India’s ageing population is crying for a new health insurance model

In other words, one out of every five Indians will become elderly by 2050.

Old age is when people need health insurance the most, but insurers deny this cover to senior citizens because it is a loss-making portfolio. In 2009, the Insurance Regulatory and Development Authority of India or Irdai took some baby steps, setting rules to allow entry into health insurance schemes till 65 years of age. Insurers were mandated to record reasons for denying the elderly insurance covers.

Later, insurance companies were also allowed to raise premiums based on the age of the insured. Rules included disclosing upfront the premiums charged from senior citizens, settling claims within 30 days, and giving consumers the option to migrate from one health insurer to another. Yet, the regulator is besieged with complaints from consumers who have been denied this cover.

It must of course do more to enhance the protection for policyholders, raise competition, lower tariffs and improve service quality.

More importantly, the Irdai must ensure that insurers and healthcare service providers swiftly join the National Health Claims Exchange – a gateway for exchanging claims-related information among stakeholders – for faster claim settlements. That will go a long way in addressing the bulk of the hassles faced by policyholders, especially the elderly among them.

Besides, integrating hospitals, healthcare service providers, third-party aggregators, and insurers onto a single platform to ensure seamless exchange of data and information will help in judicious underwriting. That’s because insurers would want to underwrite policies only when they are realistically priced.

There’s much to be gained also from advocating to the young, the largest cohort of the population, to buy policies early on, which will minimise the risk of insurance covers being denied to them at an advanced age.

But what of the large majority of the elderly whose income levels are too low to buy healthcare or health cover? Who will bear the cost of healthcare for them?

Out-of-pocket expenses can worsen their financial insecurity, disrupt their access to healthcare and in the worst cases push them into poverty. A study on publicly-funded health insurance (PFHI) for the elderly has been reported to have raised concerns over rising out-of-pocket expenses for the poor. The key limitation of the PFHI policy, it appears, is the over-reliance on a poorly regulated private sector.

The remedy then inescapably is to strengthen regulation and enforce it strictly. This is especially so when the quality of public health services remains poor. While the government must leverage the private sector for tertiary care, and use digital platforms, technology and data and processes for improving overall outcomes, there’s no alternative to a well-run public health system.

Second, there are flaws in purely traditional insurance models owing to well-known conflicts of incentives: Private hospitals invariably try to inflate costs, such as by pushing patients into avoidable and unnecessary surgeries, procedures and investigations, while insurers would naturally like to minimize their payout. 

To align the incentives of the insurer, healthcare provider and the patient, a new model must be introduced in which healthcare providers will agree to provide expert care to a group for whom they would receive an upfront per-capita fee. That fee can be worked out by actuaries used by insurers.

These care providers, in turn, would be monitored on the insured individuals’ health parameters and treatment administered in case of illnesses. In such a model, there would be no incentive really for the care provider to jack up costs, as the per-capita premium would be disbursed to them directly by the insurance buyer.

For the poor, the government should foot this bill. Those in lower income groups can pay a share of the per capita fee which can be linked to their incomes. Safeguards in the form of robust regulation can be built in for placing checks on the care provider.

Irdai should swiftly draw up a blueprint for the regulatory framework such a model would need for the greying population.