Health insurance is recommended as a measure to protect households from catastrophic health expenditure (CHE). An “Annual hospital expenditure greater than 10% of annual income,” means they have experienced CHE.
Individual households finance more than 72% of health expenditure in India at the time of illness through out-of-pocket (OOP) payments.

This is a highly regressive way of financing health care and sometimes leads to impoverishment. Two Indian community health insurance (CHI) schemes, ACCORD and SEWA, provide health insurance cover for the indigenous population in Tamil Nadu and Gujarat.

Both cover hospitalizations expenses, but only upto a maximum limit of US$23 and US$45, respectively.

There were a total of 683 and 3152 hospital admissions at ACCORD and SEWA, respectively. In the absence of the CHI scheme, all of the patients at ACCORD and SEWA would have had to pay OOP for their hospitalization. With the CHI scheme, 67% and 34% of patients did not have to make any out-of-pocket (OOP) payment for their hospital expenses at ACCORD and SEWA, respectively.

Both CHI schemes halved the number of households that would have experienced CHE by covering hospital costs. However, despite this, 4% and 23% of households with admissions still experienced CHE at ACCORD and SEWA, respectively. This was related to the following conditions: low annual income, benefit packages with low maximum limits, exclusion of some conditions from the benefit package, and use of the private sector for admissions.

Conclusion

CHI appears to be effective at halving the incidence of CHE among hospitalized patients. Improving the design of the CHI schemes, especially by increasing the upper limits of benefit packages, minimizing exclusions and controlling costs, could further enhance this protection.