Should Governments engage health insurance intermediaries? A comparison of benefits with and without insurance intermediary in a large tax funded community health insurance scheme in the Indian state of Andhra Pradesh

Abstract

BackgroundA peculiar phenomenon of engaging insurance intermediaries for government funded health insurance schemes for the poor, not usually found globally, is gaining ground in India. Rajiv Aarogyasri Scheme launched in the Indian state of Andhra Pradesh, is first largest tax funded community health insurance scheme in the country covering more than 20 million poor families. Aarogyasri Health Care Trust (trust), the scheme administrator, transfers funds to hospitals through two routes one, directly and the other through an insurance intermediary. The objective of this paper is to find out if engaging an insurance intermediary has any effect on cost efficiency of the insurance scheme.MethodsWe used payment data of RAS for the period 2007–12, to find out the influence of insurance intermediary on the two variables, benefit cost ratio defined as benefit payment divided by premium payment, and claim denial ratio defined as benefit payment divided by treatment cost. Relationship between scheme expenditure and number of beds empanelled under the scheme is examined. OLS regression is used to perform all analyses.ResultsWe found that adding an additional layer of insurance intermediary between the trust and hospitals reduced the benefit cost ratio under the scheme by 12.2 % (p-value = 0.06). Every addition of 100 beds under the scheme increases the scheme payments by US$ 0.75 million (p-value < 0.001). The gap in claim denial ratio between insurance and trust modes narrowed down from 2.84 % in government hospitals to 0.41 % in private hospitals (p-value < 0.001).ConclusionsThe scheme is a classic case of Roemer's principle in operation. Introduction of insurance intermediary has the twin effects of reduction in benefit payments to beneficiaries, and chocking fund flow to government hospitals. The idea of engaging insurance intermediary should be abandoned.

Utilisation and financial protection for hospital care under publicly funded health insurance in three states in Southern India

“…There was saving of some administrative cost under ‘Trust’ because no insurance firm was contracted to act as an intermediary. The study did not examine impact on OOPE but reported problem of formation of cartels by private hospitals [77]. We note that in the three states whose analysis was presented here, the experience is that PFHI schemes were unable to provide effective financial protection despite one opting for an Insurance model and two going for a Trust model and all three having a provider-purchaser split in place.…”

“…Thus, the ‘Insurance’ intermediary model seems to involve relatively greater separation of policy making, purchasing and providing roles, compared to the ‘Trust’ model. In India, there is a current debate regarding design of purchasing arrangements under PFHIs - whether to use a Trust or Insurance Company as purchaser [12, 77]. A study of Andhra Pradesh has suggested that Trust model offered some advantages, especially in reducing administrative costs.…”

The trust and insurance models of healthcare purchasing in the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana in India: early findings from case studies of two states

“…However, the impact on financial protection as measured through out-of-pocket expenditure and catastrophic headcounts was not significant [6][7][8][9][10]. Studies exploring the institutional and governance arrangements of these schemes indicate challenges that may have limited the achievement of scheme objectives [11][12][13][14]. Several of these challenges relate to the institutional arrangements for healthcare purchasing adopted in these schemes.…”

“…Studies on earlier schemes have indicated that when insurance company profits are linked to claim payouts, there are incentives to unnecessarily reject claims or empanel a limited number of hospitals, or hospitals with insufficient capacities to provide services [12][13][14]. Such misalignments of incentives between insurance companies and the government, suggest that healthcare purchasing through an insurance company may limit the achievement of programme objectives that seek to expand access.…”

Community-Based Health Insurance Increased Health Care Utilization and Reduced Mortality in Children Under-5, Around Bwindi Community Hospital, Uganda Between 2015 and 2017

“…Factors that affect enrollment include education status, lack of trust in health service providers, unclear regulatory framework for the CBHIs, enrollment requirements, managerial capacity, and previous health utilization history of households. CBHIs require substantial investment to start, and can be misunderstood by the informal sector (mainly the uneducated population), but may also lack political commitment ( 24 – 31 ).…”