Money & Banking

Cooperative insurance: Novel financing model aims to deliver healthcare to the middle-class segment

PT Jyothi Datta Mumbai | Updated on October 02, 2019 Published on October 02, 2019

A group of hospitals in Karnataka is exploring a financing model to address gaps in healthcare that do not get covered by private and government-run insurance schemes.

“We are trying to get a consortium of hospitals together in Karnataka where we create something like cooperative insurance,” Viren Shetty, Executive Director and Chief Operating Officer, Narayana Health, told BusinessLine.

The intent is to cover the middle-class, which is neither covered by private insurance policies nor by the government-run health insurance schemes, (government-run schemes cover only the economically weaker sections of society). The new plan also seeks to provide preventive healthcare, said Viren. The proposal is expected to be ready in a year.

The flaw in the existing state-run health insurance and the Centre’s flagship Ayushman Bharat is that it covers only hospitalisation, said Viren. “Only 10 per cent of the country’s population has private insurance, 40 per cent will be covered under Ayushman, but that still leaves 50 per cent of the population neglected.”

Narayana Health founder and cardiac surgeon Devi Shetty added, “These (government-run insurance schemes) are for the BPL (below poverty line), genuinely poor people. But there is a big segment of people earning ₹30,000 to 80,000 per month. They don’t have a financial intermediary. The whole idea is to create a financial intermediary.” Viren, along with his father Devi Shetty, was in Mumbai to announce that 200 cardiac surgeries would be done at the Narayana Health-managed SRCC Children’s Hospital for children from weak economic backgrounds, under various government schemes.

Part of non-profit society

Explaining the mechanism of the consortium, which is still under discussion, Viren said, hospitals will be part of a non-profit society. “We’ll agree on a set of prices, set of best practices, the facilities and on the number of procedures to be done, and how much it should cost. We can then calculate how much to charge each person. And so, when you have a large enough population, the risk gets pooled. And then you have taken out third-party administrators and intermediaries with their own cost structures. So, if Narayana Health says we’ll manage 10,000 patients, there’s an incentive to keep them healthy. We don’t have to do surgery.”

The idea is also prevention, said Viren, addressing the loophole of health insurance that largely does not pay for Out-Patient (OPD) services. “OPD can be a valuable tool to prevent surgery. But insurance only pays for surgery.”

Need for new models

Explaining the need for new models of healthcare financing, Viren said, the Indian landscape was looking “disturbingly” like the US market. “So, in an insurance model, there’s no amount of money that you can keep giving that there won’t be an infinite demand for,” he said. Hospitals need to be involved in the insurance process, he said, otherwise there will always be a fight with “hospitals saying give me more money and insurance saying you take too much money”.

Pointing to the healthcare landscape and its challenges in terms of violence against doctors, pricing concerns, and regulations he said, it stems from “completely mismatched expectations. Now, we have to maintain (the quality), we have to deliver (the results)...., while at the same time, the wallet is simply not there. In no country will you see such a large percentage of people paying (healthcare expenses) out of pocket.”

But as new models come up, India will become the first country to dissociate healthcare from affluence, pointed our Devi Shetty.

Published on October 02, 2019
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.