Times of India
02 October 2010
By Vikas Dhoot & Amiti Sen
New Delhi, India

UPA’s rural health cover plan now open to all
Move May Drive Down Insurance Premiums And Treatment Costs
THE government has extended a health insurance scheme earlier restricted to people living below the poverty line to a wider range of groups, a development which could drive down insurance premiums and treatment costs at hospitals.

The Rashtriya Swasthya Bima Yojana or RSBY – the United Progressive Alliance government’s flagship health insurance scheme for the poor – can now be tapped by all sections of society, even those above the poverty line, labour minister Mallikarjun Kharge told ET. RSBY offers so–called cashless medical insurance facility in which payments are made directly by the insurance company to the hospital.

Experts believe widening the ambit of the scheme, widely regarded as a success, could alter the face of the health insurance market in India as it solves a fundamental problem faced by insurers – high risk of losses due to fraudulent claims, inflated bills put up by hospitals and lack of standardised rates for medical procedures and surgeries.

Individual citizens above the poverty line can join the scheme as part of a group. The government intent is to bring sections such as truck drivers and street vendors within the scheme’s remit because the overwhelming majority of these sections are above the poverty line but usually do not have access to medical insurance from governmentowned or private insurers. Access to health insurance is crucial for reducing the incidence of poverty as many Indians slip below the poverty line due to high out–ofpocket spends on healthcare.

"We have been receiving demands from several groups such as truck drivers and small enterprises to allow them to use the RSBY platform," Mr Kharge said. "Clearly, people see value in the scheme and are willing to pay for it. So we have opened it up to all groups of citizens," he added.

Launched in April 2008, RSBY has become a rare success story among myriad government schemes plagued by weak implementation and financial leakages. Nearly 2 crore poor families across 27 states receive annual medical care cover of 30,000 under the scheme.

Cover Story
Launched in April 2008, Rashtriya Swasthya Bima Yojana offers annual cashless medical insurance cover of Rs 30,000
It covers nearly 2 cr poor families across 27 states for a premium varying from Rs 300–600 across states
Govt is keen to bring sections such as truck drivers and street vendors within the scheme’s remit Citizen groups interested in joining RSBY will have to apply to the Centre with data about their membership
Insistence on groups is to avoid prospect of only sick and vulnerable seeking cover Employers may switch to RSBY

CITIZEN groups interested in joining RSBY will have to apply to the Centre with data about their membership. "All we are saying is that the group should be large and homogeneous," Mr Kharge said. The insistence on groups is to avoid the prospect of only sick and vulnerable individuals seeking health cover – what experts call the adverse selection risk in insurance. Insurers that compete to cover the poor RSBY beneficiaries in each state would now be asked to quote premium rates for poor as well as non–poor groups allowed into the scheme.

The move would drive down the overall premium rates paid by the government for the poor, while giving non–poor citizens better rates and benefits than those available on individual mediclaim policies.

"Pooling risks of groups with different profiles would help insurers," said the CEO of a large private sector insurer, who spoke on condition of anonymity. Actual premium quotes will depend on the risk profiles of the beneficiary groups.

The industry also expects employers that offer group health cover to their workers to evaluate the RSBY option closely. "If the government scheme offers better premium rates and benefits, we would see a significant shift out of current group policies," said a senior official in a public sector general insurance firm.

While the cashless promise of mediclaim policies available in the market has become unreliable in recent months, RSBY functions like a smart credit card that allows the insured to choose between private and public hospitals with no upfront costs.

Moreover, fixed rates have been assigned for medical procedures for all the hospitals empanelled under the scheme. So consumers will not be left stranded waiting for reimbursements while insurers and hospitals fight it out over costs – as they are now, under mediclaim policies available in the market.

Expanding the scheme will also mean more business for the 4,500–odd private hospitals and 2,000 public hospitals which are part of the scheme. The premium for providing a medical cover of 30,000 to a poor household of five varies from 300–600 across states.

Groups opting for the scheme would be able to get a bigger medical cover by topping up premium payments, so they can also get tertiary healthcare for complex procedures such as cardiac surgeries. Himachal Pradesh is doing exactly that – topping up the premium to give the state’s poor families a much higher cover of 1.75 lakh. Kerala, for its part, has begun implementing the scheme for citizens above the poverty line.

Since September 1, about a lakh people from different worker groups such as coir and plantation workers have been enrolled, a senior official in Kerala’s health department told ET. States like West Bengal are expected to follow soon with an eye on quick electoral gains.

Mr Kharge’s ministry is also set to bring 40 lakh domestic workers and twice as many street vendors under the scheme. The Centre and states will pick up the entire insurance premium for them, while beneficiaries would pay a one–time cost of 30.

"We have received the finance ministry’s approval for vendors and domestic workers and are taking this for Cabinet approval soon," Mr Kharge said. Similar plans are in the offing for rickshaw pullers and rag–pickers. The government may have to pay 300 crore as annual premium for covering all domestic workers and over 500 crore for vendors. "We expect to start the scheme in 2011–12 and fully implement it over the next three–four years," a ministry official said.

The robustness of RSBY’s IT–enabled platform and its unique design have come in for global acclaim. G20 nations, the World Bank, Harvard University and a slew of think tanks have lauded the model, while several developing countries, including Pakistan, want India’s help in replicating the scheme.