Health Insurance for India’s Missing Middle

HEALTH/ GOVERNANCE

• GS-2: Issues relating to development and management of Social Sector/Services relating to Health, Human Resources
• GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Health Insurance for India’s Missing Middle

In News: NITI Aayog recently released a comprehensive report titled Health Insurance for India’s Missing Middle, which brings out the gaps in the health insurance coverage across the Indian population and offers solutions to address the situation.

Key highlights from the Report:

1. Low Public Expenditure

• Low government expenditure on health has constrained the capacity and quality of healthcare services in the public sector. 
• It diverts the majority of individuals—about two-thirds—to seek treatment in the costlier private sector. However, low financial protection leads to high out-of-pocket expenditure (OOPE). 

2. Missing Middle

• India’s population is vulnerable to catastrophic spending, and impoverishment from expensive trips to hospitals and other health facilities. 
• Around 20% of the population is covered through social health insurance, and private voluntary health insurance primarily designed for high-income groups. 
• The remaining 30% of the population, devoid of health insurance, is termed as the “missing middle”. The missing middle contains multiple groups across all expenditure quintiles and is spread across both urban and rural areas.
• The 30% of the population, or 400 million individuals—called the missing middle in this report—are devoid of any financial protection for health.

3. Low Insurance Penetration

• Significant challenges will need to be overcome to increase the penetration of health insurance.
• The government and the private sector will need to come together in this endeavor.
• Private sector ingenuity and efficiency is required to reach the missing middle and offer compelling products. 
• The government has an important role to play in increasing consumer awareness and confidence, modifying regulation for standardized product and consumer protection, and potentially offering a platform to improve operational efficiency.
• The Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana—a flagship scheme towards Universal Health Coverage, and State Government extension schemes—provides comprehensive hospitalization cover to the bottom 50% of the population.

Way Ahead:

• There is a need for designing a low-cost comprehensive health insurance product for the missing middle. The government can partially finance or provide health insurance.
• The government can expand Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) coverage to the poorest segments of the missing middle population, and leverage the scheme’s infrastructure to offer a voluntary contributory enrolment.
• The government can provide its data and infrastructure as a public good to reduce operational and distribution costs of insurers. For example, it can share government data (after taking consent) which aids identification and outreach to customers. It can also offer PMJAY’s IT platform and network to reduce operational costs. 
• A combination of implementation pathways—starting with commercial insurers and progressing to leveraging government risk-pooling schemes for voluntary insurance—phased in at different times, will ensure coverage for the missing middle population.
• The initial thrust and focus should be on expanding private voluntary contributory insurance through commercial insurers.
• Prepayment through health insurance emerges as an important tool for risk-pooling and safeguarding against catastrophic expenditure from health shocks. Prepaid pooled funds can also improve the efficiency of healthcare provision.
• In the medium term, once the supply-side and utilization of PMJAY and ESIC is strengthened, their infrastructure can be leveraged to allow voluntary contributions to a PMJAY-plus product offered by NHA, or to ESIC’s existing medical benefits. 
• The participation of NHA and ESIC will increase competition in the contributory voluntary insurance market, reducing premiums, and improving quality of care provided. In the long-term, once the low-cost, voluntary contributory health insurance market is developed, expansion of PMJAY to the remaining uncovered, poorer segments of the missing middle can be considered.

Connecting the dots:

• PM Ayushman Bharat Health Infrastructure Mission
•  Ayushman Bharat Digital Mission
• Ayushman Bharat PMJAY