The rise and risks of health insurance in India

Why in the News?

India’s public health expenditure remains among the lowest globally (1.3% of GDP, World Bank 2022). To compensate, the Union and State governments have rapidly expanded publicly financed health insurance schemes such as the Pradhan Mantri Jan Arogya Yojana (PMJAY) and State Health Insurance Programmes (SHIPs). While these schemes provide some relief to patients, concerns are rising that they may distort the health system rather than strengthen it.

Background

• UHC Vision: The Bhore Committee (1946) envisioned universal health care (UHC) as access to quality health services for all, irrespective of ability to pay.
• PMJAY (2018): Flagship scheme under Ayushman Bharat; covers up to ₹5 lakh per household annually for secondary and tertiary care. By 2023–24, it covered 58.8 crore people with a budget of about ₹12,000 crore.
• State Health Insurance Schemes: Modelled on PMJAY; combined budgets ~₹16,000 crore in 2023–24.
• Coverage Claims: Together, these schemes claim to cover ~80% of the population.
• Growth: State-level insurance budgets have grown 8–25% annually in real terms between 2018–19 and 2023–24.

Features of India’s Health Insurance Expansion

• Publicly funded premiums: Entirely tax-financed, with contributions from the Centre and States.
• Coverage limits: Generally ₹5 lakh per family, per year.
• Empanelled hospitals: Roughly half public, half private.
• Focus on hospitalisation: Outpatient and primary care largely excluded.
• Rapid inclusion: Elderly (70+) are now being added to PMJAY, expanding the risk pool.

Challenges 

Profit-driven healthcare

• Two-thirds of PMJAY funds go to private hospitals.
• Encourages over-hospitalisation and unnecessary procedures.
• Weak regulation allows profiteering and malpractice.

Neglect of primary care

• Public resources are diverted towards costly hospitalisation.
• Primary and outpatient care remain underfunded despite being more urgent.
• An ageing population risks pushing spending disproportionately into tertiary care.

Low utilisation and awareness

• Only 35% of insured patients were able to use insurance (HCE Survey 2022–23).
• Poor awareness, complex processes, and resistance from hospitals reduce effectiveness.

Discrimination & exclusion

• Private hospitals often prefer uninsured patients (who pay more).
• Public hospitals may prioritise insured patients to claim reimbursements.
• Creates inequity between insured and uninsured.

Provider grievances

• Delayed payments (₹12,161 crore pending dues under PMJAY).
• 609 hospitals withdrew from PMJAY due to low reimbursement and payment delays.

Corruption and fraud

• 3,200 hospitals flagged by NHA for fraudulent practices.
• Fake claims, denial of eligible patients, inflated billing, and unnecessary surgeries.
• Weak monitoring and a lack of transparent audits.

Structural weakness

• Health insurance is treated as a substitute for public health infrastructure.
• India’s health spending (1.3% of GDP) is far below the global average (6.1%).
• Without robust public sector facilities, insurance becomes a stopgap, not a solution.

Way Forward

Rebalance priorities

• Increase public investment in primary health care and public hospitals.
• Strengthen Health and Wellness Centres under Ayushman Bharat.

Regulation of the private sector

• Enforce standard treatment protocols, fair pricing, and quality audits.
• Transparent and timely settlement of hospital claims.

Improve utilisation & awareness

• Simplify the enrolment and claims process.
• Target information campaigns for disadvantaged groups.

Fraud control & accountability

• Real-time audits, AI-based claim monitoring, and blacklisting of fraudulent providers.
• Publish audit reports for public scrutiny.

Learning from global models

• Canada, Thailand: insurance linked with non-profit providers and universal coverage.
• India should adopt social health insurance principles rather than profit-driven medical insurance.

Boosting public health spending

• Move towards 3% of GDP in the medium term, as recommended by the National Health Policy (2017).
• Prioritise preventive and promotive health care to reduce hospitalisation demand.

Conclusion

India’s rapid expansion of public health insurance provides short-term relief but risks entrenching a profit-driven, hospitalisation-centric system. True Universal Health Care cannot be achieved without strengthening public health infrastructure, regulating private providers, and expanding primary care. Health insurance may serve as a support, but without systemic reform and higher public health investment, it will remain a painkiller for a chronically ill system rather than a lasting cure.