Indeed, the model needs to be flipped; farm insurance should be based on a trust model or risk-pools, while Ayushman Bharat should be based on pure insurance instead of the trust model that several states are using right now.
While the Centre is reportedly planning to tweak the norms of Pradhan Mantri Fasal Bima Yojana (PMFBY), to make crop insurance voluntary for farmers, it needs to relook the entire insurance model for both PMFBY as well as its flagship health insurance scheme Ayushman Bharat. Indeed, the model needs to be flipped; farm insurance should be based on a trust model or risk-pools, while Ayushman Bharat should be based on pure insurance instead of the trust model that several states are using right now. The reason for this is simple; there are fewer chances of fraud in farm insurance, so the insurance firm can be eliminated whereas, given the high level of fraud in medical insurance, the insurance company is critical in that case.
In the case of farm insurance, no single farmer can claim crop failure, it has to be a village, a district or a state where there has been crop failure due to flooding, drought etc; and with satellite imagery or drone, the extent of disaster can be immediately cross-checked. So, if there is a pool of insurance premium—from the centre, states and farmers—and this is kept in a trust, if the damages for a year are less than the premium, the balance can remain in the fund for use in the next year. In the two financial years—2016-17 and 2017-18—the gross premium collected was Rs 48,267 crore and the payout was Rs 39,789 crore. Also, it is not as if, once the premium is paid, the central/state governments have no more risk. As per the contract, to keep premiums affordable, if the losses in a year exceed a certain level, the difference is to be made good by the government anyway; if gains are above a certain level, these get ploughed back to the government. Having a trust or an insurance pool, without the insurance company, is then a less-costly model as it eliminates the profits of insurance firms.
In the case of health insurance, as was evident in Rajasthan’s Bhamashah model, the risk of fraud is quite large; in this case, the fraud was so widespread the PSU insurance firm even walked out of the project. While the insurance company was catching the fraud, the state government was delaying de-empanelling the hospitals doing the fraud; also, the state government didn’t make use of Aadhaar biometrics mandatory, nor time-stamped pictures of people being hospitalised/discharged. Ideally, all states enrolled in Ayushman Bharat should stop the trust model and move to insurance firms that are suitably empowered if fraud has to stop. Over time, if things go to plan, the Health Stack which will have digitised records of everyone’s treatment can serve as a check, especially if data analytics and artificial intelligence is used to mine the data for frauds, but for now it is clear a good insurance model is critical.