FACELIFT FOR RSBY – Govt Shuts Doors on Private Insurers in Swasthya Bima Plan

Several states are against i the move that could rob s insurance firms of biz worth thousands of crores

India’s flagship state-run health insurance programme for the poor, which has been held up as a model for the rest of the world by the World Bank and United Nations, could be under threat as the Modi government is looking to end the involvement of private insurance companies in the Rashtriya Swasthya Bima Yojana or RSBY.

This is set to happen in the next few months as part of the shift to a direct benefit model from one mediated by insurance firms in a bid to provide health insurance for all. It comes at a time when the government has liberalized foreign direct investment limits in insurance via emergency decree.

The move could mean insurance companies won’t be able to get any part of the thousands of crores of rupees that would potentially come into the business, considering the scale of RSBY’s planned expansion, according to industry estimates. Themove has been opposed by several states, a senior government official told ET. Besides, starting April 1, the scheme will be run by the health ministry, which will be responsible for disbursement of funds and monitoring implementation. It’s currently handled by labour ministry.

“A decision to this effect has been jointly taken by the ministry of labour, ministry of health and department of financial services under the ministry of finance despite resistance from several states,“ he said.

According to the official, who did not want to be identified, the Centre has asked all states to end contracts with insurance companies by March 31 and instead set up a trust that would run the scheme, along the lines of what Andhra Pradesh has done. “This has led to confusion as not many states have the expertise and human resources to do enrollment and empanelment with hospitals throughtrusts,“ the official cited above said. In such cases, the Centre will insist states rope in public sector insurance companies until state nodal units can take over.

ICICI Lombard, Max Bupa Health Insurance, Religare Health Insurance, Cholamandalam MS General Insurance and Tata AIG GIC are some of the many private companies that have been enrolling and empanelling hospitals as well as providing insurance to beneficiaries under RSBY. “This could be the beginning of end of the muchcelebrated RSBY model as it strikes at the root of the programme,“ said a health economist at an international financial institution. “Insurance companies had an incentive to enroll more families as premium depended on it.“

RSBY has been praised by the World Bank and UN Development Programme. Studies have shown that it has significantly reduced out-of-pocket expenditure on health among the below poverty line (BPL) population covered under the scheme. “A primary factor behind premium cost significantly slipping for government under RSBY was competition among insurance companies,“ said the person cited above. “Also, a handful of states may be running tertiary healthcare programmes directly, but none to my knowledge run a sec ondary healthcare program without involving insurance companies. That is because the number of people claiming benefits under secondary healthcare programs is much higher.“

“Reviling insurance companies for being-for-profit entities is fine, we also need to take an objective look at capacities of government agencies,“ it said.

Representatives of private insurance firms declined to speak on record. On condition of anonymity, they said RSBY would crumble under the system that was being proposed.

A senior private insurance executive said,“Every state would have to convert its government agency into a health insurer, which would have to do actuarial calculations, anticipate claims and create a corpus, not an easy capability to develop.“ A colleague of his added: “We are at least regulated by IRDA. Who will regulate these trusts?“

Source : Economic Times

Date : 06-01-2015


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