RSBY Health Insurance for Below Poverty Level Households
Health insurance is a matter of life and death, especially for the poor. Although only one in a thousand people may need a serious operation at a hospital, when it does become necessary many households never receive the care they need; Alternatively, they may become deeply indebted in order to pay for the treatment their loved ones require. The first case leads to unnecessary suffering and death while debts may end a family’s hope of ever escaping poverty. These tragic outcomes can be avoided through insurance which shares the risk of a major health shock across many households.
On August 15, 2007, Prime Minister Manmohan Singh announced the creation of a new health insurance scheme; the Rashtriya Swasthya Bima Yojana or RSBY. (The scheme was formally launched on October 1, 2007)
What is the RSBY and how does it operate?
The objective of RSBY is to protect below poverty line (BPL) households from major health shocks that involve hospitalization. Specifically, BPL families are entitled to more than 700 in-patient procedures with a cost of up to 30,000 rupees per annum for a nominal registration fee of 30 rupees. Pre-exisiting conditions are covered and there is no age limit. Coverage extends to the head of household, spouse and up to three dependent children or parents.
Unique features of the RSBY
The RSBY scheme is not the first attempt to provide health insurance to low income workers. To date however, these efforts have failed to achieve a significant increase in health insurance coverage among lower income households at the national level. The RSBY scheme differs from these schemes in several important ways that may result in greater success.
First, the scheme provides the participating BPL household with choice between public and private hospitals and makes him a potential client worth attracting and keeping due to the significant revenues that hospitals stand to earn through the scheme. Uniquely, the scheme places control over significant resources in the hands of the beneficiary, empowering the BPL household and potentially creating an important source of competition for his business.
Second, and related to this point, the overall design of the scheme involves incentives that are conducive both to the expansion of the scheme as well as long run sustainability. In the case of enrolment, the insurer is compensated for each household enrolled and issued a smart card. Unlike other schemes, that operate as ‘unnamed policies’, there is a direct link and ownership by the member who is required to attend the enrollment and pay thirty rupees in order to obtain benefits. In other schemes, government has paid the entire premium for all BPL workers without creating individual records of membership or any other direct link between the insurance program and those that are meant to benefit from it.
Hospitals have an incentive to attract the BPL households as a potentially huge source of revenues. This is true even for public hospitals which are now being allowed to create ‘societies’ which will allow them to retain a share of the revenues that they collect. Insurers, in contrast, have an incentive to monitor participating hospitals in order to avoid excessive claims through fraudulent or unnecessary procedures. The inclusion of intermediaries such as NGOs and MFIs which are ostensibly interested in assisting BPL households should help BPL households to understand how to utilize the services. Finally, the basic information gathered by government on a timely basis and reported publicly should allow both for mid-course improvements in the scheme as well as contribute to competition during subsequent tender processes with the insurers.
There is a five year plan for rolling out the RSBY which allows each participating state to contract 20 per cent of their respective districts each year. By April 1, 2008, almost every large state government has expressed its intention of joining the scheme and many have already issued tender notices. Three states – Delhi, Haryana and Rajasthan – have begun enrollment. The initial response from beneficiaries has been very positive.
The Government of India, in cooperation with the participating state governments, will monitor the ground realities of the scheme during the next few years. Adjustments will be made as the experience unfolds, always with the same objective in mind – to provide poor households with insurance against the costs associated with major illness.