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The Covid-19 pandemic spurred a rush in the Indian middle class to get health insurance policies. The Indian government too came up with some new health insurance instruments exclusively to address Covid care—but they remained tokenistic in nature and were nowhere near the scale of response required to tackle the health care challenges posed by the pandemic. 

Health insurance in India falls into three broad categories: 1) Insurance cover for individuals or families, purchased by the individuals themselves or provided by their employers, known as ‘retail insurance’ in industry parlance; 2) Group insurance schemes offered by the government bodies as well as private firms, covering large sets of people; and 3) Government-provided social security schemes for the poor with health, life and accident insurance components.

In Part One this write-up we look at how the government social security schemes with a health or life insurance component fared during the pandemic.  In Part Two, we deal with the impact of the pandemic on retail insurance trends. 

Government health insurance schemes too meagre to tackle the Covid pandemic

B.Sivaraman

By 2019 end, when the pandemic set in, only 38% of the Indian people had health insurance and 62% did not have any. A responsive government should have acted on a war footing to expand health insurance cover for the citizens in the face of the pandemic. But the Indian government’s record in this respect remained pathetic.

The only government moves of some significance in this regard were the launch of a Rs.50 lakh medical insurance cover for all government health workers announced on 26 March 2020, and the decision to cover Covid-19 cases under the Pradhan Mantri Jeevan Jyoti Bima Yojana, a life insurance scheme for poor and low-income sections, which offered Rs.2 lakh to the next of kin in case of death. Apart from these there was the PM-Jan Arogya Yojana, also known as Ayushman Bharat, launched in 2018 and offering Rs.5 lakh cover for the family as a whole.

The virus lingered but the insurance backing for Covid warriors vanished!

The scheme for government health workers covered all the ‘frontline warriors’ like doctors, nurses, other paramedics in government hospitals, ASHA workers, medical sanitary workers, and lab technicians etc. Around 22.12 lakh health workers were provided this health insurance cover. But in a display of sheer callousness, the uncaring government ended the scheme on 24 March 2021, just as the Covid-19 second wave was about to peak. After protests from medicos, the government extended it by just one-month upto 24 April 2021.

Though the second wave took a major toll among health workers, most of them were deprived of the benefit of this scheme. The government announced that a new scheme would be put in place. But it never saw the light of the day. Strangely, the government announced this scheme as part of the Pradhan Mantri Garib Kalyan Package, declared with a much-hyped figure of Rs.1.7 lakh crore.  The Health Minister informed Rajya Sabha on 3 February 2021 that Covid-19 till then had claimed the lives of 162 doctors, 107 nurses, and 44 ASHA workers in the country. Answering another question on 9 February 2022 in the parliament, he said a total of 1616 healthcare workers in the country were provided Rs.808 crore insurance money under this scheme. The grand scheme announced with much hype as part of a supposedly Rs.1.7 lakh crore mega package, threw up only such a modest bill for the exchequer. The scheme was limited only to health workers working in government hospitals and schemes and did not cover health workers in the private sector. Those health workers who suffered due to post-Covid complications had no other health cover.

Health insurance scenario in India

Health insurance in India, in turn, broadly falls into three categories. As per the industry parlance, one is the ‘retail insurance’ coverage. This is the cover taken for individuals or their families, either taken by themselves or provided by the employers. The people from the middle classes generally opt for this. Out of the total Indian population of nearly 1.3 billion, retail insurance coverage was available only to 43 million or one-third of the population.

The second is the category of group insurance schemes. These schemes are provided by both the governments as well as private employers. For instance, schemes such as the Mahatma Gandhi Bunker Bima Yojana (MGBBY) for weavers or Janashree Bima Yojana and Rajiv Gandhi Shilpi Swasthya Yojana for artisans are provided by the Centre for specific sections like handloom or powerloom workers or fisher folk etc. Such group insurance schemes are also provided to their employees by the private employers like Infosys or public sector enterprises like Visakhapatnam Steel Plant. Often, the government or the employer would bear the cost of the premium. As the risk is spread out evenly across a large group of people, the premiums work out relatively cheaper compared to individuals schemes. 94 million people had been covered by such group insurance schemes in India in 2021.

Thirdly, the Centre and the State governments also provide some social security schemes as a welfare measure for the poor. These include health insurance, accident and life insurance and old-age pension schemes. Such schemes covered 362 million as of fiscal year 2020–21.

Ridiculously low relief for the families of the dead

The government also declared in the parliament that the number of Covid-19 deaths in the country had crossed 5 lakhs. There was no policy from the Centre on extending reasonable amount of ex-gratia to the families of those who died. It became the headache of the States. Though Bihar started paying Rs.4 lakh and Haryana Rs.2 lakh as relief for Covid-19 deaths, from the Centre, the National Disaster Management Authority (NDMA) proposed a very low figure of Rs. 50,000 and that became the benchmark for the States subsequently. Even if the compensation had been increased tenfold to Rs.5 lakh, it still would have cost the Centre only Rs. 25,000 crore which it should have met in an exigency like the pandemic without passing the burden on the States.

Social security schemes failed to shield the poor adequately

The Centre operates three social security schemes for the poor and low-income categories—Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), and Atal Pension Yojana. Shockingly, the Centre did not come up with any custom-made health insurance scheme for the pandemic. Atal Pension Yojana is a pre-paid pension scheme and it is not directly relevant to pandemic support.

Out of the other two, the government brought the Covid-affected poor only under Pradhan Mantri Jeevan Jyoti Bima Yojana. It offered only Rs.2 lakh life insurance cover for an annual premium of Rs.330 and if a Covid-affected person died his/her family would get this money. It offered nothing to meet the hospitalization or other treatment costs.  The Pradhan Mantri Suraksha Bima Yojana offers Rs.2 lakh cover for accidental deaths and full disability and Rs.1 lakh cover for partial disability for an annual premium of Rs.12. As against 10.27 crore people enrolled under PMJJBY, 23 crore people had enrolled under PMSBY. If poor Covid-19 patients had also been covered under the PMSBY, then more than double the number of poor would have had some protection.

How much protection did PMJJBY offer? In 2020–21, a total of 2,50,351 death claims were filed under the PMJJY out of which 13,100 were dismissed and 2346 were still being examined, and for the remaining 2,34,905 cases a total amount of Rs.4698.10 crore was paid. In other words, less than Rs.5000 crore was paid for around 2.5 lakh cases out of a total of 5 lakh Covid-19 deaths in India.

Covid-19 cases were also covered under the health insurance scheme Ayushman Bharat. As Ayushman Bharat (also known as PM Jan Arogya Yojana/PM-JAY), on paper, was supposed to cover 40% of the Indian population with an annual cover of Rs.5 lakh per whole family, in theory the entire poor in India could have been offered a health insurance cushion against the pandemic. What was the reality? Though by January 2021, while the sero positivity was 10.14% of the Indian population, the reported cases accounted for less than 2% of Indian population by May 2021. Only at the most around 10% of them required hospitalization. On 3 December 2021, Mansukh Mandavia, the Union Minister for Health and Family Welfare, acknowledged in the Lok Sabha that PM-JAY paid for only 0.52 million Covid-19 hospitalizations across in the country. Earlier, on 30 November 2021, he informed Rajya Sabha that 8.3 lakh Covid cases were treated under Ayushman Bharat, including outpatient cases. This shows that the much-hyped Ayushman Bharat had utterly failed to provide a complete insurance cover to the poor.

Some States came up with their own schemes providing health insurance cover for Covid-19 treatment. For instance, the CM Jan Arogya Scheme of Uttar Pradesh was targeted to cover 4.5 crore people offering Rs.5 lakh treatment cover but by October 2021 it benefited only 40 lakh people.

Why life insurance policies didn’t click against the pandemic?

Dr.V. Laxminarayana, formerly Karnataka State President of PUCL and a medical officer at a government hospital in rural Mysore, told Covid Response Watch that health insurance was a relatively new proposition for the ordinary people in India and for a long time the Indian health system was based on strengthening public health infrastructure.

“Even today the reality is that if a poor pregnant woman of agricultural labor background gets admitted for free delivery even in a government hospital the family has to take loans after pledging whatever valuables they have in a pawn shop to meet other incidental expenses. Even commonly used ointments are exorbitantly priced.” He further added that expansion of health insurance was always welcome but to meet the day-to-day healthcare needs of the millions that was not adequate. The poor cannot afford the high premium in private health insurance policies which might benefit well-to-do sections. As far as the government-provided Ashman Bharat and other health insurance schemes are concerned, by reimbursing the high-cost, big-ticket treatment in private hospitals, the government actually benefits the corporate hospitals and health insurance companies more. The poor are treated as unwanted, second-grade patients who get inadequate care and attention, often in separate wards. So, they are returning to government hospitals, he added.

Underdevelopment of health insurance in India

Health insurance in India is marked by gross under-penetration. While the total health insurance industry turnover stands at 0.36% of the Indian GDP, the global average is 2%. Even among those who have insurance coverage, the premium paid per person in India is US$5 whereas in China it is US$66. On the whole, the healthcare expenditure in India (both private spending as well as by the state) accounts for only 3.5% of the GDP whereas the global average is 9.8%. There is no universal health insurance coverage in India. Hence, the health insurance industry has to carve out a niche from within this health spending that works out to 3.5% of GDP. And, as pointed out above, it works out to slightly above 10% of the market generated by this total health spending.

Of course, the share of government spending on health is low at only 27% of the total healthcare spending. Out-of-pocket expenditure by citizens accounted for 63% of the total health expenditure in 2018 whereas the global average in this regard is as low as 18%. 82% of the healthcare expenditure is borne by the state in rest of the world. This is one factor favourable for private capital in health insurance in India.

Further, medical inflation in India (i.e., the cost of treatment, including the drugs and medical procedures like clinical laboratory tests) at an average of 6.5% p.a. in past three years far outpaces the average general inflation for the past 4 years at 4.98%. The definition of medical inflation varies. Some take into account only the increase in the average unit cost of a given healthcare service over a period of time. Others take into account both the increase in the unit cost as well as expanded services required.

For instance, the number of days of hospitalisation required per capita would drastically go up under pandemic conditions. Likewise, increase in air pollution in Indian cities would add to more and more treatments for lungs for an average citizen. If we take into account the latter, then health inflation per year easily crosses into double digits and is more than double the rate of general inflation. This would also push more and more people to take health insurance policies and increase the turnover and profits of the health insurance industry.

Declining importance to life insurance by the insurance companies themselves

Though insurance companies came up primarily as institutions of the Indian middle classes, they have transformed into foremost institutions of finance capital. Health-life insurance has become marginal area of their business and their main income is derived from financial investment and speculation. LIC, for instance, owns 19% of government securities. It is also the single largest holder of equities investing in private companies. It is also the largest fund manager accounting for 29% of $130 billion worth of assets under management (AUM) of all the fund managers in India. This represents nearly half the value of all the mutual funds in India. LIC also owns 10% of shares in Reliance Industries Ltd., 5% each in Infosys, TCS and ITC and 4% in ICICI Bank, L&T and even SBI, another financial behemoth. LIC best symbolizes how the money of 28 crore policyholders has metamorphosed into bureaucratic finance capital put at the disposal of private capital.

Pandemic was a missed opportunity to move towards universal healthcare

The pandemic did spur insurance coverage among middle classes. But, at the policy level, the government did not come up with any plan for universal health insurance cover. Or, even at a minimum level, the government could have provided group insurance premium for all those who were tested and vaccinated. In fact, the premium cost for insurance cover for a couple of years would have worked out lesser than the cost of testing or vaccination. Or, they could have expanded Ayushman Bharat coverage to all deserving Indians. Similar to vaccination saving millions of Indian lives, such a measure to expand health insurance cover could have saved them from economic ruin caused by the pandemic. While between 2005 and 2015, 270 million people were lifted out of poverty, Covid-19 hospitalization became the single major factor in pushing nearly 230 million Indians below the poverty line as estimated in a study by the Centre for Sustainable Employment of the Azim Premji University. Strangely, this proposal for universal insurance cover never even entered the pandemic management discourse. Such is the level of weakness of health insurance awareness and consciousness amidst the public.

With suitable subsidies from the Centre, generalization of all these schemes to provide near-universal health care, or at least limited to universal Covid care for a couple of years, was not beyond the reach of the Centre. But, unfortunately, the government didn’t care.

B.Sivaraman is a researcher based in Allahabad, Uttar Pradesh