Health Insurance & India’s Missing Middle

India has made significant progress in achieving Universal Health Coverage (UHC) through the implementation of Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY). This program stands as the world’s largest fully government-funded health assurance initiative, providing coverage to approximately 40% of India’s most economically disadvantaged population. With the inclusion of State government schemes, social insurance schemes, and private insurance, it is estimated that almost 70% of the country’s population is now either covered or eligible for some form of health insurance.

In spite of the strides made in improving Universal Health Coverage, a significant portion, roughly 30% of the population, which accounts for over 40 crore individuals, remains without any financial protection for their health. This situation is concerning because unexpected health-related incidents can result in severe financial difficulties, sometimes even pushing them into poverty. This particular segment is often referred to as the “missing middle” as they fall into the category of not being sufficiently poor to qualify for Government-subsidized insurance, yet they lack the financial means to afford private insurance. The “missing middle” is mainly characterized by engaging in informal employment with unstable incomes and a lack of access to social security benefits.

The Arogya Sanjeevani policy represents an initial step in this direction, but it falls short in addressing the significant financial burden posed by out-patient care expenses. To truly cater to the needs of the “missing middle,” an ideal insurance solution should encompass comprehensive coverage that includes out-patient care, effectively easing the financial strain on individuals and families seeking medical services beyond hospitalization. By offering a more inclusive and holistic insurance product, India can take substantial strides towards achieving UHC, benefitting a broader population while fostering the growth of the private insurance market.

The private sector is characterized by high OOPE, leading to low financial protection. Relatively low health insurance coverage, and costlier provision of health services in the private sector drive India’s high out-of-pocket expenditure (OOPE). Despite the decline in the past few years, India’s OOPE as percent of current health spending is 63%, significantly above the average for lower-middle income countries, and amongst the highest in the world. High OOPE poses financial risk to individuals. Based on analysis using NSSO surveys, it has been found that over 7% of India’s population is pushed into poverty annually due to the financial burden imposed by healthcare expenses.

The missing middle constitutes the self-employed (agriculture and non-agriculture) in rural areas, and a broad array of occupations — informal, semi-formal, and formal — in urban areas

Let’s take a close look at the Arogya Sanjeevani Policy, a standardised product launched by IRDA in April 2020.

There are four key challenges with Aarogya Sanjeevani that need to be addressed to effectively target the “missing middle” segment:

1. High Premium: The current premium of Aarogya Sanjeevani can be prohibitive for the “missing middle” group, who may find it challenging to afford such insurance coverage. Lowering the premium or introducing tiered premium options based on income levels could make the policy more accessible and appealing to this segment.
2. Long Waiting Period: The two to four-year waiting period for certain diseases or treatments under Aarogya Sanjeevani can be a significant obstacle for individuals seeking immediate health coverage. Reducing the waiting period for essential treatments would provide more immediate financial protection to those in need.
3. Age Restrictions: The scheme’s restriction on enrolling individuals aged over 65 prevents many in the “missing middle” segment, who are in this age group, from accessing the coverage. Allowing enrollment for this age group or implementing alternative solutions for affordable coverage would be essential to cater to the healthcare needs of this population.
4. Lack of OOPE Coverage

The Government and the private sector will need to come together in this endeavor. Private sector ingenuity and efficiency is required to reach the missing middle and offer compelling products. The Government has a crucial role to play in increasing consumer awareness and confidence, modifying regulation for a standardized product and data-sharing for operational efficiency

References:

Niti Aayog: Health Insurance for India’s Missing Middle 2021