Labour as Chairman

and the Director General as chief executive. Its members arerepresentatives of central and state governments, employers, employees, medical profession and parliament.The financing of the scheme is done by Employees State Insurance Corporation (ESIC) which ismade up of contributions from: (a) employees who contribute at the rate 1.75 per cent of their wages (if daily wage is Rs.25 or less, his contribution is waived); (b) employers who contributeat the rate of 4. 75 per cent of total wage bills of their employees to contribution on behalf andfor employees having daily wage ofRs. 25 or less; and (c) State Governments contributes 12.5 per cent of total shareable expenditure worked out by prescribed ceiling on expenditure which isRs. 600 per insured person per annum and expenditure incurred outside/over and above the prescribed limit.The State Government runs the medical services of this scheme of social insurance meant for employees covered under the ESI Act 1948. This scheme - compulsory and contributory innature - provide uniform package of medical and cash benefits to insured persons isimplemented through special ESI hospitals and diagnostic centers, dispensaries and paneldoctors. The existing facilities under the ESIS are provided in Table 2.The delivery of medical care is through service (direct) system and/or panel (indirect) system. It provides allopathic medical care, but medical care by other systems like ayurvedic andhomeopathy in the states is also provided as per the state government decision. The medical careconsists of preventive, promotive, curative and rehabilitative types of services are provided bythe scheme through its own network or through arrangements with reputed government or  private institutions by concept of proper referral system and regionalisation.Table 2Existing infrastructure under ESIS in India

Particulars No. of Centers 632  No. of Insured Persons/Family Units 84,45,000ESI Hospitals  125 Number of ESI Hospital Beds 23,334 ESI Dispensaries  1,443 Insurance Medical Officers 6,220Insurance Medical Practitioners  2,900

Preventive services include immunization, maternal and child health, family welfare services.Promotive services include health education and health check-up camps. Curative servicesinclude: dispensary care, hospital care, maternity care, supportive services including diagnosticcentre, drugs, dressings, surgical procedures, dental care, prosthesis and other appliances.Rehabilitative services

include: physical rehabilitation, economical rehabilitation, and provisionof artificial aids (social, psychological rehabilitation)Even though the scheme is formulated well there are many problem areas in managing thisscheme. Some of the problems are:•large number of employers try to avoid being covered under the scheme,•a large number of posts of medical staff remains vacant because of high turnover and lengthyrecruitment procedures,•there is duality of control,•rising costs and technological advancement in super specialty treatment,•management information system is not satisfactory.•there is low utilization of the hospitals•the workers are not satisfied with the services they get.•in rural area the access to services is also a problem.Some of the state governments have to subsidize the scheme heavily even though the ESICorporation, which is the financial arm of the system, has much surplus funds. All these problems indicate an urgent need for reforms in the ESI scheme (Vora, 2000).Some of the options for reforms in ESI scheme could be: making the scheme autonomous-managed by workers and employers while government only retails controls through a guidingframework as is the case with German Sickness Funds. Secondly the scheme should be madeopen for non-organized sector through fixed income based contribution. This will extend the benefits of the scheme to many more people. The government should set the patient carestandards and monitor outcomes as well as patient satisfaction. The management of the healthfacilities also needs to be improved substantially. The financial management of the scheme alsoneeds improvement.

7. Health insurance for poor by NGOsWith 70 per cent of population in India living in rural areas and 95 per cent of work-forceworking in unorganized sectors, and disproportionately large percentage of these populationsliving below poverty line, there is strong need to develop social security mechanisms for thissegment of population. This need for security is further increased because the poor are the mostvulnerable for ill health, accidents, death, desertion, social disruptions such as riots, loss of housing, job and other means of livelihood. There are some efforts in this direction of providingsocial security to the poor by a few NGOs. The most prominent among them is that of Self-Employed Women's Association (SEWA). The other scheme by government insurancecompanies developed to focus on poor is called Jan Arogya Bima Policy which was introducedin 1995 and covers expenditure up to Rs. 5000 for a premium of Rs. 70 per annum.It is estimated that about 5 million people are covered under

various NGO insurance schemes.The experience from other countries suggest that in developed countries such as USA, UK, the health insurance have grown out of small non-profit schemes. A large share of health insurancemarket in USA is in not-for-profit sector. There is need in India to promote these schemes asthey address the needs of the poor. Over the last few years in India small and big NGO's like

Tribhuvandas, SEW A, ACCORD etc. have implemented the insurance schemes. Many of theseschemes are designed to meet the needs of the poorer segments of the community. They havedeveloped several innovations such as•mechanism of monitoring the performance,• pricing of various services,•integration of various risks in one single product,•linking of insurance schemes with savings,•coverage of many services not included in market based schemes such as maternity services,transportation, coverage of risks such as from riots, floods etc.Some NGOs have developed special linkages with public health systems, private facilities andalso accessed resources through insurance companies.7.1 SEWA's Health Insurance and Social Security Schemes for the Poor Poor women are the most vulnerable sections of a developing society. SEW A - a membership based women workers' trade union, has developed an initiative to protect the poor women fromfinancial burdens arising out of high medical costs and other risks. Each member has option to join the programme by paying Rs. 60 per annum and it provides limited cover for risks arisingout of sickness, maternity needs, accidents, floods and riots, widowhood etc. The scheme is alsolinked with saving scheme. Members have the option to either deposit Rs. 500 in SEW A Bank and interest on this deposit will cover the annual premium or pay annual premium of Rs. 60. Thescheme has 30,000 members and is expected to grow to 50000.In the beginning the SEW A started this programme with the support of one of the public sector insurance companies. The experience of SEW A has been that the insurance companies are notwell equipped to handle the present day

complexities of health insurance particularly in contextof lower income group needs. Given the bureaucratic rigidities in settling the claims, procedures,which one has to follow, and poor monitoring mechanisms make it difficult for the poor tocontinue with these schemes. For example, the patients belonging to lower income groups optingfor the schemes would need systems which are simple, flexible, prompt, relevant, having less paper work and have fewer tiers. The design of the product including what it covers, scope of coverage and at what premium are important considerations for people belonging to lower income groups.SEWA experience suggests that the design of the insurance products have to be integrated withseveral add-ons that may be priced differently. For example, health risk coverage should includesickness as well as maternity aspects. SEW A experience illustrates that other aspects of risk which need coverage include natural and accidental death of women and her husband,disablement, loss because of riots/flood/fire/ theft etc. The overall premium has to be low. Therehas been lot of emphasis and education in the community on understanding the concept of insurance. This awareness is growing. The linkage with the providers has been critical aspect inkeeping this cost of scheme down. At the same time the member has complete choice inselecting the provider but the reimbursement is limited. It has been observed that costs in privateare more than 5 times than what they are in public sector hence developing linkages with the public facilities are therefore critical. This also depends on quality of care at public facilities.The overall experience of SEW A's health insurance has been encouraging. Women have 

startedto seek health care and have been asking to enlarge the scope of the

scheme. The scheme hastried to address the special needs of women health by

allowing the other systems of medicine, which is quite popular in various places

and paying for maternity related expenses which are notcovered by Mediclaim

scheme. The scaling up of the scheme and increasing the coverage is themost

important management and organizational challenge. Recent study of the

members of theSEW A scheme by Gumber and Kulkarni (2000) also indicate its

usefulness.

7.2 Other NGO health insurance schemesOver the last several year there has been efforts to develop health insurance by various small NGOs. Some of the prominent among them have been ACCORD in Karnataka, Tribhuvandasfoundation, Aga Khan Health Services, India (AKHSI) and Nav-sarjan in Gujarat, andSewagram medical college Maharashtra. ACCORD works with tribal population in forestedareas ofKarnataka, AKHSI works with Ismaili population in North Gujarat, TribhuvandasFoundation works in villages of Kheda district where there are strong milk producing unions of Amul Dairy Cooperative, Nav-sarjan works with schedule castes in 2000 villages of Gujarat.Ranson (1999) has reviewed NGO efforts in India in this field. There are some common featuresof NGO schemes. The coverage of these schemes vary and most use their own health workers to provide primary care and have tied up with a hospital to provide secondary care. Premiums arelow, generally fixed and not related to risk. Most schemes have limited coverage and some also provide wider services besides health and treatment. All these organizations had good track record of services in the community and then added on health insurance on their existingactivities hence they did not have to establish credibility with the community. The key featureamong them was low premium and low coverage. These NGOs have shown that it is possible todevelop a model of health insurance for the poor without much subsidy. The experience alsosuggests that if a credible NGO exists then it is not difficult to develop health insurance as anadd on benefit. What is unclear and need to be researched is that what amount of total healthexpenditure does these scheme covers for the poor given that their coverage is limited.

8. Consumer and social perspective on health insuranceWith the liberalization of insurance and entry of private companies in this business it is veryimportant that specific interventions are developed which focus on increasing the consumer awareness about insurance products. One of the major challenges after privatization of insurancewould be how to develop such mechanisms, which help making consumers aware about thevarious intricacies of insurance plans. As of now information, knowledge and awareness of existing insurance plans is very limited. This is also shown by the study of Gumber and Kulkarni(2000) among the members of SEWA, ESIS and mediclaim schemes. With Consumer ProtectionAct coming in force it has become easy for aggrieved consumers to complain and seek redressalfor their problems. Consumer organizations such as CERC of Ahmedabad have been helpingconsumers to get due justice in disputes with the insurance companies. Their experience would be

varying valuable in guiding development of health insurance plans that are transparent and just.Many a times the insurance claims are rejected due to some small technical reasons. This leadsto disputes. Most of the time the conditions and various points included in insurance policycontracts is not negotiable and these are binding on consumers. There is no analysis on what isfair practice and what is unfair practice. Given that insurance companies are large and almostmonopoly setting the consumers is treated as secondary and they do not have opportunity tonegotiate the terms and conditions of a contract. Many times insurance companies do not strictlyfollow the conditions in all cases and this create confusion and disputes. (Shah M 1999)The most important area of dispute and unfair treatment is the knowledge and implications of  pre-exiting conditions. A number of cases of litigation are disagreement on these pre-existingconditions. These problems also arise because of lack of specification of number of areas and properly spelling out the conditions. This is also because some chronic conditions such as high blood pressure and diabetes can increase the risk of may other disease of organs such as heart,kidney, vascular and eyes diseases. The patients with these pre-existing conditions are deniedclaims for treatment of complications. This is not fair and leads to disputes.Health insurance is typically annual and has to be renewed yearly. Policy, which is not renewedin time lapses and a new policy has to be taken out. Medical conditions detected during theinterim period are treated as pre-existing condition for the new policy, which is not fair. This isseen as major issue as it changes the conditionalities about what constitutes pre- exitingconditions. Courts, however, have ruled that even if there is delay in renewing the policies itshould be considered as renewed policy. In case two doctors give different reports one favouringconsumer and other insurance company, the insurance company generally follows the later opinion. There are several such consumer-related issues, which need to be addressed in healthinsurance.One of the planks on which the insurance has been deregulated is the gain in efficiency and passing on these benefits to the consumers. It is very unrealistic to assume that insurancecompanies will be able to gain efficiency, which helps them to reduce the price of schemes. Atleast one should not be expecting this thing happening in the short-run. But providing fullinformation to the consumer and dealing with claims in a just and expeditious manner is theminimum expected outcome of the deregulation process. Consumer organizations have to playvery active role in future development of the health insurance sector in India.There are several social issues such as exclusions of sexually transmitted diseases, AIDS,delivery and maternal conditions etc. These are not socially and ethically acceptable. "Insurancecompanies much take care of all the risks related to health. The companies may chargeadditional premium for certain conditions. Secondly the present mediclaim policy premiums

arehigh and do not differentiate between people living in urban and rural areas where the costs of medical care are different. Thus the present policy is less attractive to poor and rural people. Thetax subsidy provided to the mediclaim is also going largely to the rich who are the taxpayers.The newer health insurance policies have to improve upon the shortcoming of the existing policies.

9. Impact of Health insurance on structure and quality of private provisionThe experiences in liberalizing the private health insurance suggest that it has undesirable effectson the costs of health care. The costs of care generally go up. Given the present system of fee for service and current scenario of health infrastructure in private sector, the development of insurance will need improvements in quality and change in structure. The new investments toimprove quality will result into high cost and therefore increase in prices of insurance products.There would be developments in the direction of exploring options of managed care, whichwould help in reducing the costs. The developments would be needed in the direction of stronginformation base and accreditation system for providers. The structure of the health sector willhave to change from multiple-single doctor hospitals and clinics to larger hospitals and polyclinics, which provide services of multiple specialities and can operate at larger scale. Thiswill allow them to provide high quality professional care at competitive prices. As one of theresponses to these issues Third Party Administrators (TPA) are rapidly emerging in India. Herewe can learn from the models, which have emerged elsewhere. But their applicability to Indiansituation needs to be examined carefully. These aspects of the health sector will need detailedstudy.We lack adequate information base to operate insurance schemes at large scale. The insurancemechanism prevalent in many developed countries has their history. Health reforms experiencesin many countries are replete with the suggestion that the systems cannot be replicated easily.Self-regulation is an important in any market driven system. The regulation from outside doesnot work. Implementation of regulation in this sector is difficult. We significantly lack mechanisms and institutions, which would ensure self- regulation and continuing education of  provides and various stakeholders. The accreditation systems are hard to implement withoutmechanisms to self-regulate. For example it took 35 years in US to put the accreditation systemeffectively in place. For example, it has been difficult for many States in India to put nursinghomes legislation in place. Given the deterioration on standards in medical education, lack of regulation by medical council and rising expectations of the community it is difficulty to ensurequality standards in Indian health care system. Given this situation health insurance systems willhave to deal with this complex issue of quality of care in years to come.

10. Role of regulatorsThe government has established Insurance Regulatory and Development Authority (IRDA)which is the statutory body for regulation of the whole insurance industry. They would begranting licenses to private companies and will regulate the insurance business. As the healthinsurance is in its very early phase, the role of IRDA will be very crucial. They have to ensurethat the sector develops rapidly and the benefit of the insurance goes to the consumers. But it hasto guard against the ill effects of private insurance. The main danger in the health insurance business we see is that the private companies will cover the risk of middle class who can affordto pay high premiums. Unregulated reimbursement of medical costs by the insurance companieswill push up the prices of private care. So large section of India's population who are not insuredwill be at a relative disadvantage as they will, in future, have to pay much more for the privatecare. Thus checking increase in the costs of medical care will be very important role of theIRDA.Secondly, IRDA will need to evolve mechanisms by which it puts some kind of statue in placethat private insurance companies do not skim the market by focusing on rich and upper- classclients and in the process neglect a major section of India's population. They must ensure thatcompanies develop products for such poorer segments of the community and possibly build anelement of cross-subsidy for them. Government companies can take the lead in this matter andcatalyze new products for the poor and lower middle class as they have done in the past.Thirdly the regulators should also encourage NGOs, Co-operatives and other collectives to inter into the health insurance business and develop products for the poor as well as for the middleclass employed in the services sector such as education, transportation, retailing etc and the self employed. This could be run as no-profit-no loss basis similar to the scheme pioneered by IndianMedical Association for its members. Special licenses will have to be given to NGO for this purpose without insisting on the minimum capital norms, which are for commercial insurance companies.