Insurers ask govt to rework math for National Health Protection Scheme

Thirty non-life insurance companies have argued that their viability will be under question unless states agree to a far higher premium than the proposed Rs 1,000 per family

Insurance companies have advised the government they will not be able to bid for the National Health Protection Scheme (NHPS) within the proposed pricing pattern, which they described as “highly inadequate”.

In a letter to the finance ministry, the 30 non-life insurance companies have argued that their viability will be under question unless states agree to a far higher premium than the proposed Rs 1,000 per family annual cover and also pay the money to the companies in advance, every year. They have suggested a premium of at least Rs 2,500 per family.

They have also demanded there should be a national level Aadhaar-based technology platform to reconcile all medical records and claims procedures to make the NHPS work.

Unless the states and the Centre place safeguards to stop insurance companies from having to race to quote the lowest premium, the NHPS will not be “sustainable,” the insurers have said.

While the Union finance ministry has not yet made public any premium rates in off-record briefings and NITI Aayog, officials have said the premium will hover around Rs 1,000. Finance Minister Arun Jaitley has termed the scheme, announced in the Budget for 2018-19, as the world’s biggest health cover plan targeted at 1 million poor families initially which will each receive protection of Rs 500,000 per annum. The ministry has now told the insurance companies that the premium per family will be Rs 1,082 per year.

“Insurance companies have opined that the premium of Rs 1,082 for the Rs 500,000 sum insured on a floater basis will be highly inadequate and will require a relook,” the General Insurance Council (GI Council), the apex body of these insurance companies, noted in its letter to the finance ministry last week. The letter is in response to a ministry letter seeking their comments on how to operationalise the NHPS.

The concerns raised by all the non-life and health insurance companies, even before the Centre has met the state governments to work out details of the scheme, will create a  problem for the finance ministry to get the scheme going. The projected date for the formal launch of the scheme is October 2, 2018. 

The companies are worried that not only is the sum low, but in the earlier avatar of the NHPS, the Rashtriya Swasthya Bima Yojana, the states encouraged a price war among insurance companies.

Part II: Avoiding RSBY slippages and integration of role of primary health centres

As a result, even state-owned insurance companies like Oriental Insurance Company have stopped bidding for most states. A top executive in the company said it had avoided a loss of approximately Rs 1 billion in the process. In an interview with Business Standard, SBI General Insurance Company Managing Director Pushan Mahapatra had said: “We do not participate as we feel the premium offered is low.” States are again expected to bear 40 per cent of the total cost of the premium in the NHPS with the Centre picking up the remaining 60 per cent.

Echoing these fears the GI Council has noted, “Although the tendering mechanism would ensure price discovery by the state governments, a very low premium could lead to an adverse claims ratio and would in turn result in insurance companies dropping out of the scheme.” As the GI Council sees it, the NHPS coverage will lead to high claims from the population covered because it will need to draw upon insurance at every stage. A low premium cover will make the business adverse for insurance companies right from the word go. They will also need to cover losses from other business, which will make a number of them drop out, putting the NHPS in jeopardy.

“From the experience of insurance companies it is found that payment of premium under the erstwhile RSBY was always delayed (by states)….it is necessary to put in a mechanism whereby all the premium is paid in advance,” the letter adds. The RSBY provided an annual insurance cover of Rs 30,000.

Jaitley has promised more funds if required, depending on the rollout in the next financial year, though the current year’s Budget numbers at just Rs 20 billion is very limited. In an estimate, the Niti Aayog has projected the cost of the NHPS at Rs 120 billion.

The NHPS has been rolled out in response to the need that a large chunk of India’s citizens has poor access to health cover. “The health of its population is central to a nation’s well-being and productivity. While India has made some significant gains in improving life expectancy and reducing infant and maternal mortality, our rates of improvement have been inadequate as a nation,” the Niti Aayog noted at the launch of its health outcomes scored by the states.

Among their other concerns, the insurance companies have argued that there should be a common technology platform to ensure standardisation of all claims and premium payment. “An Aadhaar-based biometric scan should be compulsory for hospitalisation. The will eliminate all impersonation-related frauds,” the insurance companies noted.