The health insurance sector in India: History and opportunities

Introduction Health shocks are one of the largest sources of uncertainty facing households in India. Although all citizens are legally entitled to free healthcare in public facilities, the combination of poor-quality and geographic inaccessibility of public hospitals drives many families to private providers despite higher costs (see Chapter 3). Nationwide, more than half of all hospitalizations take place in private-sector settings and patients finance these expensive episodes of care almost entirely out of pocket. Spending on outpatient consultations and pharmaceutical purchases is similarly dominated by private providers of varying types and quality and financed out of pocket. These expenditures are a leading cause of household debt and a major poverty trap; more than 40 percent of hospitalized patients are forced to borrow money or sell assets to cover the costs of treatment, which average 58 percent of their total annual expenditures. As Figure 10.1 shows, Indians finance significantly more of their healthcare through out-of-pocket spending than the world average; moreover, this proportion is inversely correlated with income even within India. To relieve this financial risk burden while also improving health outcomes, public- and private-sector firms have pursued several initiatives to expand access and affordability of private-sector healthcare through health insurance coverage. Civil servants and workers in the organized sector are covered under the Central Government Health Scheme (CGHS) and the Employees State Insurance Scheme (ESIS), respectively (see Chapter 3). Voluntary commercial health insurance is also available to households outside these industries and has experienced rapid growth since industry deregulation in 1999–2000.