Recently, the Indian healthcare system has seen upsurge of the Government funded Health Insurance Schemes. The schemes launched both at the Central and State level, brought quite substantial population under health care mostly through Insurance Schemes and a few directly administered by the State Governments.

Ambitious National Health Protection Scheme (NHPS) soon will be implemented to provide Health Insurance coverage  of Rs.5,00,000 per Family  per annum on Floater basis to 10 crores of  families covering nearly 50 crore beneficiaries across India.  It will be the World’s largest Government funded health care programme to provide quality health cover to our Indian population.

Now, the Ministry of Health is in  the process of getting the views of different Stake holders including the General Insurance Companies about the implementation of the scheme and exploring the possibilities to bring it under Insurance Model or under a Trust Model. The Scheme covers hospitalisation and services to be available in the primary, secondary and tertiary space of healthcare delivery both in Government and Private Sector.

Implementation of any such large Scheme has to be done in a seamless manner and also be sustainable to the key stake holders including the Central and State Governments in achieving the main objective of the Scheme. Keeping this in mind, the objective of this article is to analyse the operational issues in implementation of the Scheme. More importantly the operational issues that were experienced with the existing Government Schemes including RSBY and States Schemes would help in streamlining the implementation of the Scheme in well organised manner. The important issues relating to the implementation of the Scheme that need to be considered are (1) Determining the Diseases and procedures to be covered and standardisation of cost per procedure(2) Important factors contributing to the pricing of the Scheme(3) Empanelment of networking of Hospitals (4) Enrolment of the beneficiaries (5) Supervision by Health monitoring Committee ( Committee of morbidity/ mortality/fraud monitoring) (6) Introduction of  Gatekeeper/ Claims audit  and (7) Development of an integrated web portal etc. and the same has been  discussed in this paper.

  • Determining the Diseases and procedures to be covered and standardisation of cost per procedure: In order to keep the costing of the Scheme affordable it is essential to standardise cost of treatment for each disease and procedure. To determine the cost for any medical or surgical treatment, procedure or intervention or listed day care procedure to be limited to Package Rate to be decided by the respective States for that medical or surgical treatment, procedure or intervention or listed day care procedure. If hospitalization is due to a medical condition, a flat per day rate to be  paid depending on whether the Beneficiary is admitted in the General Ward or the Intensive Care Unit (ICU).  These package rates (in case of surgical procedures or interventions or day care procedures) or flat per day rate (in case of medical treatments)  includes  Registration Charges  Bed charges  Nursing and Boarding charges, Surgeons, Anaesthetists, Medical Practitioner, Consultants fees etc.  Anaesthesia, Blood, Oxygen, O.T. Charges, Cost of Surgical Appliances etc.,  Medicines and Drugs,  Cost of Prosthetic Devices, implants,  X-Ray and other Diagnostic Tests etc.,  Diet to patient, Expenses incurred for consultation, diagnostic test and medicines up to 5 days(say) before the admission of the patient and cost of diagnostic test and medicine up to 10 days(say) of the discharge from the hospital for the same ailment / surgery  and any other expenses related to the treatment of the patient in the hospital.

These package rates are to be designed to link with the gradation of Healthcare Providers graded into, say three categories, viz., Grade A, Grade B and Grade C depending upon the facilities available.

  • Important factors contributing to the pricing of the Scheme: Generally pricing of Insurance products are adjusted periodically on the basis of experience. For large group, prospective experience rating refers to setting premium rate for the future coverage period by trending the historical experience of the target group. Examining the available historical data of Insurance Regulatory and Development Authority of India (IRDAI), the distribution of claims by claims size or claims paid band we find that maximum number of claims comes within the lower strata. To get an idea, given below is the past data on distribution of claims by cumulative share of Claims Paid Band by number and also by amount (Table I). The data pertains to the claims for standard Individual and Group Health Insurance where no package rate is applied; Billings depends upon the room charges where the patient is admitted. Room charges is a major contributor of the hospitalisation bill.

Table I

Distribution of Health Claims by claims size/ claims paid band:

Claims Paid Band  Cumulative Share of claims by Number Cumulative Share of claims

by amount

Up to Rs. 25 K 63% 21%
Up to Rs. 50K 84% 43%
Up to Rs. 75K 90% 54%
Up to Rs.100K 94% 63%
Up to Rs. 300 K 98% 87%
Up to Rs. 500 K 99% 93%

(Source: IIB data for 2013-14)

From the above we find that 94% of the claims by number and 63% of the claims by amount are within Rs.1 lac. Between Rs.1 lac and Rs.5 lacs, claims by number is 5% and by amount it is 30%.

From the Table II below, we find that Per capita outgo for Social Sector Insurances (Sum Insured varies from Rs.30,000/- to Rs.1,50,000/-) for 2016-17 is Rs.99/-. The main reason for such lower per capita out go is due to the fact that all the benefits provided or the cost of the procedures for the Scheme were standardised or packaged at a fixed cost.  The other reason of such lower out go for this sector is the majority of the diseases treated under the Scheme was communicable disease whose average cost is comparatively lower.

Table II

Per capita outgo under Social Sector Insurance Schemes including RSBY and Persons covered under these Schemes for last Four Years

Year Social sector Insurance including RSBY Per capita outgo in Rs. Persons

Covered under such Schemes  in Crores

2016-17 99 33.50
2015-16 90 27.33
2014-15 105 21.43
2013-14 107 15.52

(Source: IRDAI Handbook on Indian Insurance Statistics: 2016-17)

From the above Table II, it can be inferred that the per capita outgo of the Social Sector Scheme including RSBY for the Financial Year 2016-17 is Rs.99/-(say Rs.100/-). Considering there are five members in a family, per capita cost per family can be worked out to be Rs.500/-. It may be noted that  package cost for different procedures under the Scheme were possibly done in 2014-15 and there has been no revision done for the last three years. Hence the revised package cost for different procedures under National Health Protection Scheme (NHPS) possibly be loaded by 30% due to inflation. Thus, projected per capita cost per family comes to Rs.650/-(130% of Rs.500/-). From Table I, it can be observed that the cumulative percentage of paid claims in respect of the claims band of Rs. 1 lac is 63% and the same is increased to 93% for the claims band up to Rs. 5 lacs. Projected outgo per family for increasing the cover from Rs.1 lac to Rs.5 lacs will be Rs.650/63*93= Rs.960/-. Therefore, for simplicity, ball park figure on burning cost per family comes to Rs.1000/-(rounded off).  The final rate for the Scheme can be estimated by adding the administrative and the claim processing cost to be incurred; which can be approximately 15% over and above the burning cost. Considering this assumption, the final rate can estimated to be Rs. 1176/- per family (Rs.1000/1—0.15). Since the Scheme is expected to be directly serviced by Insurance Model or by Trust Model, no cost of intermediary is taken into account. In addition, the claim experience of Swasthya Sathi Scheme, West Bengal would give a fair estimation of burning cost, as they are providing  a unique Top Up cover for few critical illness for Rs. 3.50 lacs (on assurance model) beyond Rs. 1.50 lacs (on Insurance model). Thus for critical illness the coverage is up to Rs.5 lacs to the beneficiaries and this data can be extrapolated to extend coverage for other diseases (depending upon the frequency) up to desired limit of coverage of Rs. 5 lacs.

Under different Social Sector Insurances including RSBY, about 33.50 crore beneficiaries are covered (Table II) and further 16.50 crore beneficiaries will get added under the new scheme. The claim experience for such existing covered beneficiaries will show favourable claim experience on the new Scheme since the claim experience  of the existing schemes have taken care of the claims emanated from pre-existing diseases of the beneficiaries already covered. In addition, implementation of Swachh Bharat Mission would reduce the incidence of communicable diseases. Reduction of cost of implants and use of more generic medicine will also help in the reduction of claims out-go. Linking Aadhaar with the smart card may have a salutary effect. Further implementation of Wellness Program would have a positive effect on the incidence of Hospitalisation. These are favourable features of the new Scheme.

  • Empanelment of Networking of Hospitals: The success of any Government Mass Health Scheme greatly depends on availability and accessibility of the health Service providers covering a vast geographical region on pan India basis to provide satisfactory services to the beneficiaries of the Scheme. In this regard the guidelines listed in the some of the State Health Schemes like Tamil Nadu Chief Ministers’ Comprehensive Health Insurance Scheme, Mahatma Jyotibe Phule Jan Arogya Yojana Maharastra , Swasthya Sathi, West Bengal etc., can be examined and the actual experience of similar other Schemes can also help in determining the required standards and infrastructural facilities for empanelling the Networked hospitals. The gradation of Health care Providers depending on the standards of facilities available is also another important factor to be considered. . In some of the State Government sponsored Health Insurance Schemes like Tamil Nadu Chief Ministers Health Insurance Scheme, the employees of Government Hospitals are incentivised to provide best services to the beneficiaries generating more cash flow which is utilised for creating more infrastructure of the hospitals.


  • Enrolment of the beneficiaries: The present Scheme aims to cover nearly 10 crores of households (families) covering nearly 50 crores of beneficiaries across India. The challenge here is to identify the eligible beneficiaries to be covered under the Scheme eliminating duplication of the cases and the creamy layers of the economically well off. The primary aim of the Government is to target mainly the socially/ economically vulnerable members of the society including the people who are below the poverty line.


  • Supervision by Health monitoring Committee (Committee of morbidity/ mortality/fraud monitoring): For successful administration of the Scheme it is necessary to monitor the morbidity and mortality experiences of the Scheme in order to keep the Scheme sustainable in the long run. This would help not only keeping the burning cost of the Scheme under control but also minimise the prevalence of fraudulent cases. In this case, the experience of Tamil Nadu Chief Ministers’ Comprehensive Scheme can be referred where in the Scheme has morbidity and mortality Committee consisting  of cross functional team headed by Senior Civil Servant along with Medical Doctor from the State Government Health Department, an officer from Insurance Company and TPA etc. This committee operates at District Level as well as in State Level and monitor the cases of inpatients receiving treatment from the Networked Hospitals. Whenever the Committee observes abnormal morbidity/ mortality rate in any of the Networked Hospitals, they visit the hospital and verify the cases. If the hospital is found involved in fraudulent cases, they are de empanelled. Similarly the experience of other Schemes can also be considered.


  • Aswathanarayana, Chair Professor (Non-Life), National Insurance Academy
  • Pareshnath Karmakar, Faculty Member, National Insurance Academy