Social Health Insurance
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Social Health Insurance. Shib Sekhar Datta. Framework. What is Insurance Why Health Insurance Types of Health Insurance Social Health Insurance History Characteristics of Health Insurance Models in Different Countries Indian Scenario of SHI CGHS and ESIS

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Social Health Insurance

Shib Sekhar Datta

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  • What is Insurance

  • Why Health Insurance

  • Types of Health Insurance

  • Social Health Insurance

    • History

    • Characteristics of Health Insurance

    • Models in Different Countries

    • Indian Scenario of SHI

    • CGHS and ESIS

    • Problems and Challenges

  • Conclusion

  • Recommendation

  • Way Forward

  • References

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WHY Health Insurance ?

  • Has the potential

  • To increase access

  • To provide financial protection

  • To improve quality of Care

  • To control costs

  • To regulate the private sector

  • Downside

  • Has been introduced for wrong

  • reasons

  • Is conceptually difficult to explain

  • Is administratively more complex

  • Needs extra resources

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  • Voluntary health insurance schemes or private-for-profit schemes

  • Employer-based schemes

  • Insurance offered by NGOs / community based health insurance,

  • Mandatory health insurance schemes or government run schemes (namely ESIS, CGHS).

  • Social health insurance in India and Europe, Germany, Japan and so on……

  • Social health insurance in these countries, in fact, evolved from a conglomeration of small ‘community’ health insurance schemes.

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Health Insurance Framework










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Social Health Insurance

  • Mandatory health insurance where everyone has to enroll and pay a

  • specified premium.

  • Everyone enrolled is entitled to specified benefits.

  • Benefits and premiums determined by regulations – difficult to adjust

  • Funds are earmarked for health service

  • Direct relation between demand and insurance premium

    2 types

  • BISMARCK system – Employs multiple organizations which call for sickness funds

  • Only one parastatal agency outside the day-to-day control of the political process

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    Private Health Insurance

    Buyers voluntarily purchase insurance coverage from private, independent, competitive, for-profit or not-for-profit insurance companies.

    • Premium that reflect buyer’s risk rather than their ability to pay.

    • Groups/ Individuals are usually based in employment

    • Problems with Private Health Insurance

      a. Adverse Selection

      b. Risk Selection (Cream Skimming)

      c. Informational Asymmetry and Moral Hazard

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    Community Financing

    • Can complement taxation and social & private insurance in order to reach those left out by formal taxation and insurance schemes such as employed in the informal sector, the unemployed, living in rural areas.

    • Mostly evolve in the context of severe economic constrains, political instability, and lack of good governance

      [eg: such arrangements improve people’s access to drugs, primary care, and even to more advanced hospital care. This community involvement allows rural and low-income populations to raise more resources with which to pay for health care than would otherwise have been possible.]

      Study done by Preker et al (2002)

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    Out-of-Pocket Payments

    • Payments by patients directly to health services providers that are not reimbursable by an insurance scheme.

      User Fees

    • Subcomponent of OOP s and refer to payments when these are made for services provided by the public sector

      In both the system

      • money is raised and spent locally

      • less leakage through insurance system

      • patients see direct result for their payment

      • so, more willing pay

      • monitor services better – enhanced quality

      • service in not free !

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    Social Health Insurance

    • Social insurance is an earmarked fund set up by government

    • Explicit benefits in return for payment

    • It is usually compulsory for certain groups in the population

    • Premiums are determined by income (and hence ability to pay)

    • rather than related to health risk.

    • The benefit packages are standardized

    • Contributions are earmarked for spending on health services

    • The government-run schemes include

    • Central Government Health Scheme (CGHS)

    • Employees State Insurance Scheme (ESIS)

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    Targets of Social Health Insurance

    • To generate sufficient and sustainable resources for health

    • To use these resources optimally

    • (by modifying incentives and through appropriate use of these

    • resources)

    • To ensure that everyone has financial accessibility to health

    • services.

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    Social Health Insurance - financing targets and final health system goals

    Resource generation

    (sufficient & sustainable)


    Performance of social health insurance scheme

    in key design issues

    Optimal resource use


    Fin. accessibility of health services for all

    Fair financial contribution

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    CGHS system goals

    (Central Government Health Scheme)

    • Since 1954, all employees of the Central Govt. (present and retired);

    • some autonomous and semi-government organizations, MPs, judges,

    • freedom fighters and journalists are covered under the CGHS

    • Designed to replace the cumbersome and expensive system of

    • reimbursements (GOI, 1994).

    • Aims at providing comprehensive medical care to the Central Govt.

    • employees and benefits offered include all OPD facilities, and

    • preventive and promotive care in dispensaries.

    • Inpatient facilities in government hospitals and approved private

    • hospitals are also covered.

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    CGHS system goals

    (Central Government Health Scheme)

    • Mainly funded through Central Govt. funds

    • Premiums ranging from Rs 15 to Rs 150 per month based on salary scales.

    • Coverage has grown substantially with provision for the non-allopathic

    • systems of medicine as well as for allopathy.

    • Beneficiaries at this moment are around 432 000, spread across 22 cities.

    • Criticized from the point of view of quality and accessibility.

    • Often high out-of-pocket expenses due to slow reimbursement and

    • incomplete coverage for private health care (as only 80% of cost is

    • reimbursed if referral is made to private facility when such facilities are

    • not available with the CGHS).

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    ESIS system goals

    (Employees State Insurance Scheme)

    • Enactment of ESI Act in 1948 led to formulation of ESI Scheme.

    • Provides protection to employees against loss of wages due to inability to work due to sickness, maternity, disability and death due to employment injury.

    • Offers medical and cash benefits, preventive and promotive care and health education.

    • Medical care is also provided to employees and their family members without fee for service.

    • Service establishments like shops, hotels, restaurants, cinema houses, road transport and news papers printing are now covered.

    • Monthly wage limit for enrolment in the ESIS is Rs. 6 500

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    ESIS system goals

    (Employees State Insurance Scheme)

    • Prepayment contribution in the form of a payroll tax of

    • 1.75% by employees, 4.75% of employees' wages paid by the employers,

    • 12.5% of the total expenses are borne by the state governments.

    • Beneficiaries are over 33 million spread over 620 ESI centres across states.

    • Under the ESIS, there were 125 hospitals, 42 annexes and 1450 dispensaries

    • with over 23 000 beds facilities.

    • Scheme is managed and financed by the ESI Corporation (a public

    • undertaking) through the state govt., with total expenditure of Rs. 3300

    • million or Rs 400/- per capita insured person.

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    Problems faced in the ESIS system goals

    • Some of the problems are:

    • Large number of employers try to avoid being covered under the scheme,

    • A large number of posts of medical staff remains vacant because of high turnover and lengthy recruitment procedures,

    • There is duality of control,

    • Rising costs and technological advancement in super specialty treatment,

    • Management information system is not satisfactory.

    • There is low utilization of the hospitals

    • The workers are not satisfied with the services they get.

    • In rural area the access to services is also a problem.

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    Community Health Insurance system goals

    Non-profit social insurance schemes

    • Membership is usually voluntary

    • Spread of risk coverage from healthy to sick and rich to poor

      3 common features

      1. Affiliation is based on community membership and the community is strongly involved in managing the system

      2. Beneficiaries are excluded from other kinds of health coverage

      3. Members share a set of social values

      (In order to deal with limited ability of community financing


      Transfer of liability from primary insurer to another insurer)

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    Type I system goals

    Provider + Insurer



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    Type II system goals

    Insurer (NGO)






    Type II: DHAN, Yeshasvini

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    Type III system goals

    Insurer Company








    Type III: BAIF, Buldhana, Karuna Trust, Navsarjan, SEWA

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    Rashtriya Swasthya Bima Yojana system goals

    • Launched on April 2007

    • Take care of Rs. 30,000 annual hospitalization expenditure

    • Five members of a BPL family in any part of the country

    • Even if they migrate

    • The BPL beneficiary has to pay Rs. 30 per year to get the smart card with his thumb impression on the chip to identify

    • Each year, 1.2 crores BPL family members will be targeted

    • Total 60 million cards will be issued under the RSBY scheme over the next five years.

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    RSBY Framework system goals




    PREMIUM – 25 %

    PREMIUM – 75 %










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    Insurance schemes in other countries system goals

    • Universal compulsory social health insurance is not possible in India at this stage

    • Experiences from other countries such as Malaysia and Philippines needs to be studies (Malaysia 1999, Philippines 1999)

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    Conclusion system goals

    • A nodal agency is important

    • Social Health Insurance has the potential

      • To increase access to health care

      • To provide financial protection

      • To improve quality

  • But a lot of systemic changes need to be made

  • Long term perspective

  • • Freeze a design but with some flexibility

  • • Use competition to get a reasonable premium

  • • Need for building capacity of the government !!

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    References system goals

    World Health Organization. Reaching universal coverage via social health insurance . WHO, Geneva, 2004.

    Richard BS, Reinhard Busse, Josep Figueras. Social health insurance systems in western Europe. England: Open University Press; 2004.

    Doetinchem O, Schramm B, Schmidt, Jean O. The Benefits and Challenges of Social Health Insurance for Developing and Transitional Countries: Series International Public Health, Germany, 2006 .

    Devadasan N, Ranson K, Van DW, Criel B. Community Health Insurance in India: An Overview. Economic and Political Weekly; 2004.

    Mavalankar D, Bhatt R. Health Insurance in India Opportunities, Challenges and Concerns. Indian Institute of Management, Ahmedabad; 2000.

    Ranson K and Acharya A. Community based health insurance: The Answer to India’s Risk Sharing Problems?. Health Action, 2003.