Community Health Insurance Network – September 2004

Dear Friends,

It is almost 6 months since I first circulated the questionnaire regarding the community health insurance network. Obviously the mail, like all electronic creations, developed a life of its own and spread far and wide. I have had responses from totally unexpected quarters and this network already has grown with a bang. There are currently 67 members, most of who have expressed their interest to join. A few of them have been inducted on the assumption that they would be interested. If any of the latter feels otherwise, please do send me a mail and I shall unsubscribe them from this list.

From the analysis of the questionnaire, it turns out that there 30 NGOs who are currently involved with CHI in some form or the other. 13 other NGOs have expressed interest in starting CHIs and want to use this forum to learn from the others. And we do not have information about 6.

Other than this there are representatives from donors, insurance companies, academics and 2 networks of existing health NGOs. The details of the members are uploaded at the website[1].

The main expectation that members appear to have was to learn more about CHIs, learn from each other and share each other’s experiences. Importantly some have expressed a hope that the CHIN would be a forum to negotiate with the insurance companies for better products. I suppose that these will be the basic objectives of this network.

I propose that this network remains a very informal but interactive one. The life of it will depend on the responses from you’ll. There are various options for this network. One is to limit it to a monthly / bi monthly / quarterly newsletter, wherein the gist of the members’ responses are presented. This requires a coordinator who collects the responses and puts it down in paper or electronic form. The other possibility, thanks to the electronic media, is to form an egroup. This is an electronic mailing facility that will allow members to share their thoughts and ideas directly with all the members of the group. This requires much less coordination, but is also less structured. And finally of course, we could have a combination of the two so that those who do not have access to emails can also benefit and it will also be structured. Your thoughts on this will be appreciated.

While I have taken the initiative to kick start this venture, I hope that it is not a fixed responsibility. I am sure that others will share the task of keeping this network alive. Even naming this network was an arbitrary one, the first acronym that came to my mind. So if any of you have more interesting suggestions, please do share it with the rest of the members.

In this first issue, I am going to share with you’ll some of the concepts in CHI (as I understand it) and also some useful websites that can help you access more material on community health insurance. I hope that from the next issue onwards, we shall hear more from you’ll, about your experiences, your aspirations and your specific queries.

COMMUNITY HEALTH INSURANCE

 A community health insurance is basically a health financing mechanism to fund health care for individuals in a community. However, most authors will agree that it is more than a health financing mechanism. It can be a tool to empower people so that they can access better health care; a tool to generate solidarity within and between communities and a tool to negotiate for better quality of health care

While there are many definitions of CHI, I present here a working definition from Chris Atim who is a guru of CHI with tremendous experience from Africa. He defines CHI as “a voluntary, non-profit insurance scheme, formed on the basis of an ethic of mutual aid, solidarity and the collective pooling of health risks, in which the members participate effectively in its management and functioning.” The three key words are that it is a non-profit venture, that it is based on the principles of insurance[2] and that the community participates to varying extent in its management. There are various other terminologies being used e.g. micro health insurance (ILO), local health insurance, community based health insurance, mutual health organizations etc. Except for the fact that in micro health insurance, ILO does not insist that it has to be a non-profit venture, all the others are variations of the same theme.

There are some basic requirements to initiate a community health insurance scheme. The most important of course is the need for a definite community, preferably an organised one. Currently many NGOs are introducing health insurance among micro-credit groups (self help groups); using the double advantage of an organised community that is familiar with financial transactions. Yashaswini trust, in Karnataka, used the existing framework of farmer’s cooperative societies to enrol more than 17 lakh people in a health insurance programme. Remember that the larger the community, the better the chances of success.

The next requirement is a health care provider. Whether it is a hospital, or a clinic depends on the benefit package. Traditionally, in India CHIs were initiated by charitable hospitals, basically to reduce the financial burden for their patients. Today many CHIs use the existing private health care sector to provide medical benefits for their members. The choice of a provider is important, for it can make or break a CHI.

These are the basic elements that need to be identified. Does this mean that one cannot initiate a CHI without an organised community or a hospital? The answer to that is yes and no. A hospital can start a CHI for the community living around it. Or it can identify existing groups like self help groups, other NGOs working with organised community, or even unions e.g. shopkeeper’s union, auto driver’s union etc. Working with an organised community has the following advantages:

Ø      It is easier to communicate the concepts of health insurance with the members (patients and non patients)

Ø      Premium collection is streamlined and very easy. Also the costs of collection are reduced considerably

Ø      One gets feedback from the community and so can tailor the CHI scheme to their needs, making it more acceptable. This is important for increasing the enrolment.

Ø      And last but not the least, working through a community increases the feeling of solidarity within the community.

Similarly, the advantage of a hospital starting a CHI is that they can control the costs and the quality of care. However, this is also possible if the NGO starting the CHI negotiates with the private providers for introducing cost containment and quality assurance measures.

Once these basic elements have been identified, then one needs to look at some issues like the premium and the benefit package. The premium is the amount that the individual pays to the insurer for future benefits. While an actuarial[3] will calculate it accurately depending on the morbidity pattern, the age distribution of the population, the benefit package, the average costs of treatment for the benefit package etc, one can arrive at a rough estimate of the premium using the formula given in Box 1.

Box 1: A rough method to calculate the premium for a hospitalisation package

As stated clearly this is a very rough, back of the envelope, calculation. What is important to understand is that one needs some data if one wants to calculate the premium. The more accurate and detailed the data, the more accurate the estimation of the premium.

Of course most CHIs do not make these calculations. They consider what their community can afford and fix the premium accordingly. This is a more realistic way to do things, especially in the field. From our study of 10 CHIs we find that in most CHIs, people pay an average premium of Rs 50 per person per year. Of course it depends on the local community – the richer the community, the higher the premium that they can afford. 

But such an approach means that the premium defines the benefit package, the lower the premium, the narrower the benefit package and vice versa. This is because the premium is dependent on the morbidity pattern in the area (hospitalisation rate) and the cost of hospitalisation. So what many CHIs (and insurance companies) do is to exclude some diseases, so that the average cost of hospitalisation comes down. This will in turn bring down the premium. One disadvantage with this is that if the benefit package is too narrow, then it causes dissatisfaction among the patients and results in low enrolment in the subsequent years. Thus one has to maintain a balance between affordability of the premium and the acceptability of the benefit package.

An important issue that next needs to be considered is to define who is going to take the financial risk of the insurance i.e. who is going to be the insurer. In two thirds of the CHIs in the country, the NGO organising the CHI has taken the risk. However, a recent trend is for the NGO to link up with an insurance company and use their policy for providing insurance. This is in keeping with current legislation, which clearly states that unless one is registered with the IRDA, one cannot become an insurer. And for registration, one needs a capital of Rs 100 crores.

So does this mean that one cannot organise a health insurance scheme anymore without the insurance company’s involvement? While theoretically yes, in practise one can circumvent the law by renaming it as a community health fund, rather than an insurance scheme. However, from my experience, I feel that linking up with an insurance company has many merits:

Ø      The most important one is the fact that one is linked up with a larger pool. So though a CHI may have small community, by linking up with an insurance company, the risk pool is enlarged and so the CHI becomes viable.

Ø      One can tap into existing products and negotiate for some changes to make it acceptable to the local community. This means that the NGO does not have the headache of defining the benefit package and calculating the premium. Moreover, many times the premium is indirectly subsidised by the insurance company. 

Ø      It increases the credibility of the NGO when negotiating with the community and the health care providers.

 Useful websites on Community Health Insurance