Overhaul brakes on insurance scheme for poor

Sector players await government's decision on future of Rashtriya Swasthya Bima Yojana

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The government-sponsored Rashtriya Swasthya Bima Yojana (RSBY) is set to undergo a overhaul with a proposal to have only public general insurers manage the scheme through a trust-like structure.

Sources said the bids that would have been considered for new contracts have been left unopened as the stakeholders are awaiting the government’s decision on its future progress.

A senior public sector insurance executive said the players were waiting for the government’s final decision on the scheme. “It is not clear whether this scheme will be managed by the government or by a separate trust from April 1,” he said.

RSBY was launched by the Union ministry of labour and employment on April 1, 2008, to provide health insurance for families below poverty line from financial liabilities arising out of health care, including hospitalisation.

Beneficiaries are entitled to hospitalisation cover up to Rs 30,000 for a number of ailments and conditions. The government has fixed package rates for the hospitals for a large number of interventions. Pre-existing conditions are covered from day-one and there is no age limit.

The coverage extends to five members of the family, including three dependents.

Beneficiaries need to pay only Rs 30 as registration fee while the central and the state governments pay the premium to the insurer, selected on the basis of competitive bidding.

As on April 30 last year, there were 37.19 million active smart cards under the scheme. A total of 7.16 million hospitalisation cases had been serviced.

However, there have been issues with respect to the prices being quoted in the bids. The chief executive of a standalone health insurer said now more companies have been taking part in the bidding process, due to which unreasonable prices are being quoted. Due to this, some players have even exited this scheme since they have found it unviable to operate at such rates.

Sources said with private insurers not being involved from the next financial year, there could be more pricing discipline since there would not be much competition. “Aggressive bidding may give way to more risk-based prices being quoted,” an official said.

Since there has not been any revision in the premiums ever since its inception, there could be some tinkling of these costs based on the incurred claims experience. “We understand that premiums could see a change, albeit marginal, based on claims data shared with the government authority. Further, since the health ministry may take over the scheme administration, the processes of claims handling may also undergo a change,” said an industry insider.

This scheme was a mechanism used by private insurers not only to reach out to more customers, but also for building their brand in the hinterland where they may not have had a branch operation. The insurer for each region is selected on the basis of a competitive bidding process, where the insurer quoting the lowest price is selected each year.

Sources said these contracts may not extend beyond March 31, before which detailed guidelines on the administration and implementation of the scheme are expected to be brought out.

The Centre pays 75 paise of every rupee of policy premium for the RSBY and the states pay the rest. Here, states like Jammu and Kashmir and the north-eastern states pay only 10 per cent of the premium.