PROJECT ON

"HEALTH INSURANCE

Bachelor of Commerce

Banking and Insurance

Semester VI

Submitted by

In Partial Fulfillment of the requirements For the Award of Degree of Bachelor of

Commerce-Banking and Insurance

By,

Dwivedi Priya Mahendra.

Roll No. 19.

VIDYAVARDHINI'S

Annasaheb Vartak College of Arts

Kedarnath Malhotra College of Commerce

E. S Andrades College of Science

Vasai (west) 401202

 Vidyavardhini
Annasaheb Vartak College of Arts,
Kedarnath Malhotra College of Commerce,
E.S. Andrades College of Science, Vasai
(West), Dist. Palghar, Maharashtra-401202
March 2022

CERTIFICATE

This is to certify that Miss. Dwivedi Priya mahendra has worked and daily
completed her Project work for the degree of

B.Com. (Banking and Insurance) under the faculty of Commerce in the subject of Project
Work and her project is entitled,"HEALTH INSURANCE under my supervision

I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted previously for any Degree or Diploma of any University. It is
her own work and facts reported by her personal findings and investigation.

PROF. JEENAL GANDHI

Internal Examiner.

Date of Submission:

External Examiner
 DECLARATION
1, the undersigned Miss. Dwivedi Priya Mahendra here by, declare that the work embodied in
this project work titled, "HEALTH INSURANCE forms my own contribution to the research
work carried out under the guidance of Prof. Jeenal Gandhi is a result of my own research
work and has not been previously submitted to any other University. Whenever reference has
been made to previous works of others, has been clearly indicated as such and included in
bibliography. 1. bere by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical conduct.

Dwivedi Priya Mahendra

ROLL NO: 19
Certified by

PROF. JEENAL GANDHI

 ACKNOWLEDGEMENT

To list who all have help me is difficult because they are so much numerous and

the depth is so enormous.

I would like to acknowledge the following being idealistic channel and fresh

dimensions in the completion of this project.

I take this opportunity to thanks the University of Mumbai for giving me

chance to do this project.

I would like to thanks my Principal, Dr. Arvind Ubale for providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator, Prof. Bhavana Chauhan for

their support and guidance.

I would also like to express my sincere gratitude towards my Project guide, Prof.
Jeenal Gandhi whose guidance and care made the project successful. I
would like to thank my College Library, for having provided various

reference books and magazine related to my project.

Lastly, I would like to thank each and every person who directly and indirectly
helped me in the completion of the project especially my Parents and Peers who
supported me thought my project.
 INDEX
CHAPTER PAGE
NUMBER CHAPTER NAME NO.
Introduction of health insurance
CHAPTER 1

Evaluation in health insurance

CHAPTER 2

Need for health insurance

CHAPTER 3

Type of health insurance

CHAPTER 4

Guideline of IRDA
CHAPTER 5

Facing health insurance professional and

CHAPTER 6 health care sector
Major health care challenges india in facing
CHAPTER 7 right now
Comparasion
CHAPTER 8

India health care system

CHAPTER 9

Government interventions in health

CHAPTER10 insurance sector
. suggestion

. conclusion

. bibliography
 EXCLUSIVE SUMMARY

• In Healthcare financing he mentioned that in country with tax based or

insurance based systems, people supplement their entitlement with
private insurance, Private insurance can also be an alterative to public
system

• Private insurance effected to cover co payments /deductibles required

under the public system or cover services which are fully not covered
under public system

• He further elaborated on the various Healthcare cod and the comes that
leading to an increase in the Healthcare costs

• He then talked about the current Indian economic in the health

insurance sector

• He briefed about the various determinants of demand for health

insurance
 OBJECTIVES OF THE PROJECT

1. To describe the profile of health insurance services, companies providing health insurance
their customers and other related groups

2. To study the awareness level of consumers towards health insurance services

3. To study the personal and social factors influencing health insurance purchase 4. To study
the purchase patten, pre and post purchase behaviour towards health insurance policies 5.
To discuss the opinion of consumers about the various practices of health insurance
marketing

6. To measure and critically evaluate the level of customer satisfaction towards health
insurance

7. To recommend or suggest strategies for improvement Suggestions to Improve

Services of Health Insurance.
 RESEARCH METHODOLOGY

Research Methodology is the Procedures used making systematic observations or otherwise

obtaining data, evidence, or formation as part of research project or study

Research in common parlance refers to a search fist knowledge Research can be defined as a
scientific and systematic search for pertinent information on a specific topic. In fact, research
is an art of scientific investigation. The advanced Lemer's dictionary of English lays down the
meaning of research is "a careful investigation inquiry especially through search facts any
branch of knowledge.

These are Types of Data Collection Methods

PRIMARY DATA SOURCE

SECONDARY DATA SOURCE

PRIMARY DATA. Primary data are connected by the investigator half for a specific
purpose. The primary data is a fresh and first-hand data which is collected for the first time
and is original character. Which are methods available for primary data collection

SECONDARY DATA Secondary data is the data that have been already collected and
readily other sources. My project is based on secondary data. Information related with the
project is collected from various web sites, books and newspaper and it is made available in
the project war. This paper is hand on the secondary data and drained from al reports of
health insurance. The data in collected from of Finance Production and Store
 CHAPTER NO. I

INTRODUCTION OF HEALTH INSURANCE

Health insurance is insurance that covers the whole or a part of the risk of a person in cutting
medical expenses, spreading the risk over a large number of persons. By estimating the
overall risk of health care and healthy system expenses over the risk pool, an insurer can
develop a routine finance structure, such as a monthly premium or payroll tax, to provide the
money to pay for the health care benefits specified in the insurance agreement. The benefit is
administered by a central organization such an government agency, private business, or
notfor-profit entity. According to the Health Insurance Association of America, health
insurance is defined as "coverage that provides for the so benefits as a result of sickness or
injury. It includes insurance for losses or accident, medical expense, disability, or accidental
death and dismemberment

Health insurance gives you coverage against hefty medical expenses that may arise due to
sickness and accidental injury. In most of the cases, health insurance is offered to people in
the age group of 5 to 80 years. In some cases, children under five years are covered it their
parents are also covered.

Health insurance is a broad term which majorly covers the following types of policies:

• Personal health insurance Health insurance policies bought by an individual for

himself herself or family.

• Group health insurance policies li mainly includes insurance policies offered by an

organization to his employees.

Many of us aren't aware of what is Health insurance? Alternatively referred to an, medical
insurance or simply medictalin, it is basically a type of insurance coverage that covers the
cost of un individual's medical and surgical expenses. The individual, also known as the
insured, pays a fixed sam (premium, every year for the health cover.
 In case of a medical problem that necessitates surgery hospitalization the insured is
reimbursed by the health insurance company either directly in cash or indirectly through
payment to the hospital/clinic.

Taking health insurance is one of those things an individual cannot ignore given the rising
costs of treating health problems Inflation in medicare or medical treatment is a lot higher
than general inflation or inflation in other categories like food and clothing. While inflation in
most categories is in single digits, inflation in medicare is often higher.

Take cancer treatment, the cost of which today could vary in the region of Rs 2 lakhs to
upwards of Rs 4 lakhs per round/cycle, depending on the stage of type of cancer

Even if we take the base treatment rate of Rs 2,00,000 prevailing today, we could well be
looking at over Rs 3.22,000 after five years assuming 10% annual increase (CAGR) in
cost of treatment. Cast escalation of this nature could also prevail in other forms of
treatment/surgery like heart surgery are or knee replacement surgery

Arranging large sums of money at the last moment to treat medical emergencies is difficult if
not impossible for individuals. Hence being prepared is the only way out. One way to plan for
medical emergencies better is by opting for health insurance plans. Health insurance offers
considerable in terms of disease coverage. Certain health insurance plans cover as many as
30 critical illnesses and more than 80 surgical surgery procedures. The health insurance plan
disburses payment towards treatment regardless factual expenses The policy continues even
after the benefit payment on selected illnesses

Health insurance is an insurance product which covers medical and surgical expenses of un
insured individual. reimburses the expenses incurred due to illness injury or pays the care
provider of the insured individual directly.
 Need for Health Insurance

• Medicare or medical costs are rising year on year. As a matter fact, inflation in
Medicare is higher than inflation in food and other articles. While inflation in food and
clothing is in single digits, Medicare costs usually escalate in double digits.

. For an individual who hasn't saved that mach money, arranging for funds at the eleventh
hour can be a task. This is particularly daunting ailments strike at an advanced age. seniors,
given that most

• One way to provide for health-related / medical emergencies is by taking health

insurance. Health insurance offers considerable flexibility in terms of disease ailment
coverage. For instance, certain health insurance plans cover as many as 30) critical illnesses
and over 80 surgical procedures. The insurance plan disburses the payment towards
surgery/illncis regardless of actual medical expenses. The policy continues even after the
benefit payment on selected illnesses.

With health insurance, you are issured of a more secure futute both health-wise and
moneywise. This makes health insurance policies critical for individuals, especially if they
are responsible for the financial well-being of the family.
 Chapter 2
EVOLUTION OF HEALTH INSURANCE

Health care expenses and lost labour cummings due to illness represent a major source of risk
for individuals and families Exposure to such risks is costly in itself (individuls risks averse
also have long term effects especially on the poor. Selling meets withdrawing children from
school to care for ill parents and exiting, the labour market an leave low incomes families
trapped in poverty

Protection against the risks of ill health can be achieved by reducing the size amt variability
of the underlying stochastic process, for instance by improving public ground that affect
health outcomes (pollution , etc., and by spreading risks across individuals This paper will
address the second of these risk reduction strategies, with particular emphasis on the design
and organization of the relevant institutions in Latin America.

Given its income, Latin America is on average a relatively healthy part of the world For
example, Figure I she das from 157 countries that reported information on GDP per capita
and life expectancy in 1997 (Latin American countries are represented as squares, the other as
diamond 2) Visual inspection of the simple logarithmic regression indices that most Latin
American countries have life expectancias a birth equal o significantly above thour predicted
by their income levels, Health outcomes asured by infant monality rutes are less positive
however, as shown in Figure 2. Similarly, the distribution of health care services within Latin
American countles is to the better off Recent analysis undertaken by PAHO UNDP: 3 and
the World Bank, . (1999)) indicates wide disparities in both health needs and access to
medical care as income groups. This with incomplete and fragmented insurance coverage, led
several countries in the region un adopt wide ranging health sector reforms in the lattice part
of the 1980s and the 1990s that continue today.

large scale changes in health insurance and health care markets inevitably involve significant
public intervention. The purpose of this paper in first, in section 2, to examine the argument
in favour of such intervention from a public economics perspective. Having identified market
failure and redistribution rationales for public intervention, section 3 addresses the important
issue of how the government should intervene. This is effectively a question of organizational
design, incorporating ideas from industrial organization. contract theory, and the theory of the
firm. In this light, Section 4 undertakes a detailed examination of the reforms perused in
Colombia, Argentina, Brazil, and Chile. These countries reject a variety of routes towards the
goals of expanding formal insurance coverage and improving the efficiency of service
delivery in their health systems.
 Chapter 3

NEED FOR HEALTH INSURANCE

Health insurance has become a necessity today because it plays a major role in health care. This is because
one never knows when illnesses may strike. And in such cases hospitalization and medication expenses
can be unaffordable. Health insurance can prove to be a source of support by taking care of the financial
burden of your family may have to go through.

Advancement in science and technology has brought about a revolutionary change in mans life. It has
reduced mortality rates and increased his life span but at the same time has given rise to a number of other
ills. Increasing pollution levels especially in metros, stress. and strain at workplace, cut throat competition
taking its toll are some of the harsh realities.

Pollution levels in certain areas are unimaginably high and the areas are nothing short of gas chambers.
An individual going to his place of work has to spend long hours in queues, inhaling the vehicular
emissions of poisonous carbon monoxide gases affecting his health in the long run. Besides accidents on
roads are common features. In such instances timely affordable me I help is the need of hou But this may
be easier said than done. Treatment for major illnesses or accidents can be unaffordable and may leave
you poorer by thousands of rupees.

It is especially worse when the patient needs specialized care. Expenses are exorbitant and the situation
leaves you mentally devastated also burning a deep hole in your pocket. The family balance is affected,
all those comforts of life have to be given up and your family has to make up with bare minimum
necessities only.

Health insurance takes care of you in such circumstances. It will help you tackle such situations with ease
by providing you with timely and adequate medical care. The financial burden of footing huge medical
bills is taken care of by health insurance. Besides if the accident causes life long disability to the patient,
the earning member of the family, the insurance company will come to the rescue.

Primary health care - a basic necessity and right of every individual, is today only a distant dream. The
government has done precious little in this regard for the masses and hence the private sector has taken
up the challenge to exploit the potential of the 92,400 crore healthcare industry.

With educational levels going up people are becoming increasingly aware of the need of timely healthcare
facilities. But at the same time the high costs of private health care is a major deterrent. The need of the
hour is affordable health care for all in order that even the people in remote villages can have access to it.
 INDIAN SCENARIO

In India, presently the health insurance exists primarily in the form of Mediclaim policy offered to the
individual or to any group, association or corporate bodies. The government spending is less than 25
percent against the average spending of 30-40 percent in other developing countries. There is need for
regulation for the self-funded health plans by major employers who may not find insurance as a cost
effective alternative. According to WHO figures (2002), total health expenditures represent 6.1% of
India's GDP, but most of this amount, representing 4.8% of GDP is the share of private expenditures and
only 1.3% of GDP is public expenditure. Of the 4.8% private expenditure, 98.5% are out-of-pocket
spending of users. In other words. 77.5% of total expenditure for health care costs is paid by individuals
or households (WHO, 2005) and this huge expenditure does not pass through any pooling mechanism.
Access to health care in India is still low and with only less than 1% of GDP allotted to public health,
there is lack of adequate health infrastructure.

Penetration of Mediclaim is currently done by state-owned insurance companies, covering only about 2.5
million people i.e. less than 0.50 percent of the country's population. There are some health insurance
schemes issued by four public sector general insurance companies, namely, National Insurance Company
Limited (NICL), New India Assurance Company Limited (NIACL), Oriental Insurance Company
Limited (OICL) and United India Insurance Company Limited

(UIICL). Besides these four companies, Life Insurance Corporation (LIC) of India also offers a few health
covers in a limited manner. At present, 82.44% of the entire commercial health insurance business the
country is shared between public companies, while private firms manage the rest 17.56%.

Paradoxically, the medical professionals are resisting standardization in treatment coding known as ICD
and cost cutting measures for making the medical treatment affordable to the ailing. They tend to forget
that that future growth of healthcare in a country like India would depend upon the development of health
insurance model.

The need for support from the health domain members/players and the ministry of health both at the
centre and the state cannot be overemphasized. However given the state of affairs of regulations in the
healthcare sector in India, it is doubtful whether full fledged insurance companies would like to take
healthcare risks manageable so that insurers may find it worthwhile to move into the sector in a big way
HEALTH CARE PRODUCTS

The following are brief descriptions of some of the major health care products available in world markets
today.

Capital Disability Policies.

Disability benefits cover the financial risk to the insured of his/her becoming disabled and are expressed
either as occupational disability or the inability to pursue any activity for a living Benefits are payable in
the form of a lump sum or as an income.

Permanent Health Insurance Policies Disability income benefits pay a regular income should the insured
experience a loss of income upon becoming fully or partially unable to follow their own or similar
occupation. The benefit usually pays an income either until the insured has recovered sufficiently from
the temporary disability to return to work, or has died or until normal retirement age. A waiting period is
usually imposed prior to the commencement of the benefit payment.

> Dread Disease (or Critical Illness Policies)

A Dread disease benefit offers a payment (sometimes an accelerated death payment) on a confirmed
diagnosis of a dread disease. This benefit is usually valid in the case of a limited number of listed diseases,
which often include the following

diseases: Heart attack, Stroke, Coronary artery disease requiring surgery, Cancer, Kidney failure, Surgery
for a disease of the aorta, Replacement of a heart value, Organ transplant, Coma Other diseases can also
be included and the percentage of the sum assured paid for each disease may be related to the severity of
the disease.

Long Term Care Policies

This policy provides financial security against the risk of needing either home or nursing-home care as
an elderly person. Premiums will be paid regularly and will cease either when benefit payments
commence or earlier (e.g. at a given age). A group version of this product would enable an employer to
provide long term care to retiring employees and their spouses.

Hospital Cash Policies

Hospital Cash policies usually provide the insured with a daily cash amount for the duration of an
insured's stay in the hospital. Further benefits are often added in order to cover the additional costs
associated with any visit to the hospital. These would often be in the form of a major medical expense
policy. Major Medical Expense Policies Major Medical Expense's policies often complement a hospital
cash policy. The policy would cover the costs associated with specified medical procedures. These would
include the cost of any surgery or follow-up visits to a Doctor. The actual benefit would normally be
based on a pre-determined fee scale for various different procedures.
 CHAPTER NO. 4

TYPES OF HEALTH INSURANCE

4.1 TYPES OF HEALRH INSURANCE

1. PPO Health Insurance Plans,

2 HMO Health Insurance Plans,

3. HSA-Qualified Health Insurance Plans, and

4. Indemnity Health Insurance Plans

The plan type that is best for you depends um what you and your family want, and how much you are
willing to spend. Here's a brief review of each type of health insurance plans.
1) PPO Health Insurance Plans

PPO or Preferred Provider Organization plans are the most common Employees covered under a PPO
plan need to get their medical care from doctors or hospitals on the insurance company's list of preferred
providers in order for claims to be pant at the highest level.

2) HMO Health Insurance Plans

HMO stands for Health Maintenance Organization. HMO plans wide range of health care services
through a network of providers that contract exclusively with the HMO, or who agrees to provide services
to members. Employees participating in HMD plans will typically need to select a primary care physician
(PCP) to provide most of their health care and refer thest on to a HMO specialist as needed.

3) HSA-Qualified Health Insurance Plans

HSA-qualified plans are typically PHO plans designed specifically for use with Health Savings Accounts
(HSA) An HSA is a special bank account that allows participants to save money-pre-tax-to be used
specifically for medical expenses in the future. HSAS can be used alongside Health Reimbursement
Arrangements (HRAS), if the HRA is designed correctly

4) Indemnity Health Insurance Plans

Indemnity plans allow members to direct their own health care and generally visit any doctor or hospital.
The insurance company then pays a set portion of the total charges Employees may be required to pay
for some services up front and then apply to the insurance company for reimbursement.
 CHAPTER NO.5

GUIDELINE OF IRDA

Re: Guidelines on Standardization in Health Insurance

Health insurance addresses a major res o l' public concerns. Although it is rapidly growing access to
health insurance still remains limited and add to it com plaints especially due to variable interpretations
of key policy terms are enormous. In order to address the expectation of public more effectively, the
Authority propose to stipulate the

following in respect of all health Insurance policies issued by and general insurers in the country.

1. Standard Definition for 46 com m only used terms in health insurance policies:

Standard terms would reduce ambiguity, enable all stakeholders to provide better services and enable
customers to interact more effectively with imorers IPAS and providers All instars shall adhere to the
stipulased definitions, mecsed at Annesare 1, while defining these 45 core ma in all health insurance
policies

2. Standard Nomenclature and Procedures for Critical Illnesses:

In view a Isolving the difformes in the definitions of terms on Critical illnesses adopted by the different
insurers which are creating confusion in the minds of consumers and the industry especially at the time
het inners and re-inputers have to arrive at a point where lurp suns payment is made, 11 Critical have
been standardized to be adapted uniformly across industry, If offered under the product. All products
offering the critical illness coverage shall ensure that definitions of the stated 11 in line with the stipalced
definitions annexed at Annexure II.

3. Standard Pre-authorization and Claim form:

A common industry wide pre-authorization and claim form will significantly streamline processes at all
stages. This will enhance the ability of providers to obuin a timely prior authorization. By implementing
it in an optical character recognition (OCR) format, the ability to transfer data from a hand written paper
bused form to IT systems has been enhanced thus reducing the daca enury issues for TPAs and insurers.
Every com party shall attach set of claim forms along with policy. policyholder The forms are attached
at Annesure III. and conditions to the

4. Standard List of Excluded Expenses in Hospitalization Indemnity policies;

Hospitalization indemnity products are the commonest products in the Indian market and account for
most of the health insurance sold in the country. The standard listing o 199 excluded items, un arca which
has otherwise been fairly variable in its interpretation and implementation, has been finalized. The same
is annexed at Annexure IV. However, Insarers may include these excluslans if the product design allows
for, or if the insurer wants to include these as part in /hompitalization expenses

5. Standard File and Use Application Form, Database Sheet and Customer Information Sheet:

The existing F&U) fom tased by the non-life insurers in designed keeping in view largely the
characteristics o Nas Life products other than Health With this, the essent information like the vem
insured, the minimum and maximum age, tens of the product etc that gets captured in the 1&U form is
very minimal. In order to capture the relevant product design information, the muffied File and Use
Application form along with the Database sheet and Customer information then as anneaed in the
Annexure: V, VI and VII respectively shall be submitted under Fife and Use procedure by the inters

6. Standard agreement between TPA & Insurer and Provider (Hospital) & Insurer:

The insurers enter into agreements with the TPA s for health services under health insurance contracts
and with the Providers (Hospitals) for health care services under health insurance contracts The Service
Level Agreement shall include the minimum standard clauses annexed in Annexure: VIII and IX, as
applicable:

This is issued under section 14(2) of IRDA Act, 1999 and shall be effective from 1st July 2013 for group
products and list October 2013 for other products.

STANDARD DEFINITIONS OF TERMINOLOGY USED IN

HEALTH INSURANCE POLICIES

1. Accident

An accident is a sudden, unforeseen and involuntary event caused by external and visible
means

2. Co-Payment

A co-payment is a cost-sharing requirement under a health insurance policy that provides that the
policyholder/insured will bear a specified percentage of the admissible costs. A co-payment does not
reduce the sum, imsored

3. Day Care Treatment.

Day care treatment refers to medical treatment, and/or surgical procedure which is
i. undertaken under General or Local Anesthesis in a hospital day care contre in less
than 24 hrs because of technological advancement, and

ii. Which would have otherwise required a hospitalization more than 24 hours Treatment normally taken
on an out-patient basis is not included in the scope of this definition.

4. Deductible

A deductible is a cost-sharing requirement under a health insurance policy that provides that the Insurer
will not be liable for a specified rupee amount of the covered expenses, which will apply before any
benefits are payable by the insurer. A deductible does not reduce the sum insured.

5. Dependent Child

A dependent child refers to a child (natural or legally adopted), who is financially dependent on the
primary insured or proposer and does not have his/her independent sources of income.

6. Domiciliary Hospitalisation

Domiciliary hospitalization means medical treatment for an illness/disease/injury which in the normal
course would require care and treatment at a hospital but is actually taken while confined at home under
any of the following circumstances:

- the condition of the patient is such that he/she is not in a condition to be removed to a hospital, or the
patient takes treatment at home on account of non availability of room in a hospital.

7. Emergency Care

Emergency care means management for a severe illness or injury which results in symptoms which occur
suddenly and unexpectedly, and requires immediate care by a medical practitioner to prevent death or
serious long term impairment of the insured person's health.

8. Grace Period

Grace period means the specified period of time immediately faliowing the premium duc
date during which a payment can be made to renew or continue a policy inforce without
loss of comtiniaity benefits such as waiting periods and coverage of pre-existing
disemes. Coverage is not available for the period for which no premium is received

9. Hospital

A hospital means any institution established for in-patient care and day care treatment of sickness and /
or injuries and which has been registered as a hospital with the local authorities, wherever applicable, and
is under the supervision of a registered and qualified medical practitioner AND must comply with all
minimum oriceria as under

has a least 10 inpatient beds, in those towns having a pogulation of less than 10,00,000 and 15 inpatient
beds in all other places

- has qualified nursing under its employment round the clock;

- has qualified medical praitioner (s) in charge round the clock: has a fully equipped operation
theatre of its own where surgical procedures are
carried out

- Maintains daily reds of patients and will make these accessible to the Inumince Company's
authized purusel

10. Intensive Care Unit

Intensive care unit means an identified section, werd or wing ofa berpital which is inder
the constant supervision of a dedicated medical practitioners, and which is specially
equipped for the continuues monitoring and treatment of paticists who are in a critical
condition require life support facilities and where the level of care and supervision is
considerably more sophisticated and intensive than in the ordinary and other wands.
 CHAPTER NO. 6

FACING HEALTH INSURANCE PROFESSIONALS &

HEALTH CARE SECTORS

The top 5 challenges facing health insurance professionals

1. Health Care Reform

Health care reform aka the Affordshie Care Ac, PPACA, Obama Care), ranks as the amber one challenge
for many health insurance professionals. At the core of this challenge is uncertainty about the role of
producers and understanding all of the shifting deadlines and requirements

How can you overcome this challenge? Understand health care reform, educate and service clients, and
recommend products to help your clients in this new market. This may include shifting inno a "consaltirit
role in addition to policy sales

2. Balancing Sales vs. Relationships

The pressure to sell and the pressure to develop long term client relationships is another big challenge we
hear from health insurance professionals

How can you overcome this challenge? Succestal agents and brokers balance short term production goals
with long-term business developesem ativnies meet sales expectations today, and grow the business into
the future.

3. Lack of Demand

There's no doubt the market is shifting and this can be frustrating Businesses an beying the same products
in the same way. At the same time, new markets are opening up.

For example, while more small and medium sized employers are terminating group health insurance to
send employees to the individual market, nuny are not doing health benefits altogether. Rather, they are
using defined contribution health, plans reimburse for individual health insurance. Berk can thrive off of
this shit by ding off their individual policy lines, and partnering with a defined comituin software provider
to offer this solution.

The trend toward definest contribution also opens up afge marketfeealth in professionals small businesses
who could not ufford health insurance in the past. There are over 23 million US small businesses in this
situation and are adopting new products such us defined contribution.
How can you overcome this challenge? Successfal agents and brokers and taking advantage of these
opportunities, and selling the right solutions to the right prospects.

4. Technology is Replacing Health Insurance Professionals

In the past, prospects would reach out to sales professionals as they were researching options and learning.
Now, prospects have usually deme extensive research in he son even speak to them. Some health
insurance professionals fear technology is replacing

them This challenge a challenging. The internet is here to stay, and companies of all are using internet
and technologies to improve benefits and increase efficiency Ostmp of this, major carriers, major online
private exchanges, and the public exchanges are utilizing the internet to reach consumers directly How
can you overcome this challenge? Despite information at their fingertips and new direct-to-consumer
models, businesses still need personal advisors.

5. Keeping Up With Diverse Communication and Marketing Channels

Similar to 14, it can be hard to get your message out there in a saturated market oc producers are
competing for marketing space with large carriers, paid advertising, savs SEO, and a sea of competition.

How can you overcome this challenge? The most successful agents and brokers are overcoming this
challenge by using social media e-newsletters word-of-mauth campaigns, and other creative forms of
content to strengthen their efforts. They are also carving out a nibe for themselves to set them apart from
the competition.

IMPACT OF HEALTH INSURANCE ON THE HEALTH CARE SECTOR

• Growth of health insurance-opportunity to improve health care standards especially health care
infrastructure and accessibility to quality care

.Will promote uniform standards of health care across the length and bread of the country Growth of
health insurance means increased standardired data resulting in greater use of information technology in
health care sector. . Stimulated growth in pharma sector.

• Employers are worried about increasing health care costs and are forcing insurers 30 be risk managers
than risk distributors

• Insaratice companies will look at control which would mean utilization reviews

• Cast control involves profiling of providers, doctors and physician education programs.

• He concluded by speaking on universal health and suggested approach of affordability and insurability.
 CHAPTER NO.7

MAJOR HEALTH CARE INDIA IS FACING RIGHT NOW

MAJOR HEALTHCARE CHALLENGES INDIA IS FACING RIGHT NOW

Late last year, after the new government come to power. PM Modi was seen to be much inclined towards
the of better healthcare

He not only stressed upon the importance of cleanliness and hygiene, hut on many occasions said how
his government wanted to effectively help health carry policies to reach poorest of the poor Indians
Meanwhile, it wouldn't be outlandish to say that Indian healthcare system has had s share of victories
over the last few decades. In fact, India was declared polie-hee in 2014.) Undeniably, this is seen as a
notable achievement since the country accounted more than 50% of the world's polio cases in 2009.
The life expectancy in India may have improved frim 32years of age a few decades ago, to over 65years
of age in the present day scenario, healthcare India is still the least discussed topic. There may be endless
debates on news channel or enough hue and cry over the turbid drinking water, healthcare challenges in
India full to become history. In fact, closer examination reveals the emergence of dangerous fault lines
that if remain unaddressed for longer period of time, put the health of one-sixth of human population at
critical risk.

Early this year, the World Health Organization (WHO) maintained that for India to achieve Universal
Health Coverage (UHC), the country should re-organize its healthcare delivery system with the right mix
and distribution of services. At the same time, we cannot deny that Indian economy is brimming, opening
up avenues of growth for the Indian middle-class, and giving an entire generation an easy access to
technology and knowledge. Unfortunately, the glowing effects of a nourishing economy are not to be
found in the system of healthcare in India. While successive governments may have committed to
numerous developmental goals, there is a dearth of a dedicated program with focus on resolving India's
healthcare challenges. It may not come as a surprise if we say that the substandard regulatory scenario,
knowledge and infrastructure deficit, and incompetent public healthcare expenditure made India stand at
a meager 112 rank out of 190 on the WHOs world health report ranking

All is not lost, though. The primary aim of the National Health Poliey, 2015, is to inform, clarify,
strengthen and prioritize the role of the Government in shaping health systems in all its dimensions
investment in health, organization and financing of healthcare services, prevention of diseases and
promotion of good health through cross sectorial action. access to technologies, developing human
resources, encouraging medical pluralism. building the knowledge base required for better health,
financial protection strategies and regulation and legislation for health. This paragraph outlining the
vision of government is the part of National Health Policy 2015 draft.

Reducing out-of-pocket expenditure

According to the Ministry of Health, nearly 63 million people are faced with poverty every year due to
"catastrophic" expenditure they incur over healthcare. In addition to this, only a very small percentage of
Indians have health insurance policies in India. And until the right mechanisms are put in place, ensuring
that out-of-pocket healthcare expenditure incurred by people comes down, the OOP expenditure will
continue to disengage all the economic progress made by the Indians.

Lack of resources

Despite being a rapidly growing economy. India spends meager resources on its healthcare needs. In fact,
the overall expenditure on public healthcare in India has contracted over the time given that India spends
only about 1 percent of its GDP on public health. In fact, if experts are to be believed India must spend
substantial funds to reach the global acceptable levels of child and maternal mortality rates.
The government may raise the resources in numerous ways right from reallocating subsidies to optimizing
welfare budgets and in particular, by working in harmony with the state governments.

Recognizing the importance of skills

The lesser number of skilled and well-learned medical graduates, in particular in rural India is turning out
to be the biggest roadblock facing the healthcare system in India. In fact, its effect has been such that no
fresh graduates are inclined to serve the rural community thanks to abject living conditions. At the same
time, this is the area where investments by government can do wonders. Dedicating resources towards
training and education of skilled workforce, competitive pay and creating standard living conditions will
make sure that public healthcare in India is in the hands of well-qualified people.
 CHAPTER NO.8

COMPARISONS

The Commonwealth Fund, in its annual survey, "Mirror, Mirror on the Wall", compares the performance
of the health care systems in Australia, New Zealand, the United Kingdom, Germany, Canada and the
U.S. Its 2007 study found that, although the U.S. system is the most expensive, it consistently under-
performs compared to the other countries. One difference between the U.S. and the other countries in the
study is that the U.S. is the only country without universal health insurance coverage.

Health Expenditure per capita, OECD Statistics 2013

Life Expectancy of the total population at birth from 2000 until 2011 among several OECD member
nations. Data source: OECD's Library The Commonwealth Fund completed its thirteenth annual health
policy survey in 2010. A study of the survey "found significant differences in access, cost burdens, and
problems with health insurance that are associated with insurance design". Of the countries surveyed, the
results indicated that people in the United States had more out-of-pocket expenses, more disputes with
insurance companies than other countries, and more insurance payments denied; paperwork was also
higher although Germany had similarly high levels of paperwork.

AUSTRALIA

Main article: Health care in Australia

The Australian public health system is called Medicare, which provides free universal access to hospital
treatment and subsidized out-of-hospital medical treatment. It is funded by a 2% tax levy on all taxpayers,
an extra 1% levy on high income earners, as well as general revenue.

The private health system is funded by a number of private health insurance organizations. The largest of
these is Medibank Private Limited, which was, until 2014, a government-owned entity, when it was
privatized and listed on the Australian Stock Exchange.

Some private health insurers are for profit enterprises such as Australian Unity, and some are non-profit
organizations such as HCF and the HBF Health Fund (HBF). Some, such as Police Health, have
membership restricted to particular groups, but the majority have open membership. Membership to most
health funds is now also available through comparison websites like money time, Compare the Market,
iSelect Ltd., Choosi, Comparing Expert and You Compare. These comparison sites operate on a
commission basis by agreement with their participating health funds. The Private Health Insurance
Ombudsman also operates a free website which allows consumers to search for and compare private
health insurers' products, which includes information of cover. price and level

Most aspects of private health insurance in Australia are regulated by the Private Health Insurance Act
2007. Complaints and reporting of the private health industry is carried out by an independent government
agency, the Private Health Insurance Ombudsman. The ombudsman publishes an annual report that
outlines the number and nature of complaints per health fund compared to their market share

The private health system in Australia operates on a "community rating" basis, whereby premiums do not
vary solely because of a person's previous medical history, current state of health, or (generally speaking)
their age (but see Lifetime Health Cover below). Balancing this are waiting periods, in particular for pre-
existing conditions (usually referred to within the industry as PEA, which stands for "pre-existing
ailment"). Funds are entitled to impose a waiting period of up to 12 months on benefits for any medical
condition the signs and symptoms of which existed during the six months ending on the day the person
first took out insurance. They are also entitled to impose a 12-month waiting period for benefits for
treatment relating to an obstetric condition, and a 2-month waiting period for all other benefits when a
person first takes out private insurance. Funds have the discretion to reduce or remove such waiting
periods in individual cases. They are also free not to impose them to begin with, but this would place such
a fund at risk of "adverse selection", attracting a disproportionate number of members from other funds,
or from the pool of intending members who might otherwise have joined other funds. It would also attract
people with existing medical conditions, who might not otherwise have taken out insurance at all because
of the denial of benefits for 12 months due to the PEA Rule. The benefits paid out for these conditions
would create pressure on premiums for all the fund's members, causing some to drop their membership,
which would lead to further rises in premiums, and a vicious cycle of higher premiums-leaving members
would ensue.

The Australian government has introduced a number of incentives to encourage adults to take out private
hospital insurance. These include:

• Lifetime Health Cover: If a person has not taken out private hospital cover by I July after their 31st
birthday, then when (and if they do so after this time, their premiums must include a loading of 2% per
annum for each year they were without hospital cover. Thus, a person taking out private cover for the
first time at age 40 will pay a 20 percent loading. The loading is removed after 10 years of continuous
hospital cover. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover.

. Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (in the
2011/12 financial year $80,000 for singles and $168,000 for couples) and who do not have an adequate
level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The
rationale is that if the people in this income group are forced to pay more money one way or another,
most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event
that they need private hospital treatment rather than pay it in the form of extra tax as well as having to
meet their own private hospital costs.

. The Australian government announced in May 2008 that it proposes to increase the thresholds, to
$100,000 for singles and $150,000 for families. These changes require legislative approval. A bill to
change the law has been introduced but was not passed by the Senate. An amended version was passed
on 16 October 2008. There have been criticisms that the changes will cause many people to drop their
private health insurance, causing a further burden on the public hospital system, and a rise in premiums
for those who stay with the private system. Other commentators believe the effect will be minimal.

. Private Health Insurance Rebate: The government subsidizes the premiums for all private health
insurance cover, including hospital and ancillary (extras), by 10%. 20% or 30%, depending on age. The
Rudd Government announced in May 2009 that as of July 2010, the Rebate would become means-tested,
and offered on a sliding scale. While this move (which would have required legislation) was defeated in
the Senate at the time, in early 2011 the Gillard Government announced plans to reintroduce the
legislation after the Opposition loses the balance of power in the Senate. The ALP and Greens have long
been against the rebate, referring to it as "middle-class welfare".
CANADA

Main article: Health care in Canada

Health care is mainly a constitutional, provincial government responsibility in Canada (the main
exceptions being federal government responsibility for services provided to aboriginal peoples covered
by treaties, the Royal Canadian Mounted Police, the armed forces, and members of parliament).
Consequently, each province administers its own health insurance program. The federal government
influences health insurance by virtue of its fiscal powers-it transfers cash and tax points to the provinces
to help cover the costs of the universal health insurance programs. Under the Canada Health Act, the
federal government mandates and enforces the requirement that all people have free access to what are
termed "medically necessary services," defined primarily as care delivered by physicians or in hospitals,
and the nursing component of long term residential care. If provinces allow doctors or institutions to
charge patients for medically necessary services, the federal government reduces its payments to the
provinces by the amount of the prohibited charges. Collectively, the public provincial health insurance
systems in Canada are frequently referred to as Medicare. This public insurance is tax funded out of
general government revenues, although British Columbia and Ontario levy a mandatory premium with
flat rates for individuals and families to generate additional revenues in essence a surtax. Private health
insurance is allowed, but in six provincial governments only for services that the public health plans do
not cover, for example, semi-private or private rooms in hospitals and prescription drug plans. Four
provinces allow insurance for services also mandated by the Canada Health Act, but in practice there is
no market for it. All Canadians are free to use private insurance for elective medical services such as laser
vision correction surgery, cosmetic surgery, and other non basic medical procedures. Some 65% of
Canadians have some form of supplementary private health insurance; many of them receive it through
their employers. Private-sector services not paid for by the government account for nearly 30 percent of
total health care spending.

In 2005, the Supreme Court of Canada ruled, in Chaoulli v. Quebec, that the province's prohibition on
private insurance for health care already insured by the provincial plan violated the Quebec Charter of
Rights and Freedoms, and in particular the sections dealing with the right to life and security, if there
were unacceptably long wait times for treatment, as was alleged in this case. The ruling has not changed
the overall pattern of health insurance across Canada but has spurred on attempts to tackle the core issues
of supply and demand and the impact of wait times.

CHINA

Main articles: Healthcare reform in the People's Republic of China and Pharmaceutical industry in the
People's Republic of China
FRANCE

Main article: Health care in France

The national system of health insurance was instituted in 1945, just after the end of the Second World
War. It was a compromise between Gaullist and Communist representatives in the French parliament.
The Conservative Gaullists were opposed to a state-run healthcare system, while the Communists were
supportive of a complete nationalization of health care along a British Beveridge model.

The resulting programme is profession-based: all people working are required to pay a portion of their
income to a not-for-profit health insurance fund, which mutualises the risk of illness, and which
reimburses modical expenses at varying rates. Children and spouses of insured people are eligible for
benefits, as well. Each fund is free to manage its own budget, and used to reimburse medical expenses at
the rate it saw fit, however following a number of reforms in recent years, the majority of funds provide
the same level of reimbursement and benefits.

The government has two responsibilities in this system.

The first government responsibility is the fixing of the rate at which medical expenses should be
negotiated, and it does so in two ways: The Ministry of Health directly negotiates prices of medicine with
the manufacturers, based on the average price of sale observed in neighboring countries. A board of
doctors and experts decides if the medicine provides a valuable enough medical benefit to be reimbursed
(note that most medicine is reimbursed, including homeopathy). In parallel, the government fixes the
reimbursement rate for medical services: this means that a doctor is free to charge the fee that he wishes
for a consultation or an examination, but the social security system will only reimburse it at a pre-set rate.
These tariffs are set annually through negotiation with doctors' representative organisations.

The second government responsibility is oversight of the health-insurance funds, to ensure that they are
correctly managing the sums they receive, and to ensure oversight of the public hospital network.

Today, this system is more or less intact. All citizens and legal foreign residents of France are covered by
one of these mandatory programs, which continue to be funded by worker participation. However, since
1945, a number of major changes have been introduced. Firstly, the different health care funds (there are
five: General, Independent, Agricultural, Student, Public Servants) now all reimburse at the same rate.
Secondly, since 2000, the government now provides health care to those who are not covered by a
mandatory regime (those who have never worked and who are not students, meaning the very rich or the
very poor). This regime, unlike the worker-financed ones, is financed via general taxation and reimburses
at a higher rate than the profession-based system for those who cannot afford to make up the difference.
Finally, to counter the rise in health care costs, the government has installed two plans, (in 2004 and
2006), which require insured people to declare a referring doctor in order to be fully reimbursed for
specialist visits, and which installed a mandatory co-pay of 1€ (about $1.45) for a doctor visit, 0,50 €
(about 804) for each box of medicine prescribed, and a fee of 16-18 € ($20-25) per day for hospital stays
and for expensive procedures.

An important element of the French insurance system is solidarity: the more ill a person becomes, the
less the person pays. This means that for people with serious or chronic illnesses, the insurance system
reimburses them 100 % of expenses, and waives their co pay charges.

Finally, for fees that the mandatory system does not cover, there is a large range of private complementary
insurance plans available. The market for these programs is very competitive, and often subsidised by the
employer, which means that premiums are usually modest. 85% of French people benefit from
complementary private health insurance.

GERMANY

Main article: Healthcare in Germany

Germany has the world's oldest national social health insurance system, with origins dating back to Otto
von Bismarck's Sickness Insurance Law of 1883.

Currently 85% of the population is covered by a basic health insurance plan provided by statute, which
provides a standard level of coverage. The remainder opt for private health insurance, which frequently
offers additional benefits. According to the World Health Organization, Germany's health care system
was 77% government-funded and 23% privately funded as of 2004.

The government partially reimburses the costs for low-wage workers, whose premiums are capped at a
predetermined value. Higher wage workers pay a premium based on their salary. They may also opt for
private insurance, which is generally more expensive, but whose price may vary based on the individual's
health status.

Reimbursement is on a fee-for-service basis, but the number of physicians allowed to accept Statutory
Health Insurance in a given locale is regulated by the government and professional societies.

Co payments were introduced in the 1980s in an attempt to prevent over utilization. The average length
of hospital stay in Germany has decreased in recent years from 14 days to 9 days, still considerably longer
than average stays in the United States (5 to 6 days). Part of the difference is that the chief consideration
for hospital reimbursement is the number of hospital days as opposed to procedures or diagnosis, Drug
costs have increased substantially, rising nearly 60% from 1991 through 2005. Despite attempts to contain
costs, overall health care expenditures rose to 10.7% of GDP in 2005, comparable to other western
European nations, but substantially less than that spent in the U.S. (nearly 16% of GDP).
 CHAPTER NO. 9

INDIA'S HEALTH CARE SYSTEM

Now that the 2014 general elections are in the rear view mirror, Prime Minister Narendra Modi and his
ministers face the challenge of expectations set by the media and all his supporters. One of the key
challenges his team will be facing is: Healthcare.

With the World Health Organization's 2000 World Health Report ranking India's healthcare system at
112 out of 190 countries, some key questions in his mind should be: How should the country transform
its healthcare system? What are its current pain points? What could be achieved during his tenure?

For those living in urban areas, healthcare is merely a political issue. They argue that the country faces
bigger challenges such as economic development, infrastructure, jobs, and border disputes with Pakistan.
I believe that the 2014 elections have presented India with a unique opportunity to take a fresh look at its
healthcare landscape. I was happy to browse through the PM's campaign website which had a section on
his achievements in this sector.

But here are 5 things you should know about India's healthcare system.

1. Rural Versus Urban Divide: While the opportunity to enter the market is very ripe, India still spends
only around 4.2% of its national GDP towards healthcare goods and services (compared to 18% by the
US), Additionally, there are wide gaps between the rural and urban populations in its healthcare system
which worsen the problem. A staggering 70% of the population still lives in rural areas and has no or
limited access to hospitals and clinics. Consequently, the rural population mostly relies on alternative
medicine and government programmes in rural health clinics. One such government programme is the
National Urban Health Mission which pays individuals for healthcare premiums, in partnership with
various local private partners, which haveIn contrast, the urban centers have numerous private hospitals
and clinics which provide quality healthcare. These centers have better doctors, access to preventive
medicine, and quality clinics which are a result of better profitability for investors compared to the not
so-profitable rural areas.

2. Need for Effective Payment Mechanisms: Besides the rural-urban divide, another key driver of
India's healthcare landscape is the high out-of-pocket expenditure (roughly 70%). This means that most
Indian patients pay for their hospital visits and doctors' appointments with traight up cash after care with
no payment arrangements. According to the World Bank and National Commission's report on
Macroeconomics, only 5% of Indians are covered by health insurance policies. Such a low figure has
resulted in a nascent health insurance market which is only available for the urban, middle and high
income populations. The good news is that the penetration of the health insurance market has been
increasing over the years; it has been one of the fastest growing segments of business in India.
Coming to the regulatory side, the Indian government plays an important role in running several safety
net health insurance programmes for the high-risk population and actively regulates the private insurance
markets. Currently there are a handful of such programmes including the Community Health Insurance
programme for the population below poverty line (like Medicaid in the US) and Life Insurance Company
(LIC) policy for senior citizens (like Medicare in the US). All these plans are monitored and controlled
by the government-run General Insurance Corporation, which is designed for people to pay upfront cash
and then get reimbursed by filing a claim. There are additional plans offered to government employees,
and a handful of private companies sell private health insurance to the public.

3. Demand Basic Primary Healthcare and Infrastructure: India faces a growing need to fix its basic
health concerns in the areas of HIV, malaria, tuberculosis, and diarrhoea. Additionally, children under
five are hom underweight and roughly 7% (compared to 0.8% in the US) of them die before their fifth
birthday. Sadly, only a smallpercentage of the population has access to quality sanitation, which further
exacerbates some key concerns above.

For primary healthcare, the Indian government spends only about 30% of the country's total healthcare
budget. This is just a fraction of what the US and the UK spend every year. One way to solve this problem
is to address the infrastructure issue... by standardising diagnostic procedures, building rural clinics, and
developing streamlined health IT systems, and improving efficiency. The need for skifled medical
graduates continues to grow, especially in rural areas which fail to attract new graduates because of
financial reasons. A sizeable percentage of the graduates also go abroad to pursue higher studies and
employment.

4. Growing Pharmaceutical Sector:According to the Indian Brand Equity Foundation (IBEF), India is
the third-largest exporter of pharmaceutical products in terms of volume. Around 80% of the market is
composed of generic low-cost drugs which seem to be the major driver of this industry.

The increase in the ageing population, rising incomes of the middle class, and the development of primary
care facilities are expected to shape the pharmaceutical industry in future. The government has already
taken some liberal measures by allowing foreign direct investment in this area which has been a key
driving force behind the growth of Indian pharma.

5. Underdeveloped Medical Devices Sector: The medical devices sector is the smallest piece of India's
healthcare pie. However, it is one of the fastest-growing sectors in the country like the health insurance
marketplace. Till date, the industry has faced a number of regulatory challenges which has prevented its
growth and development.

Recently, the government has been positive on clearing regulatory hurdles related to the import-export of
medical devices, and has set a few standards around clinical trials, According to The Economic Times,
the medical devices sector is seen as the most promising area for future development by foreign and
regional investors, they are highly profitable and always in demand in other countries.

.
 CHAPTER NO.10

GOVERNMENT INTERVENTION IN HEALTH

INSURANCE SECTOR

The theoretical literature on the performance of insurance markets is well developed. However, not all of
the market failures that may arise in such markets necessarily justify public intervention. This section
examines the efficiency and equity reasons for intervention in health insurance markets, paying specific
attention to the informational constraints facing governments.

3.1 REASONS FOR GOVERNMENT INTERVENTION

HEALTH SECTOR

3.1.1 Market failure in the health insurance sector

It is useful to briefly review sources of inefficiency in the delivery of health insurance, and to examine
the extent to which public intervention can correct the associated market failures. The inefficiencies
derive mainly from information asymmetries and imperfect competition, and less from standard public
goods and externality characteristics.

• Asymmetric information - moral hazard

The role of information in the performance of insurance markets has been widely appreciated. In the
health insurance literature, Feldstein (1973), Pauly (1968), and Zeckhauser (1970) showed how
asymmetric information at the ex post stage that is, after an insured event has occurred - can reduce the
efficiency of equilibrium insurance contracts. This moral hazard occurs when insurance contracts are
written on the basis of endogenous incurred expenses and not on the basis of exogenous health needs.
This kind of insurance leads to over-consumption of care, the distortionary costs of which are offset by
reducing the level of insurance.

A similar inefficiency results from "ex interim" moral hazard, when precautionary actions can be taken
after the insurance contract is signed, but before uncertainty isresolved. In this case, the inability to make
insurance contracts contingent on such actions reduces the optimal level of insurance. In both cases, the
individual optimally exposed to some risk, second-best

Within a partial equilibrium model neither source of moral hazard argues for public intervention, unless
one assumes unrealistically that the government has better information than private insurers. On the other
hand,Greenwald and Stiglitz (1986) showed that, taking a general equilibrium approach, there may be a
role for government intervention, even when the government does not have an information advantage vis-
fl vis private insurers. Their argument is simply that, through its powers of taxation and subsidization, the
government can encourage desirable ex interim actions by altering the prices of goods and services that
have non-zero cross elasticity's of demand with such actions. Thus, taxing cigarettes may reduce the
(assumed unobservable) ex interim action of smoking, thus mirroring an efficient

Insurance contract. The scope for such Pareto improving intervention becomes more limitedas private
insurance contracts become more sophisticated, eg, by disallowing benefits to smokers.

• Asymmetric information-adverse selection

While moral hazard derives from asymmetric information that is generated after contracts are signed,
adverse selection occurs in markets when information is held asymmetrically at the date of contracting.
A competitive insurance market in a population with heterogeneous ex ante risk characteristics may
perform inefficiently if insurance contracts cannot be differentiated on the basis of these risks.

When only a single insurance policy is available, Akerlof's (1970) lemons problem may emerge, with a
proportion of individuals choosing not to purchase insurance. On the other hand, if multiple contracts are
available, then even when risk characteristics are unobservable it becomes possible for insurers to charge
low risk individuals lower prices. All individuals will have some insurance in an equilibrium, (Rothschild
and Stiglitz. (1976)), but two problems may arise: first, the good risks will not have full insurance, and
second, an equilibrium may not exist.

Evidence of the lemons-type of equilibrium (in which a fraction of the population is uninsured) has been
provided in a number of studies (e.g., Cutler und Zeckhauser (1997). and Cutler and Reber (1998)). The
relevance of the Rothschild-Stiglitz equilibrium is possibly more debatable, since it is typically high risk
individuals who have trouble obtaining full insurance against health risks, and not low risks, as their
model suggests. However, since risk is correlated with other determinants of insurance coverage (such as
income, education, etc.) it is probably imprudent to dismiss the underlying model

Government intervention cannot easily correct these market failures. In both models, niversal and iform
coverage can he mandated, but the resulting resource and risk allocations are not Pareto-comparable with
the initial equilibrium.

• Imperfect competition.

The models of adverse selection reviewed above identified failures of competitive insurance markets. But
even in the absence of adverse selection problems, insurance markets may yield socially sub-optimal
resource and risk allocations if firms have market power. Such market power may derive from
information imperfections on the demand side, say contributing to switching costs (which make it difficult
for new firms to attract customers). Also, increasing returns in administrative costs suggest that a
somewhat concentrated industry is likely to be observed in equilibrium.

In standard industrial organization models, while market power typically leads to allocative inefficiency,
what competition there is generally welfare improving. However, in insurance markets with information
asymmetries, competition may sometimes have negative effects on allocative efficiency. For example,
when insurers are faced with a heterogeneous risk population they will have incentives to sell policies
only to low risk individuals - i.e., those individuals to whom it is cheap to provide insurance. If they
cannot offer different policies to different risk types, then they may lower the quality of the policies they
do sell so as to make them sufficiently unattractive to high risk individuals (Jack, forthcoming). This kind
of selection incentive might suggest public intervention to control the extent, or at least type, of
competition in the insurance market.

Consumer protection

> Quality of care

The examples of moral hazard above concentrated on the behavior of consumers when they are at an
informational advantage vis-fl-vis the provider of insurance. One response by insurers is to try to improve
the information they have about consumers, by undertaking "utilization reviews" - essentially checking
that doctors are not providing "too much" care.

In order to motivate doctors, insurers may indeed give them stakes in the insurance company, converting
it to a managed care organization.

Such an organizational design is efficient, as long as the information asymmetry removed that is, as long
as information about health status (and the effects of medical interventions and their costs) is held
symmetrically by all parties. In practice the physician is the primary source of this information, so that
when acting as the patient's agent he confers an information advantage on the patient vis-fl-vis the insurer.
However, when acting for the insurer, the physician may put the patient at a disadvantage, and warranted
treatments could be withheld. The usual competitive forces that induce firms to keep quality high may
not work well in this situation, and quality of care could suffer. One can appeal to the literature on
consumer protection and safety standards in support of the role of government in markets with uninformed
consumers.

> Financial regulation

Insurance companies perform similar functions to banks. Banks facilitate inter-temporal trades (saving
and dissaving) implemented through contemporary inter-personal trades (lending and borrowing), while
insurance companies facilitate trades between uncertain states of nature implemented through inter-
personal pooling of current risks.

The transformation function of banks (converting short-term savings into long-term. project funds) results
in a mis-match between the time profiles of assets and liabilities in banks' balance sheets, introducing a
moral hazard problem with regard to the behavior of asset managers. Similarly, insurance companies tend
to collect premiums in advance ofthe resolution of uncertainty, and may optimally build up resources in
order to self insure against systemic risks. In this case, insurance company managers must choose how
and where to invest these funds. A feature of health insurance that is not common to banks in this regard
is the fact that the real value of the firm's assets is a function of two factors: the quality of financial
investments, and the costs of providing medical services.

Dewatripont and Tirole (1994) use an incomplete contracts model to show that bank managers can be
given appropriate incentives to perform by transferring control from equity holders (who have relatively
weak incentives to interfere with management) to debt holders (whose incentives to interfere are stronger)
when bank performance as measured by the value of assets is poor. This allocation of hority is in place
of a more sophisticated, but infeasible, explicit performance contract. The role of government is then to
act as a representative of small, uncoordinated, debtors, and the theory rationalizes public take-overs of
distressed banks as a means of providing incentives to managers.

A similar role can be ascribed to the government with respect to health insurance regulation. If the value
of a firm's assets falls enough, the government may wish to intervene and take over the administrative
functions (maybe contracting out such administration to another healthy insurer).

Life-time insurance and non-diversifiable risks

A final important failure of insurance markets is that they often do not provide life-time insurance. Since
individuals' health needs exhibit a degree of autocorrelation, insurance that is actuarially fair only on an
annual basis exposes the individual to a high variance of medical costs over the lifetime. Part of the reason
it is difficult to provide lifetime insurance is that the future development of medical care prices is itself
uncertain, due mainly to the vagaries of technological and epidemiological dynamics. These components
of risk are systemic, so cannot easily be insured against (except intertemporally, across generations).

3.1.2 EQUITY

Efficiency is a relatively uncontroversial goal of economic policy and organization. However, in the
health care and health insurance sectors, equity is equally, if not more, important in shaping policy. This
may be because individuals are more willing to accept differences in general income levels than in health
statuses across individuals.

At a conceptual level, having high medical needs, or being at high risk of needing medical attention,
reduces an individual's available budget set. In consequence, the government may wish to redistribute
resources between individuals with identical money incomes. In practice, the redistribution from healthy
to sick is often attempted by imposing uniform prices for health services and for health insurance across
individuals. Of course, charging uniform prices for doctor visits is not redistributive if the sick must visit
the doctor more often than the healthy.

On the other hand, in insurance markets, uniform pricing of insurance policies across individuals is a
feasible tool for redistribution from low risks to high risks. However, requiring private firms to
community rate may only exacerbate such adverse selection and active selection problems that already
exist.
It is important to note that, even if selection issues were unimportant, it would still be only second best
to require uniform insurance pricing. The first best policy, of course, is to redistribute income (lump-sum)
from low risks to high risks, and to require each to buy insurance at the actuarially fair price (i.c., to allow
price discrimination by firms). Such redistribution is notoriously difficult, and even more so when income
inequality itself is high, as it is in many Latin American countries. Indeed, a social welfare maximizing
planner will likely wish to redistribute from rich to poor, and from less risky to more risky. This multi-
dimensional problem of redistributive taxation is difficult, even when the government restricts itself to
simple linear tax and transfer systems (Jack (1999)).

Henriet and Rochet (1999) have recently analyzed the optimality of a uniform public insurance system
within the context of a similar multi-dimensional redistribution problem. They find that, in the absence
of moral hazard, a comprehensive insurance policy providing full insurance to all individuals is part of
an optimal tax and insurance system. This result relies to some extent on the assumption that individuals
face the same distribution of losses, albeit with different probabilities. However, as the demand for health
care is income elastic, the financial cost of care consumed when ill is an endogenous function of income
(and is in fact limited by the individual's available income). This suggests that the poor may prefer
additional income transfers and less extensive public insurance to being offered the same level of
coverage as the non-poor. Alternatively, the rich may be willing to pay somewhat higher taxes in order
to have more comprehensive insurance than the poor.

This discussion leads us to expect that in the presence of health risk and incomedifferentials across the
population, and in the absence of first-best redistributive taxation, governments will likely wish to couple
a progressive general tax source (eg.. an income tax) with a system of health insurance (privately or
publicly supplied more on this later) that delivers subsidized insurance to the poor, but allows coverage
to increase with income.

One means of effecting such a graduated insurance profile is to have a mixed public/private system of
insurance, in which the government provides (or mandates) a given base level of insurance, and
individuals are permitted to top up their coverage through private purchases, or to opt out of the public
system and purchase private insurance. For example, Besley and Coate (1991) have shown that public
provision of insurance (of low enough quality) can be used as a redistributive tool as long as individuals
have access to supplementary private coverage. Using a political economic model with three classes of
voters, Gouveia (1997) also establishes the use of opting out as a means of implementing non-uniform
insurance coverage in the presence of a progressive income tax. Such a system is supported by the rich,
since the cost of purchasing their preferred level of (privately provided) insurance is less that the taxes
they would pay for a similar level financed through taxation. The poor also support the mixed system
because they have a lower demand for coverage- they would prefer to save some of their taxes that would
finance better coverage in order to purchase other goods.
3.2 THE NATURE OF GOVERNMENT INTERVENTION

The arguments above have suggested that either due to market inefficiencies (mainly alverse selection)
and rodistributive concerns, governments may wish to control individuals' choices about insurance in
certain ways. What the discussion does not tell us is how such control over choices should be effected. In
this section we examine the design of public interventions recognizing that the productive efficiency of
insurance is a function of the administrative costs incurred and the costs of providing covered services
Costs of provision of insurance and medical care can be controlled through explicit contractual
arrangements between insurer and provider, organizational choices (e.g vertical integration), and
competition. These three avenues are considered in turn.

3.2.1 Motivating physicians

In many markets, providers of goods or services are paid on the basis of outputs, not inputs, providing
strong incentives for efficient production. It is well understood however that insured medical services are
nearly never compensated in this fashion. For example, an insurance policy that reimburses incurred costs
gives the provider no incentive to choose an efficient input mix.

The underlying problem here is one of motivating physicians and hospital administrators. When neither
health output nor physician effort is directly purchasable (ie, contractible) then effon incentives may be
difficult to generate without exposing the physician to undesirable risk. At two extremes are the salaried
physician and the decentralized fund holder. Under the first arrangement, an insurer (possibly the
government) pays the physician a fixed amount, independent of his supply of effort, and reimburses non
physician expenses (e.g., laboratory tests). In the absence of ethical concerns of job satisfaction (which
are likely to be significant in many instances), doctors will tend to substitute out of personal effort and
into complementary inputs. On the other hand, a decentralized fund holder, who is given a fixed budget
to finance all incurred costs (including the cost of his own effort) will have strong incentives to choose
the right input mix The trade off, as in any moral hazard problem, is between incentives and risk. A
salaried physician faces little personal financial risk associated with expensive cases, since he is
reimbursed for other costs. On the other hand, a fund holder with good effort incentives must bear the full
costs of treating expensive cases, and so might be exposed to considerable risk. This generates a potential
alternative source of inefficiency: if providers attempt to reduce their risk exposure by inducing hard to
treat patients to switch physicians, then these active selection attempts can increase equilibrium costs, or
reduce quality. If instead the physician is provided with some insurance against hard-to-treat cases
directly by the payer, then his incentives to perform are weakened.

It should be clear from this discussion that the trade offs between risk and incentives at the provider level
are not specific to the public sector. Private insurance companies also must induce physicians to
implement insurance contracts at minimum cost, and so face a similar optimization problem. Some
endogenous differences across the public and private sectors may emerge than imply different contractual
relationships between payers (the government, or insurance companies) and providers of medical care.
For example, if public insurance is aimed at the poor, then in the absence of accurate eligibility tests self-
selection constraints may require that the public system provide a relatively low quality of service.
Inducing low effort from physicians who provide services to the public system (they might still be in the
private sector, not public sector employees) might be easier than inducing the higher effort, and hence
service quality. characteristic of private insurance companies who, in equilibrium, serve the non-poor.
One might expect then to see relatively flat incentive schemes for physicians serving the public insurance
system, and steeper compensation schedules employed by private insurers.

Another reason that public and private insurance systems may provide different incentive schemes to
physicians is that physicians may represent a heterogeneous group. If they differ in their aversion to risk,
in their ethical priorities, or in their job satisfaction, it may be optimal to offer one kind of compensation
contract to one group of physicians, and another kind to a second group.

Once again however, these arguments suggest reasons that we might see different ways of paying
physicians emerge in the delivery of health insurance, but they are not necessarily the outcome of a
public/private mix of insurance provision.

3.2.2 Purchaser-provider split versus vertical integration

The previous section examined issues of how to pay physicians, under the assumption that such payment
mechanisms were implemented through explicit contractual agreements. Instead of writing a detailed
contractual agreement between insurer and physician, the two parties might decide instead to integrate
into a single organization, and to rely on bargaining protocols to determine the allocation of rents.
Traditionally, in many countries in Latin America and elsewhere, public insurance systems have been
vertically integrated to a significant degree. Recent reforms however have focused on separating the
functions of insurance and provision, through the so-called "purchaser provider split. These reforms
effectively require that explicit contractual arrangements govern relationships between insurers and
providers.

On the other hand traditionally, private insurance was of the fee-for-service type tie.. indemnity plans),
whereby a physician would send a bill to the insurer for covered services. This is one kind indeed a
common one of explicit contract. Over time however, private insurance companies have moved towards
a more integrated organizational structure, bringing physicians in-house, or at least adopting long-term
contractual relationships with them. This apparent anomaly between the evolution of the organization of
public and private systems can be understood in a number of ways.

3.2.3 Soft budget constraints

First, both institutional developments might represent attempts to provide physicians with stronger
incentives, within constraints that differ between the public and private sectors For example, it might be
difficult for a government bureaucracy to commit to funding a public sector employee prospectively,
thereby making him the residual claimant. Thus, if future renegotiation in the event of high costs makes
it difficult to credibly threaten punishment, endogenous soft budget constraints limit incentives
Conversely, if political pressure is likely to force governments to expropriate profits (or to renegotiate
future contracts) in the event of low costs, incentives will again be dulled. By contracting explicitly with
the private sectorie, by adopting a purchaser-provider split- a public payer may be able to harden what
would otherwise be an endogenously soft budget constraint.

On the other hand, the easiest way for a private payer to provide a physician withincentives might be to
make him a shareholder in the insurance firm. (Of course. there areobvious free-rider problems when
physicians are paid on the basis of group profits and not individual contributions thereto.)

3.2.4 Common agency in public institutions

A second way to understand the opposing directions of reforms in the public and private sectors is to look
more closely at the nature of the purchaser-provider split arrangements. In particular, instead of
contracting directly with individual physicians (as we assumed in the preceding paragraphs), a public
insurance system might sign contracts with groups of physicians indeed often with managed care
organizations. This suggests that the function that is being contracted out from the public system is the
management of physician services. Having a formal arm's length contract between the public sector and
the manager of physician services might be an effective way of improving the incentives of such a
manager. For example, building on the work of Williamson (1985) and Hölmstrom and Milgrom (1990),
Dixit (1997) has shown that when an agent (here the manager) reports to multiple non-cooperative
principals with heterogeneous objectives, a negative externality exists amongst the principals that results
in low powered incentives being provided to the manager. The implicit side contracts that may easily
exist in a political environment support such a view of the constraints on incentives of public sector
managers (hut less so for individual physicians). Requiring an explicit contract could facilitate the
cooperation of the principals, removing the externality, and leading to higher powered incentives being
given to the manager.

Explicit arm's length contractual arrangements might also be a way of limiting the scope of a manager's
activities. The usefulness of limiting objectives of public sector decision makers has been suggested by
Tirole (1994) and formally elaborated in a model of career concerns by Dewatripont, Jewitt and Tirole
(1999). Providing a manager with a well defined "mission again makes it easier to induce effort. In Dixit's
analysis the narrowing of a manager's objectives is effected by reducing the number of competing
principals to whom the manager answers.

3.2.5 Contractual incompleteness

An alternative literature examines issues of contracting out versus internal provisioni... vertical
integration-starting from the presumption that contracts are necessarily incomplete. Even if choices are
observable by both parties to a contract, if they are not verifiable and if the contract is consequently
unenforceable, then institutional arrangements can have substantive effects on incentives. In particular,
ownership of productive assets can matter when explicit contracts are unavailable -private contractors are
those who own the assets they use to produce services (eg, hospitals), while public servants do not have
the implied control rights over asset use.
Hart, Shleifer, and Vishny (1997) present a model of service provision when quality and Cost are non-
contractible. by definition, public sector employees cannot retain ownership of any quality innovations
they generate, while private sector providers can. Incentives for quality innovations are thus greater in
the private sector. On the other hand, incentives for cost reduction are also greater in the private sector,
but cost control is associated with lower quality. Thus the private sector will always (in the model)
produce at lower cost, but could produce higher or lower quality. When one of the ways of reducing costs
is to actively select easy-to-treat patients ahead of expensive cases, the social aspects of quality can be
severely affected by incentives to control costs.

One might be willing to argue that innovations in medical care are very important, while those in
insurance administration are less so. This would argue in favour of private provision of physician services,
under the condition that active selection could be controlled adequately. However, in countries with large
sections of the population uninsured against health needs that are susceptible to standard treatments,
innovation in insurance delivery may have high social payoffs, in which case public provision may then
be favored

3.3 COMPETITION

Competition within the public sector, in the private sector, and between the two, can provide incentives
for quality provision and cost-reducing effort on the part of medical care practitioners. The important
feature of competition is the disciplining impact it allows consumers to have on service providers.

3.3.1 Competition within government: quasi-markets

Competition amongst suppliers should not necessarily be identified with private supply. Indeed, the UK
government has attempted to induce competition amongst public providers by developing the so-called
"quasi-market" (Le Grand (1991)). Even when consumers do not face financial incentives to choose
wisely between suppliers, they might still induce effort and quality provision if their choices affect the
payoffs to providers. Thus Halonen and Propper (1999) model the impact of competition on quality when
providers are paid by a public sector payer on behalf of consumers who are free to choose their supplier.
The essential feature of their model is that when providers' objectives are not coincident with consumers'
(on average), allowing consumer choice can help to realign providers' incentives. The benefits of
competition are of course limited by the elasticity of demand.

3.3.2 Private sector competition

Competition can improve incentives, but can also have negative effects. The discussion above centered
on public sector providers' incentives to attract patients through quality improvements. An important
aspect of quality is that, while it is reasonable to assume that all individuals value more quality than less,
the willingness to pay for quality varies in accordance with health needs. In general, a hospital is likely
to face a higher elasticity of demand with respect to quality from patients with high needs than from
patients with low needs, assuming an alternative source of supply exists. Competition can then result in
a kind of "race to the bottom," in which all hospitals try to deter high cost patients from seeking treatment
by under-providing quality, Such negative effects of competition would not arise if hospitals were able
to charge sufficiently higher amounts for treating expensive patients.Similar forces are likely to be at
work in private insurance markets.

In some private health insurance markets consumers are required to commit ex ante to limit their ex post
choices, thus weakening the competitive pressures they can exert on physicians. This occurs under various
managed care arrangements (1IMOS, PPOs, etc.) These restrictions reduce ex post demand elasticities,
allowing either prices to be higher, or more likely, quality to be lower.

3.3.3 Public-private competition

A common argument in favour of large purchasing groups is the monopsony power they can wield in
negotiating supply contracts. However, as Propper and Green (1999) have recently pointed out, there is
no particular merit in such actions market power is inefficient be it on the supply side or the demand side.
They suggest that under such arrangements staff will either be of poor quality (good staff will be driven
from the market by low wages), or employment contracts will permit outside earnings with little or no
monitoring, weakening incentives for performance of primary job tasks. Introducing competition from
the private sector may thus lead to higher public sector wages and costs, but with a net welfare gain. The
lesson from this analysis is simply that focusing on budgetary impacts alone is not sufficient to determine
welfare effects, especially if rationing costs (i.e., waiting times, search costs, etc.) are included (Danzon
(1992)).

On the other hand, introducing public provision into a private market may be beneficial, if it serves the
purpose of making a minimum quality standard credible. For example, Ronnen (1991) has shown in a
model of vertical product differentiation that a minimum quality standard can raise the quality provided
by all market participants (even those who would have met the standard in the absence of regulation), and
lower equilibrium hedonic prices (i.c., prices adjusted for quality). An appropriately chosen standard, by
restricting product differentiation and intensifying ex post price competition, makes all consumers better
off. Such a standard could in principle be imposed by government, without recourse to public provision.
On the other hand, if quality is difficult to monitor and if lapses are costly to penalize, public provision
of the standard quality at a minimal price could act as a substitute for direct monitoring. In equilibrium,
private sector quality would be higher than that in the public sector, and any increase in prices would not
he enough to outweigh the positive effects of higher quality.

The idea that public and private sector quality can act as strategic complements should be viewed with
some caution. Standard equilibrium analysis (Hammer (1997)) suggests the need to anticipate potential
crowding out of private sector supply by public sector provision. In the case of non-differentiated goods
this is indeed appropriate, and one expects that if the publicly provided quality level was too high then
private supply would dry up.
 CONCLUSION:

AICHEMIST

The Government of India, in one of its economic survey reports, has proclaimed that human development
is the ultimate goal of India's developmental plans. It is also being realized that sound long-term
development of social sectors, such as education, and health is crucial to sustain economic growth in an
increasingly integrated world economy. The government can intervene in the health insurance market in
two ways: by directly providing subsidizing insurance or by regulation. These two forms of intervention
do not lead to identical results. Provision of partial public insurance, even supplemented by the possibility
of opting out, can lead to second beat equilibrium. Regulation of the private insurance market by
imposition of a standard contract or by restricting premium rates, on the other hand, can exacerbate the
problem of adverse selection and lead to chronic market instability.

There is yet another criticism about the Indian health delivery system: urban bias in the allocation of
resources. As of 90-91, 66.96 percent of the resources spent on health care had gone to the urban sector
which accounts for 25.7 percent of the total population, while only 33.04 percent of the resources had
gone to the rural sector, which accounts for 74.30 percent of the total population. The per capita
expenditure on health care of the urban sector was said to be around Rs.152 as against Rs.26 of the rural
sector.

The Government being the central player in the health care delivery, the system is suffering from financial
constraints and inefficiency in allocating whatever resources available. It is slowly being realized that
sole reliance on the public health care system is no longer desirable.
 SUGGESTION

SUGGESTIONS TO HEALTH INSURANCE CUSTOMERS

✓ Taking health policy at very young age and covering all members of the family.

✓ Customers should be fully aware of the various health coverages available.

✓ Customers should know about the various health insurance schemes and companies.
providing these schemes.

✓ The attitude of customers should be always towards the preventive health care.

✓ Customers should take decisions relating to the features of the policy, sum assured,
premium paid, persons covered, after careful analysis.

✓ They must be aware of the conditions and exclusions in the policy.

✓ They have to pay the premium in time and file the claims if any strictly as per rules and regulations.

✓ Take at most care towards ethics in reveling the preexisting disease

✓Make use of the grievances cell in the case of any dissatisfaction relating to health insurance.
 BIBLOGRAPHY

I. Wikipedia

2. www.izito.co.in

3. www.researchgate.net

4. www.indiaspend.com

5. www.cognizant.com

6. www.actuariesindia.org

7. www.apollomunichinsurance.com 8. www.businesstoday.in

9. www.nrias.net

10. www.irdai.gov.in