New players opt out of national health insurance scheme

Competition for the Rashtriya Swasthya Bima Yojana, the state-sponsored group health insurance scheme that has 36.9 million cards in use, is driving down bids by insurance companies to un-viable levels.

The scheme was launched by the labour ministry to provide health insurance to families living below the poverty line.

“More companies are participating in each bid. Prices have been quoted by some players that do not make business sense. Hence, several players have gone slow in this segment,” said a senior executive with a private general insurance company.

The Rashtriya Swasthya Bima Yojana provides insurance to five members of a family—the head of the household, spouse and three dependents—up to Rs 30,000 for most diseases that need hospitalisation. The government has set hospital rates for a large number of treatments. Existing ailments are covered from day one and there is no age bar.

Beneficiaries register with Rs 30 and the government pays the policy premium to insurers chosen through bids. Till February 28, 2014, there were 6,761,583 cases of hospitalisation covered by this scheme.

Insurers found the Rashtriya Swasthya Bima Yojana useful for building their brands in the countryside. “The scheme was a platform for newer players to introduce their brands to rural India and several of us bid for districts in north and south India. Now with unreasonable rates quoted by the big players, it is no longer a viable model,” said the chief executive officer of a mid-size general insurance company. He added that the smaller insurers had decided to sit it out for a while.

The Centre pays 75 paise of every rupee of policy premium for the Rashtriya Swasthya Bima Yojana and the states pay the rest. Jammu & Kashmir and the northeastern states pay only 10 per cent of the premium.

In his budget speech for 2013-14, Finance Minister P Chidambaram had said the scheme would be extended to select categories of workers like rickshaw pullers, auto-rickshaw and taxi drivers, sanitation workers, ragpickers and miners. Auto-rickshaw and taxi drivers have been brought under cover but they need to pay half the policy premium.

An area of concern in group health insurance in India is the heavy discounts offered by insurers. Several companies have switched insurers because of their rates. Chairman T S Vijayan said the Insurance Regulatory and Development Authority would like to study possible distortions in premiums for individual and group health policies.