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 coverages 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.

Historically (and internationally) this almost always leads to the over-utilization of services and very high costs, which in turn leads to high premium rate increases and, ultimately, to an unstable health insurance market. Relevant here is the big lesson from the U.S.: Individuals must remain responsible for their health and care treatment. Notions of paternalism and entitlement do not work well in a private, voluntary health insurance market.

This feeling of responsibility could easily be overlooked in a rush to create broad coverage for today’s Indian health insurance policies.