How feasible is Govt. Funded Health Insurance Plan for 62 Lakh Teachers?

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Recently, we came across news in an online Publication, m.timesofindia.com

Health Insurance and Life Insurance for Teacher

NEW DELHI: In a move that could benefit more than 62 lakh school teachers in government, municipal and private unaided schools, the Centre plans to provide them with life insurance and health insurance at highly subsidized rates.

The health insurance would cover a family of six the teacher himself or herself, the spouse, two children and two parents. The maximum sum assured for family in a year could be Rs 1 lakh. There would also be a corporate buffer of about Rs 25 crore that would double the reimbursement in cases of need. It is estimated that with corporate buffer, the annual premium to cover a family of six would be Rs 15,860.

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Experts from Medimanage.com give their opinion:

KS Sankar:

K S Sankar from Medimanage.com

I am restricting my responses to only the Health Insurance part of this piece.

The first concern with any such scheme is the issue of credibility and transparency. We live in a country where Government sponsored fund management schemes are cleverly bandied about as insurance schemes. Actually what happens in these schemes is that the Government apportions funds and creates a corpus for reimbursing hospitalization costs to a specified target group – say, farmers. The target group members enroll in such a scheme by paying a fee. This fee is ambiguously projected as though it is premium, and the corpus, as though it is insurance. All is fine initially, but once the corpus dries up the subsequent ‘claimants’ are left high and dry.

I would hope this would indeed emerge as an insurance and not get compromised into another fund management scheme.

The second concern is implementation. Educating and enrolling such a large population is in itself a mammoth task. Even within this article, the projected numbers for Life Insurance is 60 Lakhs, but for Health Insurance, it is 50 Lakhs! I am saying this just to drive home the magnitude of enrolling this many numbers. The dependants enrollment will have further challenges not alone because we are looking at 5 times more the number of teachers but also because it involves validation of actual dependency. And then comes claims management with all its complexities.

Will the Government be able to scale this? Go no farther than today (30.06.10)’s ET. In July last year, aping the banks, the Employees Provident Fund Organization introduced drop boxes in all their offices for employers filing returns and workers’ withdrawal requests. Obviously no receipts were issued. So, employers had no acknowledgement of having filed their returns and workers had no way to follow up on their withdrawal claims. Chaos ensued and the boxes were given an unceremonial burial recently.  

If this were not to become another model of implementation to be followed by a post haste withdrawal or where the cost of running the scheme exceeds the cost of actual benefits provided like ESIC, it would make sense for the Government to outsource it to a capable entity. Like I keep saying, an entity who has:

a)      Thorough knowledge of health insurance and health care processes and practices pan India.

b)      Strong interface with healthcare service providers.

c)       Working dedicatedly in this sphere so that focus is not diffused.

d)      Interactive IT driven robust processes that will enable enrolments and claims management of such a large population. 

At a very nominal percentage of the total outlay, an entity with the above capabilities will be able to seamlessly manage this.

The third concern is the financial viability of the insurance scheme itself. The general insurance industry is currently reeling under claims far in excess of premium in their Health Insurance portfolio. If this scheme also ends up on the wrong side of the ledger, the burden would simply cripple the industry. At the same time, there could also be the temptation to see this Government sponsored premium base as a cash cow to subsidize and camouflage losses in the existing Health Insurance portfolio. Indeed a double edged sword. To ensure viability of the scheme, the scope of cover under the scheme has to be determined with due application of thought, and should be left to insurance veterans than the North and South blocks. And to act as a watchdog over the insurance company that will underwrite this scheme, these veterans should be from outside the current insurance industry executives. The entity I had referred to above will ideally have such veterans and will have to be involved from the drawing board level in the scheme.

Sudhir Sarnobat:

Sudhir Sarnobat from Medimanage.com

It is interesting news & we wonder whether this will ever become reality.

The life insurance part is fairly simple & premium of Rs. 840/- per annum is affordable (but does not look cheap as the premium is turning out to be Rs. 420/- per Lakh. Looking at the group size & the nature of work of the insured, we definitely feel this premium rate is high. The break even morbidity ratio is turning out to be 0.42% which we believe is on higher side.) Government should look at inviting quotes from Private Insurers too who could bring the rates down for this scheme.

The health insurance or Mediclaim part is going to be tricky. The coverage of Rs. 1,00,000 for premium of Rs.15,860 is definitely very expensive. The premium for this scheme for 50 Lakh teachers is expected to be 8250 Crores which is around 120% of the current total Indian health insurance industry size (it’s around 7200 Crores now). The breakeven morbidity is around 8% which is reasonable looking at the group’s average age & keeping in mind the parental cover offered.

However, the sheer size of the proposal make it difficult to implement in one go. Also the part that expects teachers to pay 50% of the premium (Rs. 7930/- per annum or Rs. 660/- per month) is going to be difficult to implement.

Our take is that the Life insurance proposal may get implemented but the health insurance part will not be possible to bring into reality.

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