In this article Dr. D Dhanuraj, Chairman of CPPR, tries to find out the lessons the Health Insurance Market can learn from the already successful Telecom Market by doing a comparative market approach. 

In India as on today, private healthcare expenditure amounts to around 4 percent of the GDP[1], making it one of the highest ranking countries in terms of private expenditure on health. Out of this, health insurance accounts for 5-10% of expenditure, employers account for around 9% while personal expenditure amounts to an astounding 82%.

This shows that there is a huge gap in health care sector and  this article aims to correlate the health care expenditure and health care consumption with the health insurance schemes administered as a part of the universal social security schemes.

Government of India during the last decade launched various public health insurance schemes. In the National Health Policy 2015 published by Ministry of Health & Family Welfare of Government of India, it is stated that “The population coverage under these various schemes increased from almost 55 million people in 2003-04 to about 370 million in 2014 (almost one-fourth of the population). Nearly two thirds (180 million) of this population are those in the Below Poverty Line (BPL) category”.

In this article, a comparison of the health insurance market with the already successful telecom market is attempted. Health insurance sector is akin to telecom sector in many respects. When the telecom sector was opened up, the number of telephone users in India did not cross 60 million at the start of this century.  Health insurance market could be made a competitive one by innovating on the health insurance premiums by learning from the way the telecom market innovated in early 2000s. This will help in boosting the penetration and scope of the health insurance policies in India.

Comparison between telecom and health insurance market

   S No Telecom Health insurance Remarks and Suggestions
1. Market for One Billion plus Market for One Billion plus Though telecom has already inching towards 80 % subscriber density, health insurance hovers around 10 % in density calculations
2. Telecom policy promotes competition by creating circles and encourage competition amongst the providers National Health policy (2002) and subsequent National Rural Health Mission have not discussed the competition in the market rather gone for universal definitions and plans Like Telecom circles, health circles can be created. Premiums and provisions attached to health insurance shall be customised for the demands and requirements in each health circle. Local communities, NGOs, TPAs and health care providers can be brought into the loop
3. Innovative products like pre paid cards and differential pricing for different plans. Plenty of choices are offered in the market Most of health insurance policies are uniform in nature and the insured does not have options to select from. Similar to prepaid cards, innovative cashless schemes can be customised for  the need particular sections of the society such as poor, middle class, vulnerable etc. this will take care of adverse selection, moral hazard and cream skimming in the health insurance sector.
4. For licensing purposes, spectrum is sold out in the telecom sector and it acted as the basic lifeline for the telecom operators. Telecom operators have built the necessary infrastructure like network towers, cabling etc by themselves or by outsourcing it. partnerships and agreements amongst telecom operators are common to optimise their resources Health care infrastructure and skilled health workers are lacked in the sector. Success of health insurance also depends on the health care providers. A model can be devised where the establishment of health care providers and insurers are mutually beneficial by linking innovative health insurance policies with the health care providers. This ensures the supply of customers from an investor’s point of view. Government can incentivise both public and private health care providers to set up health infrastructure.
5. Telecom Regulatory Authority of India (TRAI) has marshalled all the resources for the best interests of the sector and gave priority to the customers Insurance Regulatory Authority of India (IRDA) is responsible for all types of insurance policies. They have to set the process of innovations in the complex health insurance sector leveraging on ICT and JAM (refer Economic Review of 2015) A national body to coordinate and monitor the health care insurance can be set up. IRDA can be a constituent body in the overall set up. Each health sector will have a monitoring agency that will work under the aegis of the national body.
6. Universal Service Obligation Fund. This fund was created to increase the telecom penetration in rural and backward regions Health contingency fund can be created. Health contingency fund can be a direct or indirect way of supporting the needy. Using this money, subsidisation of health insurance schemes for the poor and back ward sections can be planned. In addition, this fund can also be used to subsidise the cost involved in setting up health care infrastructure in select remote areas if needed.
7. Rating of services of different providers and data base is kept There is no such credit rating at the local and national level that can be compared. Health circles with ensured market competition amongst health insurance providers and health care providers will eventually lead to rating exercise.  It will benefit the customers.
8. Number portability is introduced and received wide applause Even though the health insurance portability has been initiated, it has not been a success like in telecom sector. After a minimum period of one year, insured will be able to change the insurance provider to seek the better insurance products. As in the case of telecom sector, obligatory clauses shall be incorporated.

The findings of this comparative study suggests the following

  1. Creation of health circles like in telecom sector for the wider reach out and penetration for the health insurance sector in India.
  2. Periodic updating of the patients registry is required. Not fringing into the privacy of the patients’ case history, numbers reflecting the various types of ailments and diseases at the local, regional and national level shall be set up. This alone cannot be a Government’s responsibility but a better policy facilitating the level playing field for investors in health sector can mandate the collection of such data by both private and public institutions in the longer run.
  3. Like in the financial markets, rating and grading of various health infrastructures, quality of the skilled man power available with the health sector, treatment fees for different ailments in different health providers and so on can be complementary to the data base of the patients. This would help a transparent mechanism to evolve and a better business opportunity for the investors. In the net effect, Government can monitor and regulate the sector in an efficient manner and the needy will get the provisions at a cheaper and available distance.
  4. A policy to ensure participation of private players can lead to a variety of health insurance products in the market that are available at an affordable price for different needs. Such a healthy competition amongst the health insurance providers within a circle may be able to check the quality of the health care provided. Adverse selection, moral hazard and cream skimming can be dealt diligently by the health insurance providers as a result of such a policy.
  5. The creation of a government body specifically for health insurance regulations and practices. The State would be able to fund and incentivise the health insurance providers and health care providers on a priority basis leading to an overall improvement of health indicators for the country.

[1]McKinsey&Company, ‘India Health Care: Inspiring Possibilities, Challenging Jounrney’, December 2012

D. Dhanuraj
D. Dhanuraj
Dr D Dhanuraj is the Chairman and Managing Trustee of CPPR. He holds a PhD in Science & Humanities (Anna University), MSc Physics (Mahatma Gandhi University) and MA Political Science (Madras Christian College). He also holds a Post Graduate Executive Diploma in International Business from Loyola Institute of Business Administration, Chennai, and has undergone training by TTMBA of Atlas USA, IAF Germany, FEE USA, etc. His core areas of expertise are in urbanisation, urban transport & infrastructure, education, health, livelihood, law, and election analysis. He can be contacted by email at or on Twitter @dhanuraj

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