This is an exciting time: The Indian insurance industry and its regulators are currently undertaking a number of actions to further India’s goal of developing a strong health insurance market, which would improve the general health status of Indians, ease the government burden of public care, help families avoid catastrophic financial losses, and improve the overall quality of healthcare in India.

Here are some of the special issues ahead for two big stakeholders—Indian consumers and Indian regulators.

Consumers

Indian culture traditionally emphasizes a philosophy of building personal financial security, placing particular importance on the well being of one’s family. Indian consumers want “well-designed” health insurance plans with reasonably comprehensive coverage—and without unnecessary or counterproductive gaps. Indian Mediclaim policies typically cover only medical services rendered in an inpatient hospital setting. Given today’s changing world of medical delivery, Indian health insurers would be well served to cover a broader set of services that encourage preventive “well” care and healthy behaviors as well as avoid inappropriate financial incentives. When only inpatient hospital services are covered, insured individuals have an incentive to seek inpatient hospital care, when lower cost treatment settings (e.g., a physician’s office) may be more appropriate. Additionally programs aimed at changing unhealthy behaviors could be considered. Programs such as smoking cessation and weight control have been shown to have some success in lowering a person’s future risks in some markets.

For consumers to purchase health insurance, several things need to exist:

Financial incentives–While the desire to protect savings by itself is a strong motivator, India may well consider proposing enhanced tax treatment of insurance costs for individuals (some of which exists.) Another path not currently present in India is structuring financing alternatives such as medical savings accounts, which combine higher-deductible insurance coverage with money set aside in tax-favored accounts for future health costs.

Competitively priced products with choice–To make prudent purchases, consumers should be able to choose among hospitals and other healthcare providers, along with coverage scope and insurers. Not every family situation is the same, nor does every person need or want the same coverage. Likewise, providing for non-inpatient services encourages smarter buying: Fairly priced, affordable products will ensure accessibility to the greatest number of people.

Understandable information–Educating consumers about health insurance, in general, will be extremely important. Beyond awareness of insurance coverage, information on disease, cost of treatments, alternative treatment options, and the quality of the treatments provided must be available to consumers to make informed choices.

Employer-sponsored programs–Financing of health insurance through employer-sponsored programs is likely to improve access to insurance for some. Employers would have to be motivated to provide such coverage; again, more favorable tax treatment might be a motivating force.

While it is important that health insurance provide sufficient protection to make it attractive to the buying public, care must be taken to design coverage’s that sufficiently involve the consumer in the cost of care, so that individuals are encouraged to behave in a cost-conscious way. A health insurance policy that provides 100% coverage for all services removes the patient entirely from the economic consequences of his course or place of treatment. The patient, then, has no incentive to pursue cost-effective treatment options.