Page 53 - The Insurance Times May 2025

Feature

Gaps in health insurance system

W hile a growing number of households are being cov- underscores a critical challenge for India's health insurance
system: while coverage has expanded, the effectiveness of
ered by health insurance schemes, the real test lies
in how well those schemes support individuals when it comes that coverage in alleviating financial stress remains limited.
to reimbursement of hospital expenses. This can be mea-
sured by the proportion of individuals (how many) receiving A closer examination of the data reveals significant dispari-
reimbursements for their healthcare costs and the extent ties across different income groups. In urban areas, the
of those reimbursements (how much). bottom 20 per cent of income earners receive reimburse-
ments for only 9.1 per cent of their hospital costs, leaving
The most recent data from the Comprehensive Annual them to bear nearly 91 per cent of the expenses themselves.
Modular Survey (CAMS) of the National Sample Survey (NSS) In stark contrast, the top 20 per cent of earners in urban
79th round (202223) offers valuable insights into these is- areas receive reimbursements for 31.8 per cent of their
sues. According to the survey, 61.5 per cent of urban house- hospitalisation expenses, more than three times higher than
holds and 59.9 per cent of rural households have at least the lowest-income group.
one member covered by some form of health insurance.
In rural areas, even the wealthiest households still cover,
On the surface, these figures suggest a widespread adop- on average, 90.2 per cent of their hospital costs out of
tion of insurance coverage across the country, but the real- pocket, while the lowest-income households are burdened
ity is more complex when we examine how much of the with an even greater share, paying 94.2 per cent them-
actual healthcare expenses are reimbursed. selves. These figures underscore a troubling reality: across
all income levels, rural households, in particular, receive
The survey reveals a significant gap between the percent- minimal support from their insurance coverage, exacerbat-
age of people covered by insurance and the level of finan- ing the financial strain they face.
cial support they receive. In urban areas, only 23.1 per cent
of hospitalisation expenses incurred in the last year were Further analysis of the data reveals a similar trend across
reimbursed by insurance. Even more concerning, just 8.2 per various types of insurance. We focus on two insurance
cent of hospitalisation costs in rural areas were reimbursed. schemes with the widest coverage in both urban and rural
This means that in urban regions, a staggering 76.9 per cent areas: Ayushman Bharat Pradhan Mantri Jan Arogya Yojana
of hospital costs are borne as out-of-pocket expenses by (ABPMJAY), covering 18.9 per cent of urban households and
households, while in rural areas, this figure escalates to a 29.5 per cent of rural households, and the State Health In-
troubling 91.8 per cent. surance Scheme, covering 22.5 per cent of urban households
and 26.8 per cent of rural households.
Out-of-Pocket Expense
These numbers highlight the limitations of insurance Focusing on households that are solely insured under
schemes in providing adequate support to those in need and ABPMJAY (i.e., those with no additional coverage), we find
a high financial burden on individuals. The high out-of- that a significant 87.7 per cent of rural households that in-
pocket expenses can lead to significant financial strain, forc- curred medical expenses on hospitalisation in the past year
ing many households to either delay or forgo necessary received no reimbursement at all. Among the small percent-
medical care altogether. age that did receive reimbursement, on average, only 57.5
per cent of their total expenditure was covered. This means
This disparity in reimbursement rates and out-of-pocket costs that for every 100 people insured under ABPMJAY in rural

The Insurance Times May 2025 49