Health Insurance in India

03.09.2025

Health Insurance in India

Context

Debate on India’s Universal Health Care intensifies; Pradhan Mantri Jan Arogya Yojana and State Health Insurance Programs expand coverage, but critics warn of profit-driven care neglecting public health infrastructure.

Background

1. Universal Health Care (UHC) was recommended by the Bhore Committee in 1946 but remains largely unrealised in India.
    
2. PMJAY and SHIPs have extended coverage to over 80% of the population.
    
3. Questions remain about the sustainability and long-term impact of these programs.
    
4. Equity and strength of India’s public health system continue to be major concerns.
    

Growth of Health Insurance in India

• PMJAY (2018): Provides annual inpatient coverage of ₹5 lakh per household, reaching nearly 59 crore individuals in 2023–24.
   
• State Schemes (SHIPs): Parallel programs in most states cover a similar population with a combined budget of around ₹16,000 crore.
   
• Total Expenditure: Around ₹28,000 crore annually, growing at 8–25% in real terms between 2018–2024.
   
• Coverage vs Utilisation: Only about 35% of insured hospital patients actually used these schemes (HCES 2022–23).
   

Key Challenges in Health Insurance

Challenges in Health Insurance

• For-Profit Bias: ~2/3 of PMJAY funds go to private hospitals; weak regulation causes overcharging and unnecessary procedures.
   
• Neglect of Primary Care: Schemes focus on hospitalisation, diverting resources from rural clinics and preventive services.
   
• Utilisation Barriers: Beneficiaries often unaware of coverage; low reimbursements discourage private hospitals; marginalised groups face extra hurdles.
   
• Discrimination in Care: Public hospitals favour insured patients; private hospitals may prefer uninsured patients, creating inequities.
   
• Financial Strains & Provider Exit: Pending reimbursements exceed ₹12,000 crore; 600+ hospitals have exited due to delayed payments.

Structural Risks for UHC

• Underfunded Public Health: Government health spending is just 1.3% of GDP (2022), compared to the global average of 6.1%.
   
• Profit-Driven System: Insurance programs strengthen private sector dominance without addressing quality gaps.
   
• Exclusionary Tendencies: Despite high coverage, out-of-pocket expenditure remains among the highest globally.
   

International Comparisons

• Thailand and Canada: Social health insurance is part of UHC but relies on non-profit providers, universal access, and strong regulation.
   
• India’s Approach: Insurance is largely targeted, profit-oriented, and poorly regulated, unlike successful international models.
   

Policy Way Forward

• Strengthen Public Health Infrastructure: Expand primary health centres, diagnostics, outpatient services, and rural health workforce; prioritise preventive care.
   
• Regulate Private Sector: Implement standard treatment protocols, price caps, and strict monitoring of empanelled hospitals.
   
• Improve Utilisation & Awareness: Conduct community outreach, digital literacy campaigns, and simplify claims and grievance redressal.
   
• Ensure Financial Sustainability: Guarantee timely reimbursements and consider direct public funding instead of relying solely on insurance intermediaries.
   

Move Toward True UHC

• Increase public health spending to 2.5% of GDP (National Health Policy 2017 target).
   
• Transition from insurance-driven patchwork to publicly funded, universally accessible healthcare.
   

Conclusion

While PMJAY and SHIPs provide immediate relief to millions, they risk institutionalising a profit-driven, hospitalisation-heavy system. Achieving true Universal Health Coverage requires substantial investment in primary care, stricter regulation of private providers, and equity-focused reforms. Without these, health insurance acts as a temporary solution rather than a long-term cure for India’s healthcare challenges.