It is unfortunate that most of the coverage under the prime minister’s ambitious National Health Protection Scheme (NHPS)—10 crore families are to be covered under it, with a Rs 5 lakh annual cover—will take place under the ‘trust’ model as opposed to the traditional insurance model. According to a statement by Indu Bhushan, chief executive of the Pradhan Mantri Rashtriya Swasthya Suraksha Mission, a total of 23 state governments have, so far, opted for the trust model—in this model, the premium to be paid by the Centre/states is put into a trust and payments for medical treatment are paid out of this; the trust is run by the state government. Some like Gujarat and Chhattisgarh have opted for a mixed model in which claims up to Rs 50,000 are dealt with by an insurance company and those above this by the trust. Uttar Pradesh and Bihar, according to The Economic Times, had first opted for the insurance model, but later switched to the trust model.
The fact that so many states are willing to go with the trust model indicates the problems they perceive with insurance companies. In the case of Rajasthan’s Bhamashah insurance scheme, for instance, the surge in claims—the claims ratio jumped from 90% in the first year to 170% in the second year—ensured that the insurance company more than trebled its premiums from Rs 370 per family per year to Rs 1,263, when the contract was renewed after the first phase of the two years ended. While state governments are not too keen on seeing such a dramatic hike in premium payouts, the flip side is that when the claims ratios cross 100%, the trusts will have to be funded for the extra payouts. The PSU insurance company, New India Assurance, also had frequent run-ins with the Rajasthan government and, on one occasion, even de-empanelled 66 hospitals for fraud, only to have the state government rescind this decision within a few hours.
The problem with the trust model, in fact, stems from this very problem. All health insurance schemes face a lot of fraud and, to that extent, the insurance company is a valuable ally in this fight against graft. This is because the insurance company, as well as the reinsurance company, have a lot of skin in the game and, in most cases, also have significant experience across not just various states in the country, but also from overseas. In which case, not having the insurance company involved is losing an invaluable ally in the anti-fraud campaign. This is not to say that the government-run trusts will allow fraud to go undetected, but, apart from the fact that insurance companies have more experience in catching such fraud, the government and the insurance companies actually have very different goals—the states will probably hire third-party administrators (TPAs) to help run the scheme, but TPAs don’t have as much skin in the game as insurance firms. The government, by and large, wants more people to avail the scheme and operates towards that goal—so, the government wants as many hospitals to be empanelled and as many patients as possible to avail the cashless insurance plan. The insurance company wants the exact opposite, but with sensible contracting—the insurance company can be asked to refund extra premium collections if payouts are below 70%, for instance—you can get the perfect combination of providing insurance to as many people as possible along with the insurance company’s greater ability to check fraud.