THE IDEA OF A hospital-owned health insurance company is not new. The latest to join the bandwagon is Narayana Health (formerly Narayana Hrudayalaya), promoted by well-known cardiac surgeon Dr. Devi Prasad Shetty.

Shetty, who made heart surgeries affordable by adopting a new sourcing model for costly surgical equipment, has come up with an insurance plan, Aditi, targeted at the lower-middle class, for an annual premium of ₹10,000 (excluding GST). Aditi, launched under Narayana Health Insurance Ltd., offers a ₹1 crore comprehensive cover for surgeries and ₹5 lakh for medical management at Narayana Health network hospitals for a basic entry level plan.

Initially limited to Narayana Health facilities for selective procedures, Aditi now allows emergency treatment at other hospitals as well. The insurance plan also covers treatment in general wards, which has been launched on a pilot basis in four districts around Mysore.

“Today, health insurance is exemplified by a ‘trust deficit’. The three main parties to the transaction — the insured, the payor (insurance company), and the provider (hospital) do not enjoy mutual trust. By creating an integrated care model the trust deficit is bridged,” says Shetty.

Industry insiders claim Aditi could disrupt the standalone models adopted by hospitals and their health insurance partners.

“Despite scale-related limitations, structuring insurance plans around a service provider’s specific network is innovative,” says Aniruddha Marathe, MD and partner, BCG. “This model will pave the way for others to look at it as an attractive opportunity.” The model is already a big success abroad, including the U.S. and South East Asia.

Sharad Mathur, MD and CEO, Universal Sompo General Insurance, says besides disrupting the healthcare industry, the in-house insurance model “will help hospital chains diversify revenue streams, and gain more control over patient care and data, leading to lower premiums through vertical integration.”

A Crowded Market, But...

Narayana Health is not the pioneer among hospital chains to enter health insurance, though. Apollo Hospitals and Max India (now Max Healthcare Institute) had insurance joint ventures (JVs) with Munich (from 2007-20) and Bupa (from 2008-19), respectively. In 2018, Manipal Group had entered into a JV with Cigna Corp. and TTK Group, to form ManipalCigna Health Insurance.

Sumit Bohra, president, Insurance Brokers Association of India (IBAI), highlights a key difference between them and NHI. “Their concept was not similar to that of Narayana Health in terms of offering treatment in their own hospital, and hence controlling claims and reducing hospitalisation cost. The NHI model will keep premiums under control and reduce the cost of hospitalisation, akin to self-regulation in the insurance sector,” says Bohra.

“We designed Aditi to redefine health insurance as a tool for proactive healthcare, not reactive treatment. The plan includes benefits, including discounts on diagnostics, medicines and OPD (out patient department) services,” says Viren Prasad Shetty, vice chairman, Narayana Health.

Other insurance players are also catching up with this trend. Anand Roy, MD & CEO, Star Health Insurance, says, “We are investing in preventive healthcare initiatives to encourage healthier lifestyles among policyholders, a win-win for both customers and the company.” Star Health is India’s largest standalone retail health insurance company with ₹15,000 crore in premium collection as on March 31, 2024.

With 17 hospitals and three heart centres, Narayana Health operates one of the world’s largest cardiac programmes. It is the first healthcare provider in India and the sixth worldwide to receive the prestigious JCI Enterprise accreditation for integration of policies, procedures, and operational rigour across multiple facilities, enabling shared resource allocation, strategic planning, and quality oversight processes across all facilities under the enterprise.

Changing Dynamics

Experts, however, say the move goes against the tide, described in economic parlance as the ‘concept of adverse selection’ (when sellers have information that buyers do not have, or vice versa, about some aspect of the product quality). “Why is insurance not sold through pharmacy shops and in hospitals? It amounts to choosing sick patients, which will lead to very high claims. That way, the NHI offering is designed with these risks in consideration,” says Marathe.

The biggest hindrance today is the spiralling cost of health insurance. “Since there is no regulator in the case of hospitals, the pricing control is absent, and insurers have to bear the brunt,” says Bohra of IBAI. Roy of Star Health highlights an urgent need for a health sector regulator to facilitate affordability and standardisation of costs while maintaining quality healthcare for the masses.

“Health insurance premium is growing because of medical inflation,” says Marathe. “The health insurance industry will continue to grow at 18%, driven by a growing awareness and need for health insurance.” Other major drivers will be the Centre’s focus on health insurance and renewals.

Tech Drive

The National Health Authority (NHA) is setting up a Health Claims Exchange (HCX) to facilitate the interoperability of claims and exchange of claims-related information among various stakeholders on the lines of Aadhaar, UPI (United Payments Interface) and FAStag. However, it would bring to the fore issues of data privacy and security.

“Technology’s major contribution to the industry is in terms of public digital platforms such as the HCX, analytics driven fraud identification and reduction and digital journeys for distributors and customers, ultimately helping bring down costs,” says Marathe.

“As technology continues to evolve, leveraging digital tools can significantly enhance customer experience and operational efficiency. Insurers can use data analytics to understand customer needs, streamline claims processing, and offer personalised products,” says Roy of Star Health.

The NH is leveraging technology such as electronic medical records to help improve safety by providing real-time access to patient information, reducing errors, and improving care coordination.

Despite all technological advancements, the industry is unable to reach out to rural and remote areas. “The challenges are complex — from limited healthcare infrastructure to low-awareness levels. We need to think differently — perhaps microinsurance products or sachet products specifically designed for rural needs,” adds Roy.

Looking Ahead

The health insurance market is becoming increasingly competitive with the entry of new players, including hospital chains, tech start-ups, and non-traditional companies offering innovative products. “There is also a threat of tech giants entering with digital-first offerings, leveraging AI, Big Data, and Machine Learning to offer faster, more personalised, and cost-effective services,” says Mathur.

The industry, meanwhile, is seeking a reduction in GST from the current 18% on health insurance premiums, terming it an essential service. The high rate often serves as a deterrent for insurance penetration in India, forcing people to opt for lower coverage.

Leading players in the industry are already working on innovative “product design to make premiums more affordable, balancing comprehensive coverage with sustainable pricing remains a constant endeavour,” says Roy. In fact, Star Health Insurance sees potential for a public-private partnership model to ensure that rural focused and comprehensive initiatives, including incorporation of OPD coverage in basic health plans, is achieved.

The bottomline: Industry and stakeholders need to join forces to achieve the Centre’s target of ‘Insurance for all’ by 2047.