Upload
harish-sihare
View
43
Download
3
Embed Size (px)
DESCRIPTION
Adverse selection and Moral Hazard in Micro health insurance
Citation preview
Adverse Selection & Moral Hazard in
Micro health insurance
Dr Harish Sihare(MBA,PGDIRM,FIII,PHD)
Flow of Presentation……………………
• Introduction of micro health insurance
• Micro health insurance in India
• Importance: Need of hour
• Moral Hazard & Adverse selection
• Moral Hazard & Adverse selection in RSBY
• Suggestions and Solutions
• Innovations in Health insurance
Various Risk and Probable solutions………….
Early death
Living too long
Disabilities
Sickness
Unemployment.
Insurance is a Mechanism that helps to reduce the effects of such adverse situations
Healthcare for Poor
When a person experiences a bad shock to health, their medical expenses typically rise and their contribution to household income and home production (cooking or childcare) declines. (Wagstaff and Doorslaer, 2003; Gertler, Levine & Moretti, 2003; Gertler and Gruber, 2002).
According to the WHO, “Each year, approximately 150 million people experience financial catastrophe, meaning they are obliged to spend on health care more than 40% of the income available to them after meeting their basic needs.” (WHO Factsheet N°320, 2007)
Healthcare for Poor
Low income and high medical expenses can also lead to debt, sale of assets, and removal of children from school, especially in poor nations. A short-term health shock can thus contribute to long-term poverty. (Van Damme et al, 2004; Annear et al, 2006).
Solution ? …………………..
MICRO HEALTH INSURANCE
Micro health insurance is different from other traditional
products in the market as it’s being a targeted instrument for
inclusive insurance for low income households.
According to IRDA
Micro-insurance is insurance with low premiums and low
caps / coverage. In this definition, “micro” refers to the small
financial transaction that each insurance policy generates.
IRDA , in 2005 issued regulations enabling micro-insurance.
Compulsory to be done by life and nonlife insurer.
Is Micro Insurance Need of hour??
High out of pocket expenditure
94
64
80
99.89
89.5
75.13
96.5792.37
72.42
94.62
83.57 84.8
55.77
63.6 62
76
89
Out of Pocket Expenditure
Out of Pocket Expenditure
Rapidly ageing population: Worldwide
Ageing population (India)
27.3
17.47
43.12
12.11
27.8
19.6
40.75
11.85
0-14 15-24 25-54 54+
Age Group wise population in %
Male(%) Female(%)
Age Groups
Adverse Selection in insurance:
• Underwriting / Selection of standard Life.
• People with more risk are more likely to buy insurance.
• Adverse selection effect Profitability.
U/W minimizes adverse selection
Pure risk : when the outcome is always negative
Speculative risk : outcome not known, might be negative or positive
Preferred category - Usually non-smokers/non-tobacco users with
no health or occupational problems
Standard category – No health or occupational problems but may
use tobacco products
High Risk category – Those with health problems, occupational
hazards
Moral Hazard in insurance
Over utilization of health service.
Miss utilization by service provider.
“Moral Hazard & Adverse Selection from the perspective
of RSBY”
RSBY At a Glance…………………….
• Launched on April 1, 2008
• Beneficiary pays only Rs 30 as the registration fee
• PPP Model
• Death cover due to an accident @ Rs.25,000
• Compensation due to loss of earning of the earning
member @ Rs.50/- per day up to maximum of 15 days
• Covers 28states and about 80 million people
• Shared financial contribution by both central (75% ) &
state government (25%)
• Base Premium and Bidding Process.
RSBY At a Glance…………………….
was launched on April 1, 2008 was launched on April 1, 2008 • Total sum insured of Rs 30,000 per BPL family on a family
floater basis
• Pre-existing diseases to be covered
• Coverage of health services related to hospitalization &
services of surgical nature which can be provided on a day-care
basis
• Cashless coverage of all eligible health services.
• Provision of Smart Card. IT-enabled (smart card ,pre-
authorization of admissions, claim submission and approval etc)
• Provision of pre and post hospitalization expenses.
• Transport allowance @ Rs.100 per visit upto maximum of
Rs 1000
RSBY At a Glance…………………….
• Freedom of choice between public and private hospitals
• Insurance company empanelment guidelines.
• Hospital empanelment guidelines.
Process Overview
Adverse Selection & Moral Hazard in RSBY
• Social Security leading to Deliberate Adverse Selection – Direct economic burden on Scheme
• Behavior of Poor is changing.
• Claim ratio is High which shows the presence of Moral Hazard.
• Poor people think Smart card as ATM Card.
• Poor people admit to Hospital for Bread and butter.
Claim Ratio(in %)
0
10
20
30
40
50
60
70
80
90
100
Bihar Chattisgadh Delhi Gujrat Kerela Maharastra UP Punjab Nagaland Haryana
Claim Ratio(in %)
Increase in BPL Hospitalization:
0.28
0.28
0.28
2.69
2.39
1.5
Kerla
Gujrat
Haryana
%Hospitalization
2009 2005
Suggestions and solution………..
OPD should be introduced to reduce moral hazard
Gatekeeper approach
Moral hazard & Adverse selection eventually benefices
the consumer. Access to healthcare through RSBY is
morally good for the poor.
1. Disease Burden
2. Improved standard of living
3. Social Security for poor.
Innovations in Health Insurance
• Portability Act
• Disease specific policies
• Coverage of pre existing illness, pregnancy etc
• Extension of age limits
• Better off as Health Investments than Expenditure i.e. Health Saving accounts
• 100% of sum assured not in lieu with loss.
• Entrance of Preventive/ wellness health packages
Thank You