Rashtriya swasthya bima yojna health insurance for the poor - a brief analysis with a focus on the state of kerala

International Journal of ManagementISSN 0976 – 6502(Print),
International Journal of Management (IJM), (IJM) ISSN 0976 – 6510(Online)
Volume 1, Number 2, Aug - Sept (2010), © IAEME
ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online) IJM
Volume 1, Number 2, Aug - Sept (2010), pp. 208-221
© IAEME, http://www.iaeme.com/ijm.html ©IAEME

RASHTRIYA SWASTHYA BIMA YOJNA- HEALTH
INSURANCE FOR THE POOR - A BRIEF ANALYSIS WITH A
FOCUS ON THE STATE OF KERALA

D. DHANURAJ
Research Scholar
Anna University of Technology Coimbatore
Jothipuram, Coimbatore – 641 047, India
E-Mail: dhanurajd@gmail.com

ABSTRACT

Millions of the people in India do not have access to the medical facilities and quality
medical care. Most medical treatments are prohibitively expensive. Each year almost 3.5
million people are pushed below poverty line due to expensive medical care. Majority of
medical bills are still private out of pocket payments. Government spending on health
care is very low in India. Total per capita expenditure on health care is around$ 23 of
which government provides only around $4. In addition to that, medical insurance sector
in India is still in the nascent stages of development. In this scenario, The Federal
Government, with the help of State governments implemented a health insurance scheme
called Rashtriya Swasthya Bima Yojna (RSBY) intended for absolute poor in the country
in 2008. It has been implemented in different states in India in such a short period of time.
Some initial studies from different parts of the country reported challenges in enrollment,
claim ratios and fraud claims from different hospitals. In order to validate such findings, a
study has been conducted in the state of Kerala. The goal was assess issues of
acceptability and management issues of the scheme among stake holders in an effort to
make RSBY more efficient and effective for all the stakeholders involved. Interviews
with administrators of different empanelled hospitals and insurance company
representatives in Ernakulam district were included in the study. The study conformed
some of the challenges reported earlier about the scheme and further research in this area
is indicated.

INTRODUCTION

Access to quality health care is still a distant dream for majority of population in India in
spite its status as a rising economic power. Escalating prices on basic necessities is
continuing to make the life of a common man miserable. As per WHO statistics in 2011,
25.7 % of total population in India is living below poverty line which is about 300 million
of total population. Burden of communicable and non communicable diseases are
increasing in India and this is disproportionately affecting the vulnerable sections of the
population. About 40% of poor people had to borrow money from lenders with high
interest rates or have to sell their assets in order to ensure quality medical care. (Rajeev
Ahuja, 2006) About 24% of total hospitalized population is pushed below poverty line

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)

because of health care costs per year in India. (World Health Organization,
2005)Incompliance due to high health care costs also a major problem faced by a huge
section of population. Deterioration of health and loss of work days is a mounting social
problem that is especially affecting the lower quintiles of population. This phenomenon
significantly reduces economic productivity of the country as a whole.
Government expenditure on health is historically very low in a country where poor people
consists a major chunk of population. Total health expenditure in the country is 4.9% of
GDP. Out of this the government spends only 1.1% of the GDP per year. Per capita total
expenditure on health in India was $23 in 2004 which was increased to 44.8 in 2009
where Governmental spending per capita is only around $4 in 2004. (World Health
Organization, 2005). This is lower than most similar Asian countries like China,
Malaysia, Sri Lanka, Thailand and Bangladesh. Again, out of total health care
expenditure, public expenditure accounts for only 26.7% and the rest 71.6% was private
expenditure. Among the private expenditure, 74.4% is out of pocket expenditure in India
(World Bank, 2009). Medicines (40%, highest), hospitalization, surgery, consultation and
transport are the major expense areas in health care.
This situation perplexed the policy makers and governments alike. Factors like poor
health care delivery systems, inadequate access to health care facilities and absence of
any financing mechanisms made government to concentrate more on health issues of the
poor. In order to overcome the inequalities in the society and to provide financial
protection to the marginalized, the Central Government decided to increase the health
care expenditure from 1.1 to 3 % of GDP per year. (Joint Learning Workshop, 2009) In
addition, Governments, both States and Central, came up with different health insurance
schemes in response to increasing demand for alternative financing mechanisms for
health care other than out of pocket expenditures. Most of these schemes failed due to
inadequate policy designs, accountability and sustainability issues, dysfunctional
monitoring and evaluation mechanisms and lack of awareness among target populations.

LITERATURE REVIEW

Health care delivery system in India consists of private, public and mixed ownership
institutions. The government sector or the public sector includes medical colleges, district
hospitals, primary health centers, community health centers and tertiary care hospitals.
While the Central Government is limited to certain programs like family welfare and
disease control, the state governments are responsible for primary and secondary medical
care. They are also in some extend responsible for specialty care in the state. All these
institutions work on a no or minimal fee basis and are intended for people who cannot
afford to pay for their health care needs. But in reality even the most poor in India prefer
private care rather than government facilities in spite of huge out of pocket expenses in
private hospitals. According to a UK based study on health care spending in India, it was
found that there is not much difference in spending in private health care sector between
poor and non poor people in the country. Around 69% of poor people’s health care
expenditure is on private health care facilities compared to 75% of non poor. (Berg, R, &
Ramachandra, 2010)

Reasons for not relying on public hospitals include huge disparities in the standard of
care, lack of proper infra structure, outdated equipments and unclean environments. Most
government institutions are way below quality expectations of a normal hospital in India
and this, when combined with corruption make government hospitals and health centers
score very low in customer satisfaction. But one cannot deny the fact that they are a great
help for the absolute poor in the country though not very high tech in nature.

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The private sector hospitals have more perceived quality than public hospitals by the
general population, which to a greater extend is true. Most hospitals are equipped with
skilled staff, modern technology and imported machineries. Reduction of import duties
and loosening of regulations helped in proliferation of quality private hospitals in the
country in the last two decades. Now, India has such private hospitals that have all the
facilities and quality of care comparable to any state of the art hospitals in the developed
countries. Even though everything is available here in the country, majority of its citizens
cannot access such high quality services due to unthinkably high healthcare costs. This is
especially true for the marginalized and unprivileged in the society. Again, private health
sector also has varying degree of quality of care as it operates in an unregulated market.

Most people in India go to government hospitals not out of choice, but out of compulsion
due to poverty and huge health care costs in the private sector. Non compliance to
medical advice due to unbearable costs is another reason for increased morbidity and
mortality since health insurance is not common at all. People have to pay the bills from
their own pockets. Affordable and accessible healthcare programs are to be developed
immediately to tackle this burgeoning problem in India.

Health care access is found to be significantly reduced for poor quintile of population in
India. Unequal geographic distribution of health care facilities, socioeconomic conditions
and existing gender norms all play an important role in significantly reduced access to
health care especially by poor rural population. A person from the poorest quintile of the
population is six times less likely to access health care facilities than a person from the
richest quintile in India. Also skilled birth attendance at the time of delivery is six time
more for women in rich quintile that the poor quintile of population. Geographic location
of health care facilities and reduced transportation services affect access to care. This
scenario is exacerbated by reduction in governmental health spending and high cost for
health care services in private sector. The inequality in health care services between
public and private sector and economic constrains are found to affect health of the poor
sector of population which constitutes majority of India. Corruption in governmental
health facilities, out of pocket expenditures and lack of insurance also affects utilization
and access of care by needy people. (Milind Deogaonkar, MD, 2004)

In India, health care is financed through general tax revenue, community financing, out of
pocket payments and social and private health insurance schemes. Twenty four percent of
all hospitalized persons are pushed below poverty line in India due to huge health care
bills in a single year (World Bank, 2002). In 2004, around 6.2% of household fell below
poverty line as a result of huge health care costs. Among this, 1.3% as a result of inpatient
care and the rest 4.9% due to outpatient care. Out of pocket payments, still the major
health care financing system in India is responsible for such financial strain and
bankruptcy that is especially affecting the lower and middle class population.
Health insurance in India
Insurance industry in India has a history dating back to 18th century when Oriental Life
Insurance Company was first started in 1818 in Kolkata. After that many insurance
companies were founded. In 1912, the Life Insurance Companies Act and the Provident
Fund Act were passed as a measure to regulate the insurance industry in India. Health
insurance was introduced in India in this year. In 1972, the Parliament passed the
General Insurance Business (Nationalization) Act which brought 107 insurers under one
umbrella of General Insurance Cooperation with four subsidiary companies namely
National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd and the United India Insurance Company Ltd. The General

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Insurance commenced its business on January 1sst 1973. Again, the enactment of the
Insurance Regulatory Development Act in 1999 facilitated the entry of private and
foreign health insurance players into the Indian market.

HEALTH INSURANCE MARKET IN INDIA

Health care financing plays a major role in improving access to quality health care and
improving health care delivery systems both in developed and developing countries. But
even today, the penetration of health insurance market in India is very limited covering
about 10% of the total population. But data indicates than the health insurance industry is
growing much faster than the average industry growth. According to IRDA Annual
Report, 2007-2008, the premium collected from health insurance has been increased from
INR 4894 crore to INR 6088 crore in 2008-09. (Chawla, 2010) The industry is
recognizing the growth potential and is concentrating on more of getting volume than
depth to increase profitability. The schemes currently available in India can be
categorized into the following:
(1) Voluntary health insurance schemes or private-for-profit schemes
Major Players in Public sector: General Insurance cooperation; 4 subsidiaries- National
Insurance cooperation, New India assurance company, United Insurance , LIC
Private sector: Bajaj Allianz, ICICI Lombard, Royal Sundaram, Cholamandalam General
Insurance
(2) Employer-based schemes
These schemes are offered through employer managed facilities. Both private and public
employers offer employer based schemes. Railways, defense and security forces,
plantations, mining sector are covered by this type of policies. But coverage is minimal,
only about 30 to 40 million people.
(3) Insurance offered by NGOs / community based health insurance
Community based health insurance schemes are mainly targeting the poor population in
bypassing unexpected health care costs. Such schemes aim to protect poor from
indebtedness by prepayment of a small premium rather than borrowing money. These
schemes mainly operate through Non Governmental Organizations.
(4) Mandatory health insurance schemes or government run schemes
(ESIS, CGHS)
Most of the above mentioned schemes and health insurance policies cater to middle and
above middle class population in India and there are not many takers for absolute poor in
the country. Either their employers do not give health insurance or simply cannot afford
monthly insurance premiums. Even if some community or faith based institutions offer
health insurance for poor people in the country, they are not enough to cover the entire
BPL population in the country.
Though government has implementing different insurance schemes catering to different
sectors of population such as agricultural workers and marginalized women, it is not
considered very successful so far. In order to provide quality medical access to the most
vulnerable absolute poor population in the society, various schemes have been launched
by both State and Federal governments. One such scheme is the Universal health
Insurance scheme from Central Government in 2003.
Universal health Insurance Scheme:
Central Government launched the Universal health Insurance Scheme in 2003 with the
intention of covering low income population in the country. The term “universal” is
misleading as it only meant low income people in India. Though it was intended for all
low income individuals initially, the scheme ultimately was made available only to people
who were identified as people below poverty line (BPL) as per the Planning Commission

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recommendations. The insurance is provided by four public companies and the benefits
package offered include Rs 30,000 per year per family or 15,000 per individual per year.
It also includes accident benefits and loss of wages benefit on daily basis. High subsidies
in insurance premium were offered by Government of India. The scheme was operated
through third party administrators or TPAs, which are independent agencies to coordinate
between the various hospitals, customers and insurance agencies. (Nandraj, N. Devadasan
and Sunil, 2006). The premium for joining the universal health insurance scheme is listed
below.
Premium rates for Universal Health Insurance Scheme

Target population: BPL families in India
Total premium for Payable by insured From
joining the scheme Government
subsidy
For an individual Rs 365 Rs 165 Rs 200
For a family of 5 Rs 548 Rs 248 Rs 300
For a family of 7 Rs 730 Rs 330 Rs 400

Source: (Nandraj, N. Devadasan and Sunil, 2006)
In spite of low premium rates and coverage benefits, the scheme was faced with low
enrollment rates and had a very low claim ratio in the end of the year 2006, which was
only 12%. Only 9252 families enrolled in the first year. In order to raise the enrollment in
the scheme, the government increased the subsidy share and reduced premium rates to
Rs.165 for an individual, 248 for a family of five and 330 for a family of 7. This move
from the government’s part increased enrollment to a great extend but still there are
limitations noted in coverage and execution. The government failed to exploit the
insurance market by allowing only the public ones to supply insurance schemes. Also
there was no flexibility in schemes offered and the insurance companies were not allowed
to fit schemes to beneficiary’s needs. This seriously affected the enrollment rates for the
scheme. Another problem faced by the scheme was the lack of proper infrastructure and
weak health system delivery. Insured people were unable to access quality care due to the
lack of proper health infrastructure nearby. (Rajeev Ahuja, 2006) This scheme also lacked
a nodal agency which the Central or Sate Government can use to tap large number of
beneficiaries.
The Government of India, after realizing that the UHIS is not as successful as desired,
launched Rashtriya Swasthya Bima Yojna in 2008. After incorporating various lessons
from similar schemes from the past and recommendations from various stake holders,
professional think tanks and International organizations, policy makers came up with an
exciting new scheme loaded with technology which targeted the absolute poor in the
country.

RASHTRIYA SWASHTYA BIMA YOJNA (RSBY)

RSBY is a health insurance scheme for absolute poor, launched by the Central
Government through the Ministry of Labor and Employment in April 2008. This public
private partnership program is intended to provide financial protection for those identified
as people below poverty line (BPL) in India by increasing access to quality health care

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and covers most health care costs of beneficiaries that involve hospitalization. (Ministry
of Labour, 2011).

RSBY process Flow chart

State Govt. Central
Govt.

Set up agency when plan to implement RSBY

BPL data (2)
upload data (3)

Nodal Agency (1)

(13) Data& bill (14) Payment
RSBY website

Bidding

(4) BPL data

TPA Insurance Company NGO (6)

(11) Claims payment (12)

Empanelment (5) Kiosk

(9) BPL list issue smart cards (7)

(10) Hospitals

Smart cards Beneficiaries (8)

RESEARCH METHODOLOGY

The World Bank prescribes four major tools for analyzing the existing policy by in which
reforms can be suggested. They are 1) stake holder analysis 2) political mapping 3)
network analysis and 4) transaction cost analysis. In the context of this study stake holder
analysis, network analysis and transaction cost analysis are used. Political mapping is not
considered as it is beyond the scope of this study.

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An in depth study was organized to understand Rashtriya Swasti Bhima Yojna (RSBY).
Questionnaires was prepared and administered in the slums of Kochi. Stake holders’
interviews with the accredited hospitals of RSBY in Kochi were also conducted. Results
were analyzed.
An overall understanding helped to suggest the recommendations and a new policy
framework as suggested by World Bank policy study toolkit. Various methods are used
for the analysis as given below
• Secondary Research
• Qualitative Research
• Comparative Study
• Systematic Review
• Meta-Analysis
Using secondary data analysis, the challenges for RSBY are found out as;
1) Accessibility issues 2) Low enrollment rates 3) Issues with transparency and
false claims from hospitals 4) Low claim ratio
In order to validate the findings in literature review, a pilot study is being conducted in
Ernakulum district, Kerala to find out the challenges in management of the scheme by
different stakeholders. RSBY is a comparatively new policy which is in the process of
implementation in many states. So it is hard to analyze a central government policy based
on what happened in just one or two states considering the huge socio economic and
demographic differences in different States in India. But it is never too early to critically
look at a policy to find the current challenges of the scheme in order to improve it for the
future. Again the challenges will be different in different parts of the country too. In order
to find more about the challenges faced by different stake holders in management of the
scheme in Kerala, a pilot study has been conducted in Ernakulam district in the State of
Kerala and included interviews with the insurance company and administrators in 6
empanelled hospitals in the Ernakulam district in an effort to improve management and
efficiency of the scheme and to increased access to quality health care.
In Kerala, the State government decided to extend the scheme to the poor families not
covered under RSBY BPL guidelines by paying Rs.30 as premium/year and to those
above poverty line provided they contribute the full premium amount including smart
card costs. The extended version of RSBY is called Comprehensive Health Insurance
Scheme or CHIS, The State government decided to launch the scheme in all 14 States in
2008-09 itself. The nodal agency responsible for implementation of the scheme in the
State is known as Comprehensive Health Insurance Agency of Kerala or CHIAK. United
India Insurance Company Limited is the insurer for RSBY CHIS scheme in the state.
They are utilizing the services of community based organization called “Kudumbasree” in
order to raise awareness and enrollment of beneficiaries. (Comprehensive Health
Insurance Agency of Kerala, 2011)

DATA ANALYSIS AD FINDINGS

1. Challenges with the claim process:
A claim will be completed only if the empanelled hospital completes three processes.
1. Registration:
2. Swipe and block the money during admission.
3. Hit again during discharge
Only if the hospital completes these three hits, it is called a transaction and can be
processed as a claim thereafter. For an insurance company, if any of these steps are
missing then it is not a claim and the company is not responsible to pay back the claim to
the hospitals.

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Insurance companies responded that there was high frequency of claims from different
empanelled hospitals, especially public hospitals without completing these three steps.
Last year, the claim from a public hospital in Kochi was approximately 82 lakhs (U.S
$8.2 million)but the amount with TPA was only 33 lakhs (U.S $3.3 million), The rest , 49
lakhs (U.S $4.9 million) of claim was withheld or rejected by TPAs because of
incomplete transactions by hospitals, even though the hospital did provide treatment. This
happened mainly because beneficiaries left hospital after discharge and do not usually
come back to the RSBY counter for swiping. This phenomenon was rare in private
hospitals but after two years experience, government hospitals are also trying to make it
better as such incomplete transactions resulted in huge debts for hospitals.
2. Challenges with the reimbursement process
The number of days specified in the policy regarding reimbursement of claims to
hospitals is 21 days. But serious delays are reported in that process by hospitals which
made this scheme less lucrative to such institutions. Main complaints from hospitals was
late reimbursement from insurance companies which most often put them it huge debts.
The reimbursement process can be summed up as follows:
The TPAs are instructed to give the invoice of claims from hospitals to the insurance
company on a weekly basis. After getting the invoice, the insurance company releases the
cheque to TPA and from there it will be send to the concerned hospitals. The whole
process can take around 21 to 25 days. But normally there will be serious delays due to a
variety of reasons. The insurance company complained that weekly invoice is not
happening from TPAs. Usually this will be twice monthly or even monthly in spite of
repeated instructions from insurance companies.
As of now in Kerala, there are 5 TPAs for the state and none of them have local bank
accounts. So cheques released from insurance companies will be sending to banks in
somewhere out of state like Pune or Chennai which will again delay the process at least
by one week. There are some delays noted in dispatch time of cheques by TPAs to
hospitals also. Initially insurance companies did not expect all these intricacies and
confusion in reimbursement delays which is one of the major complaints against
insurance companies from hospitals. But now they are trying to respond to such
complaints. Recommendations from insurance company in sorting out the complications
and to reduce delays include starting local accounts by TPAs and opening of a separate
account by hospitals only for RSBY reimbursements. They are insisting on exclusive
accounts because then it will be easy to sort out accounts if any in case of complaints or
anomalies from claims. But this is not a very attractive alternative for hospitals since such
exclusive accounts will result in accountability for that amount of money for which
hospitals have to pay tax for.
3. Challenges with Out of pocket payments
In certain cases beneficiaries had to pay out of pocket payments which is strictly
prohibited by government scheme. This mostly happens by a process called clubbing
which can be explained with an example. Suppose the beneficiary is hospitalized in the
ward for two days for hernia and the package rate for hernia is Rs. 7000 and the package
includes all the services including stay in general ward. But the hospital will charge two
days of stay in the ward in addition to package charges, that is Rs 1000 extra for that case.
But as per the package, the total amount reimbursed to the hospital will be only Rs. 7000.
The balance Rs. 1000 will be OOP by clubbing surgical and nonsurgical package rates.
Another scenario is that there occurred some requests from beneficiaries and other
stakeholders that the scheme should allow beneficiaries to cover the difference out of
pocket in order to avail more quality services like rooms instead of general wards or
more quality services than that of prescribed in the package. Those who argued for this
benefit were ready to pay the difference in amount. But Government strictly rejected
such a request on the ground that if somebody can afford to pay such difference then

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he/she is not BPL anymore. Besides, accepting such requests are like questioning the very
basis of this scheme since this is for very poor people or marginally above absolute
poverty line. Again, if beneficiaries can do that, that will increase the chance for a
fraudulent BPL list. Already there are so much allegations about the list on which the
whole scheme is based on. There are complaints that the list includes large number of non
BPL population and left out many genuine poor. APL wanted to join the list since they
can avail all the benefits allotted to the BPL population. Once they realize that they can
get only as per standards prescribed and not as per they wanted, there is a reduced chance
for such people for renewal of the scheme.
4. Challenges with premium level
Reimbursement rates for staying in general ward is Rs. 500/day and in ICU it is Rs. 1000
/day. Most high tech hospitals do not want to take up the scheme and those who are
empanelled wanted to get out because of very low package rates as per their standard
rates. Either they have to compromise on quality standards or had to opt out from
accepting the scheme. It will be difficult for most hospitals to give quality treatments and
manage costs of administration because of insufficient amount of money quoted for
procedures, as per hospitals.
Many hospitals responded that current payment rate of Rs. 500/day is manageable and
welcoming. But such responses were heard only from small private hospitals and public
hospitals. High tech private hospitals expressed concerns over this as their standard prices
are much above this fixed rate. This may sometimes affect the quality of services
provided by such hospitals. They unanimously voted for an increment in per day
reimbursement rate at least to Rs. 700 /day.
5. Challenges with communication among stakeholders
There is another challenge in reimbursement process due to lack of communications
between different stakeholders. The hospitals expressed a need for more communication
flow with insurance companies regarding the pending amount and reason for not settling
claims which can be explained below:
Suppose a hospital bill the insurance company for 5 lakhs ($500,000). But the company
reimbursed the hospital only for 4 lakhs ($400,000). The next time, suppose the bill is 5
lakhs, the hospital will bill for 6 lakhs($600,000) adding one lakhs($100,000) which they
think as pending from last transaction, to the present bill. Again the insurance company
reimburses a lesser amount and rejects the remaining claim. The hospitals keep on adding
the non reimbursed amount thinking that it is pending from insurance company. In reality,
this is the amount rejected or with held by companies due to different reasons. But the
company through TPA failed to communicate why there is a difference and what are the
reasons for not paying the claim amount.
The balance amount is actually rejected claims or amount withheld rather than pending
amount of reimbursement from insurance companies. This communication gap is mainly
caused by the format of document given to hospitals regarding claim reimbursement. It
just shows that the amount reimbursed and there is no explanation on why they had to
receive reduced payment than claimed amount if that is the situation. As of now, the
document includes claim amount from hospitals and reimbursing amount. It must include
rejected/withheld amount and detailed explanations on why the amount is rejected as this
serve as a feed back of performance in a way for hospitals and ultimately will help
hospitals understand the pitfalls in order to improve their performances. Such a format
will avoid a lot of communication gaps in claim reimbursement processes.
6. Challenges during yearly renewal of insurance providers
Severe delays in reimbursement and claim processing is noted during renewal time of the
scheme every year. The change of insurance companies, software and cards on April 1st
every year is causing different problems in reimbursements and enrollment processes.
The new software cannot read the smart cards from previous year resulted in many

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pending claim process and there is no way that hospitals can finish transactions or
insurance companies can pay bay the pending amounts. Huge amounts are pending
especially in government hospitals due to this problem. This can be solve to a greater
extend by doing manual claims for that pending claims. But most insurance companies do
not entertain such moves since it will increase administrative costs.

7. Challenges with false claims
There are instances where hospitals claimed for unnecessary treatments from RSBY
beneficiaries. Complaints about hospitals keeping the cards with them even after
discharging the patient were heard during the study. They can swipe the card whenever
needed and this will result in fraud claims. One hospital even reported two caesarian
sections on the same patient within 10 days. After repeated claims for unnecessary long
hospital stays, the rule has changed about blocking the money from the card. Earlier it
was one time block for entire stay in the hospital. But now hospitals are allowed to block
only for three days at first and after that for two days if needed. If hospitals need to keep
the patient more than 5 days, then they will have to notify the insurance company before
doing so.
In order to control fraudulent claims from empanelled hospitals, insurance
agencies have come up with different software applications to find duplication of claims.
TPAs submit claims from hospitals to insurance companies in the form of floats. A float
is the total number of claims in a fixed time period for all the empanelled hospitals in the
districts allotted for that particular TPA by insurance companies. The float is numbered in
ascending order as per the date of claims. A float will tell the insurance companies the
total amount it has to pay in claim reimbursement in the concerned districts in a particular
time period like for example 10 days.
A float can be illustrated as below:

TPA Card Patient Date of Date of Package District Hospital Hospital Total
code number name Discharge Admission code code code name amount

One float from single TPA will be about 500pages for 10 days. But it is important to
check the whole document for claim verification and manual verification of such a huge
document is laborious and often not feasible. In order to overcome this problem, the
insurance companies introduced an efficient soft ware to check for duplication within
each of the floats. But now they extended the process by making it intra as well as inter
float checking for duplication of procedures.
8. Challenges in the market for insurance company
Insurance companies are viewed as profit making mechanisms by government and
beneficiaries alike. Though there certainly is a market aspect to it, trends in Kerala is not
that great from an investor’s point of view as of now. In Kerala, insurance company is at
least looking for a break even in order to consider the business successful. Besides the
element of social commitment, every company needs some incentive to take the business
forward. The normal way of doing business is an 80-20 profit margin where companies

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are ready to spend 80% for claims with 20% profit margin which can be utilized for
administrative costs.
As of now even a 10% profit can be considered as success as per the company. But last
year the company suffered a loss ratio of 172% which is extraordinarily high. But Kerala
has its own reasons for that like better infrastructure, awareness and high literacy rate
compared to rest of India. High number of claims occurred from Kerala was unexpected
to an extent because of the trend of low claim ratios almost throughout India.
The insurance companies arrived at bidding rate by a trial and error method since it was
just the starting in the State. In 2008, the insurance company quoted the premium based
on rough estimates which was Rs. 440/family. Total enrollment was 12 lakh families and
the total premium came up to Rs. 52, 80, 00,000 ($528 million) and the total claim
amount was Rs. 60 crore ($600 million) from 130,000 claims. That year, there was a loss
and the total loss for insurance company was 7.2cr ($72 million). In the second year,
though the enrollment increased to 18 lakhs, the premium was Rs. 420/family. The
second year also showed huge loss for the insurance company, which was around 75
crores ($750 million). The first two years bidding premium was a trial and error method
since there were no statistics or yardsticks to compare. So for the third year of operation,
the insurance company quoted a higher premium as Rs. 748/ family. The company is
hoping that it will be a break even for the company and all the stakeholders involved. But
if the loss is continuing like this, the sector will no longer be attractive to companies
unless government decides to increase the premium level.
As per the rule in India, health is the responsibility of the State government. As of now,
the loss suffered to the insurance company is its own sole responsibility. But this is a
model that works because of the close coordination of all the stakeholders in the scheme.
So government can give a hand by giving subsidies if the insurance company suffered any
loses so that they can have some security to enter into the business. A competitive
company will give preference for profits rather than depending on government subsidies.
Also, such a move can make the market a bit more lucrative for insurers too.
9. Challenges with monitoring and evaluation
Another problem incurred to beneficiaries and insurance company is the deduction of
amount from smartcards before it goes to monitoring and evaluation for fraud claims.
Once the 3 step transaction is over, the amount is already deducted from the smart card
even if it is a fraud claim. If in evaluation, it was found out that the amount deducted is
for fraud claim, the insurance companies are unable to return that amount deducted from
smart card during transactions. If the claim is for Rs. 7000 and the original is Rs, 5000
and by the time the insurance companies monitor the fraud, Rs, 7000 will already be
deducted from the card and nobody can refund the smart card with the excess amount
claimed.
Monitoring all the transactions real time before swiping the card means, insurance
companies have to place an agent to monitor every transaction which will in turn prove to
be will be very expensive for the companies.
Qualification of insurance representatives who are responsible for monitoring and
evaluation of admissions are questioned in some hospitals. Most of them do not have any
medical background and hospitals had difficulties communicating with them about the
need for certain medications and procedures.
10. Challenges with enrollment process
As per the policy requirements one enrollment center should have 2 laptops, one card
reader and one camera for enrolling 250 families. It will take approximately 8 hours to
enroll 125-130 families if electricity supply is not fall short. But most units will work
with one laptop and this will result in delay in enrollment. The enrollment is usually done
for two days at a stretch and delays means, the units fail to enroll the families arrived at
that time which resulted in discontent among beneficiaries. In adequate infrastructure and

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enrollment timings delayed the enrollment process in initial years. For example, some
areas of Kerala economy is dependent on rubber plantations and most BPL population
here work as tappers in such plantations. They leave early in the morning and return only
afternoon. The morning enrollment in the first years considerably reduced their
enrollment rates which the insurance companies rectified with work oriented timings.
11. Challenges with packages
Some hospitals were concerned about the way packages were fixed too. For example, in
RSBY chemotherapy has a fixed rate. But this procedure may require a mix of medicines
from different packages, say for example three. But the hospital cannot block three
packages. But in the Kerala version of RSBY scheme, CHIS (Comprehensive Health
Insurance Scheme), it is revised and put it as medicine package. But still there are
complaints that they don’t include all the standard medicines in the medicine package.
12. Challenges with awareness
Even though most people are aware about the scheme, a majority is under wrong concepts
about the package and the limit. They are not aware of the limit of Rs. 500/day and
packages but think that there is 30,000 and can use it however they want it to be.
Handbooks and brochures will be helpful to raise right awareness about the scheme
among beneficiaries. Hospitals complained that there were frequent awareness programs
and public service announcements during enrollment period but that it did not last long.

CONCLUSIONS AND RECOMMENDATIONS

Influx of beneficiaries for availing treatment is increasing steadily in all the hospitals
studied regardless of the size and ownership of hospitals. But certain challenges in
communication and claim processing between TPAs, insurance companies and
empanelled hospitals were noted. Regular updates and clarity in communication with the
empanelled hospitals are recommended in order to reduce friction between those
stakeholders. Continuing workshops and training for hospital staff in the RSBY help desk
is necessary to reduce erroneous and incomplete transactions.
Out of Pocket expenditure are still reported in some hospitals. Government should take
strong initiatives to control such steps in the future for successful implementation of the
scheme. Again, some government hospitals complained of underestimation of their
capacity by government and insurance companies alike. There are some government
hospitals, though less in number, are exceptionally good in quality of services provided.
If they claim more than as expected from a normal public hospital, then there will be
doubts and questions on their capacity and number of claims. Many hospitals surveyed
recommended CHIAK to conduct a study to assess the capacity of hospital, quality of
each hospital, normal rates of procedures and their quantity of input before empanelment
of hospitals in order to avoid such situations.
In many small hospitals where majority of patients are RSBY beneficiaries, it will be
difficult for them to manage hospitals costs if reimbursement is very late. Timely
reimbursement will make the scheme more acceptable for most hospitals studied. This
will again be possible only by more communication and coordination between hospitals,
TPAs and insurance companies.
The fixed package rates are definitely found good for small hospitals with reduced staff
capacity but for most big hospitals the present rate is less and was found difficult to make
ends meet. The price rates for all the procedures are fixed in 2007 and did not changed
after that. It can increase since fixed rate is very low compared to regular prices of the
same surgeries if done outside the scheme. Seeking help from local NGOs and
community based organizations like kudumbasree proved to be very beneficial during the
enrollment process. For example, many people in the same area have same common

219


names included in the list. It will be easy for local bodies like kudumbasree to identify
who is on the list and who is not than people from outside.
All respondents of the study responded that RSBY scheme is one of the massive scheme
from Central Government and beyond doubt is helping millions of people to access health
care services that they never even dare to dream. But like most government schemes, it
had some concerns with the implementation and accountability part which should not be
left unaddressed. This is a process which can be made efficient by capacity building and
coordination of all the stakeholders in the loop. Government should also consider
strengthening the health systems in addition to provision of health insurance schemes
since it is lame to have an insurance policy without a place to go for treatment. RSBY-
CHIS is an evolving scheme and if done right, will definitely increase access to quality
health care facilities for millions of absolute poor people in the country.

REFERENCES

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