Importance of Health Insurance in Pakistan

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IMPORTANCE OF HEALTH INSURANCE IN PAKISTAN

EXECUTIVE SUMMARY

.

The topic of this research paper makes it quite special in the wake of scenario

experienced by almost entire population of this country. Right from the common

citizen up to the upper class, people are facing consequences related to their health

in one way or the other.

We know the number of people in Pakistan living below the poverty line, living

without potable water, without health care, without education, without basic

sanitation facilities and without much more. It shows that our country is a very poor

country and it has not been provided with even the bare necessities of life.

Health Insurance in law and economics is a form of risk management and can be

defined as the equitable transfer of the risk of a loss from one entity to another in

exchange of a premium.

Whatever insurance industry we have experienced in Pakistan, can be described

as a business rather than an industry meant for the welfare of the in affordable poor

people of Pakistan.

Unlike United States of America and India, where the government and the

NGOs are playing their due role in making the health insurance policy flourish in

their respective countries, Pakistan is lacking in both the financially strong

government to bear the cost of such scheme as well as the willing NGOs and

philanthropists.

Hence what is required is some serious efforts on part of the government not to

let anyone exploit and fleece the handicapped population of the country; instead

play its long awaited role of giving immediate and cost effective relief to its citizens

at large through efficient and corruption free public health sector; Government on

one hand can make judicious use of public funds, and simultaneously work on

improving the affordability of the poor masses.


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ACRONYMS

FD Finance Department

OPD Out Patient Department

SENWA Sindh Employees New Welfare Association

EFU Eastern Federal Union

LP Local Purchase

GOS Government of Sindh

ICU Intensive Care Unit

CT Computed Tomography

MRI Magnetic Resonance Image

SGA & CD Services General Administration & coordination

Department

HMO Health Maintenance Organization

SLIC State Life Insurance Corporation

HELP Health Expenditure & livelihood Protection for Poor

OASDHI Old Age Survivors, Disability and Health Insurance

IRDA Insurance Regulatory Development Authority

CGHS Central Government Health Scheme

ESIS Employee State Insurance Scheme

GIC Government Insurance Corporation

SCHIP State Children Health Insurance Programme

ERISA Employee Retirement Income Security Act

PSDP Public Sector Development Programme

MDG Millennium Development Goals

BISP Benazir Income Support Programme


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INTRODUCTION

Health insurance is defined as the coverage of expenditure incurred on the

medical or surgical treatment of a citizen of a country against some premium paid

by the citizen or state promoted social security plan. Implementation of health

insurance policy is long overdue in Pakistan especially in the prevalent deteriorating

health conditions of the population at large.

In Pakistan almost half of the population is low income and 99% of this

population is uninsured and 97% of their health care expenses are out of their own

pockets. It is high time that government should come up with some implementable

policy to give umbrella protection of health insurance to all the masses of Pakistan

rather than the prevalent policy of insurance cover at individual or institutional

level. In Pakistan, public healthcare provision has not been successful in creating

health security for the poor. The sector remains grossly under-funded, with public

expenditure on health counting for barely 0.5 per cent of the GDP of which close to

75 per cent is spent on salaries. There are only two countries in the world

Nigeria and Sudan that spend less than this proportion on health. It is around one

per cent for India, two per cent for Bangladesh and Nepal and three per cent for

China, while for most developed countries it ranges from five to seven percent.

More than 80 per cent of the total healthcare expenditure is spent by the

private sector and almost all of this represents private out-of-pocket expenditure on

curative care consultations and in-patient diagnostic care, laboratory tests and

medicines.

The health sector has acquired a notorious reputation for inefficiency and

corruption at all levels. Most of the government-operated outlets for primary

healthcare, except perhaps in Punjab, are on the verge of total collapse. There aresome forms of social welfare protection instruments in many countries like

unemployment benefits or social security for the needy, driven by the belief that it

is the primary responsibility of the state to look after its citizens. Free or subsidized

healthcare is also one such instrument. Poverty reduction and health outcomes are

integrally linked as improved health outcomes contribute to reduction in poverty


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and vice versa. Several studies have shown that expenditure on healthcare is more

effective in reducing poverty than expenditure on poverty alleviation programmes.

Those hardest hit by lack of health coverage are the poor, who suffer from higher

levels of mortality and malnutrition than the rich.

The point is that low levels of expenditure, poor quality of services, and

inefficiencies have failed to provide decent health cover for the poor. This has

raised the need for alternative financing mechanisms and instruments to achieve this

objective, that is health insurance to improve the access of the poor to health

services an instrument now being developed by insurance companies in the

private sector for the more affluent households and for employees of corporate

entities. The poor can also make small, periodic contributions that could go towards

meeting their healthcare needs. Hence, the need for setting up a health insurance

scheme for low-income groups. The government of India introduced the Universal

Health Insurance scheme targeting the poor in 2003. The premium was set at Rs365

per annum for an individual and Rs548 for a family of five. The government gives a

subsidy of Rs100 per family below the poverty line. The benefits include

reimbursement of expenditure of up to Rs30,000 and illness compensation of Rs50

per day for the period of hospitalization of the earning head of the family. There is a

provision of coverage for Rs 25,000 in case of death of an earning head of family in

an accident.

The problem with the scheme is that the premium is too low for the insurance

companies to offer good coverage and too high for the poor to pay upfront. Thus so

far only two per cent of the policies have been sold to the people living below the

poverty line. Pakistan, by learning from the experiences of India and other

developing countries, can introduce its own scheme that addresses the kind of

weaknesses identified here.

To make the scheme financially viable, the transaction costs for the insurance

companies can be lowered by educating the people to buy insurance as a group

contract (important characteristics for which would be age and sex of members) so

that risks and contributions are pooled more effectively, while flexibility in

payment of premium and the system of certifying claims and healthcare provision


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can be improved by the introduction of an agency that acts as an intermediary

between the target community and the insurer.

For the poorest of the poor who cannot make any contribution, health

insurance will not be relevant. For them there would be continuing need to provide

free access to public health facilities or subsidized healthcare in private facilities.

Health insurance as a financing mechanism would be appropriate only when part of

the cost is recovered from the beneficiaries. It would make sense only when the

beneficiaries are in a position to contribute something, provided, of course, this

offers a means for the low-income groups to meet their priority health needs in a

cost-efficient manner

Problem Statement

As Pakistans public health care sector is under resourced and overwhelmed,

the will of the government to adopt health insurance as a public policy remains

doubtful. Low income families are conceptually entitled to free health care through

government hospitals but in practical terms they end up paying the related costs.

Insurance companies have focused on the top of the pyramidthe corporate elite

rather than the base which represents much larger population of low income

families whose biggest issue is affordability; hence there is a dire need to customize

a micro insurance scheme for the poor focusing on enhanced affordability and

reducing costs. Health insurance is beyond doubt a remedial solution as it plays a

key role in economic growth and human welfare provided it is handled with utmost

care and managed with highest professional standards with special emphasis on

how to include those not formally employed.

Hypothesis

Since health insurance policy cannot be implemented in Pakistan keeping in

view the affordability by the poor masses with under-funded, inefficient and

reluctant public sector, attention needs to be diverted towards much more improved

health services through government/charity hospitals and regulation of private

health sector.


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Scope of the Study

The scope/objectives of the study are:

To locate any such prevalent facility from public and private sector which can satisfy the

people ofPakistans medical requirements.

To examine the attempts made by the government to implement the policy of health

insurance at federal and provincial level.

To assess the medical needs of the citizen of Pakistan and governments capability to meet

their requirements.

To analyze the affordability of masses to take advantage of this policy of health insurance

and the potential and intention of the government to make it functional.

And lastly to identify important areas which require urgent reforms to make Health

insurance policy workable and subsequently to recommend the probable solution for

resolving the dilemma in a most befitting manner.

Research Methodology

The research paper is mainly based on the secondary data which was gathered

from various sources like books, reports, newspaper articles, internet and research

conducted in the past.

The primary data is also gathered through interviews from the concerned

officials of public sector like secretary finance GOS, health insurance agents and

general perception of the public as well as personal observation.

On the basis of the primary and secondary data, the qualitative research will

be conducted to address the problems relating to the hypothetical problem.

Literature Review

For writing this research paper, in depth study of various books, reports,

newspaper articles and net search was carried out. The literature that was reviewed

on the subject reflected not only the views and analysis of the authors, who in their

own right are authority on the subject, but also incorporating the views and

soliciting the ideas of othe stakeholders and finally the experience of those who are

somehow involved in the subject of Health Insurance.


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The material that I have gone through during writing of this research paper

also included deliberations by government officials to examine the pros and cons of

the health insurance scheme in Pakistan.

To properly analyze and assess the extent of success and failure of

implementation of Health Insurance Policy in the province of Sindh, assistance has

also been sought from the officials of Finance Department GOS right up to the level

of secretary and special secretary.

The websites have also been frequently visited to go through various

researches already taken on the subject.

Studies undertaken by Karim Khan Qamar in Pakistan, Finance Department

GOS in Sindh province and David Bickelhaupt in USA are very useful reading on

the given subject.

The close relationship of insurance to the environment within which it

operates is being examined more now than ever before. Although some experts

warn that the social insurance area is growing too fast in competition with the

voluntary health insurance system, most agree that the application of insurance

techniques to individual, social, and combined individual-social problems will all

be important in the future. (David L.Bickelhaupt,1983)


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SECTION-1

NEED FOR HEALTH INSURANCE IN PAKISTAN

1.1 Prevalent Conditions of Health Care in Pakistan

Healthcare in Pakistan is administered mainly in the private sector which

accounts for approximately 80% of all outpatient visits. The public sector was until

recently led by the Ministry of Health, however the Ministry was abolished in June

2011 and all health responsibilities (mainly planning and fund allocation) were

devolved to provincial Health Departments which had until now been the main

implementers of public sector health programs. Like other South Asian countries,

health and sanitation infrastructure is adequate in urban areas but is generally poor

in rural areas. About 19% of the population and 30% of children under age of five

are malnourished.

Ministry of Health of Pakistan states that health expenditure of period 2007-

08 was 3.791 billion Pakistani rupees while that spent on development was 14.272

billion.1

Basic health indicators

Indicators of the functioning of health system are equally important as

indicators of health status of a population of a country. The most prominent amongthem are the governance, stewardship, delivery of service, health financing and

other inputs into the health sector at all levels of human resources i.e. doctors,

paramedics and availability of medicines.2

Although some indicators on health financing have been included herewith,

the list is not complete due to data gaps. The health financing indicators show that

although allocations have increased, Pakistan still spends 0.67% of its GDP on

health with a percentage of the budget going unutilized. In addition, some allocation

disparities are evident, and alternate mechanisms of financing health have not been

mainstreamed into the delivery of care. Therefore, in addition to the need for greater

increments in allocation, there is a need to address allocation disparities, improve

1en.wikipedia.org/wiki/Health_care_in_Pakistanaccessed on 15/3/20122www.heartfile.org/pdf/GWP-II.pdfaccessed on 20/3/2012
http://www.heartfile.org/pdf/GWP-II.pdfhttp://www.heartfile.org/pdf/GWP-II.pdfhttp://www.heartfile.org/pdf/GWP-II.pdfhttp://www.heartfile.org/pdf/GWP-II.pdf


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utilization and develop alternative approaches to heath financing, albeit with

safeguards against creating access and affordability issues for the poor.3

Primary Health Care is defined as "essential health care based on practical,

scientifically sound and socially acceptable methods and technology made

universally accessible to individuals and families in the community through their

full participation and at a cost that the community and the country can afford to

maintain at every stage of their development in the spirit of self-determination"

Primary Health Care delivery is considered the most effective and cost

efficient method of improving health for its citizens. In this article, we examine the

multifactorial reasons for its failure in Pakistan.4

Looking at Primary Health Care in isolation from other services that impact

the standard of living in a given community is a mistake. However, this is a vast

subject and beyond the scope of this article. By necessity, we will keep our focus on

Basic Health Unit (BHU) which is one of the programs that is considered vital in

providing primary health care in rural areas.5

In order to understand the complexity of the problem, we will first summarize

how Pakistans overarching Federal Health Policy & Planning impacts the delivery

of Primary Health Care at the BHU level.6

Pakistan's health indicators, health funding, and health and sanitation

infrastructure are generally poor, particularly in rural areas. About 19 percent of the

population is malnourisheda higher rate than the 17 percent average for

developing countriesand 30 percent of children under age five are malnourished.

Leading causes of sickness and death include gastroenteritis, respiratory infections,

congenital abnormalities, tuberculosis, malaria, and typhoid fever.7

Hepatitis B and C are also rampant, with approximately 3 million cases of each in

the country. The cost of curing or treating these illnesses is many times more than

preventing them.

3 www.heartfile.org/pdf/GWP-II.pdf4 insaf.pk/Portals/.../FAILURE%20ANALYSIS%20%20%206-28-09.p...5 insaf.pk/Portals/.../FAILURE%20ANALYSIS%20%20%206-28-09.p...66 insaf.pk/Portals/.../FAILURE%20ANALYSIS%20%20%206-28-09.p...7 britishpakistanfoundation.com/healthcare


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In 2007 there were 85 physicians for every 100,000 persons in Pakistan. There are

only 62,651 nurses all over the nation, which highlights the problem of nurse-to

doctor ratio. Delivery of health in rural areas is designed to be met by a strong force

of 100,000 Lady Health Workers (primary health care providers).

According to the World Health Organization, Pakistan's total health expenditures

amounted to 2.0 percent of gross domestic product (GDP) in 2006, (but according

to Economic survey of 2005-6, Pakistan spent 0.75% of GDP on health sector). Per

capita health expenditures were US$51 (2006). The government provided 24.4

percent of total health expenditure, with the remainder 75% being entirely private,

out-of pocket expenses.

Failure Analysis of Primary Health Care in Pakistan & Recommendations for change M. Asad Khan, MD Insaf Research

Wing 2009


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1.2 Hostile Factors for Implementation of Health Insurance Policy

There is a host of causes for losses in health insurance business. The

companies are forces into unwarranted and negative premium rate cutting due to

unavoidable market competition. This practice results in underwriting policies with

lower than required premiums. There is no appropriate actuarial database for health

insurance in Pakistan to assess premiums for underwriting the policies which results

in the Non-Tariff nature of this business. The nature of this business forces heavy

management and administrative expenses.

There is a general lack of understanding and education in customers due to

the nature of health insurance, which requires a rather higher education and literacy

rate. It is difficult to control compliance due to nature of hospitals available in the

country. Generally the patient/customer prefers to choose few state of the art

hospitals having higher treatment cost.

At present there is lack of coordination among various stake holders like

users, hospitals and operational personals of the insurance companies which also

result in absence of mutual understanding and appropriate controls.

It is also found that number of health insured individuals with various

insurance companies is still not adequate to make it a profitable business as

normally expected according to laws of large numbers which is essential for anybusiness to prosper.


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ISSUES IN HEALTH INSURANCE

Need for a variety of products micro insurance to international coverage birth

to old age

Clarity in policy terms, conditions, exclusions

Need for Services Cashless, toll free nos., quick response

Curtailment of Costs

State life is in existence since 1972 and it controls 97% of the market share of life

premia. But unfortunately SLIC did not venture in the field of health insurance

whole heartedly. Normally in all developed countries i.e. USA, Canada, UK,

Europe and Japan all life insurers sell health insurance, and in abundance. Why they

sell sickness insurance is because they have huge funds to invest, not only to earn

profit but also to fulfill their socioeconomic responsibilities.

But who has prevented life insurers in Pakistan to write this class of business?

They can also take the lead; but unfortunately their hands have been tied by our

government.

The Insurance Act, 1938 does not permit life insurers in Pakistan to write

health insurance as a separate class of business but they can write it as a rider of life

policy.

Hence a Pakistani citizen has to take life policy whether he can afford it ornot, or does he need it or not, he must take a life policy, otherwise he cannot take

health insurance. What an irony!


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SECTION-2

RESOURCES

2.1 Role of private insurance companies.8

The majority of general insurance companies have started to market Health

Insurance product in Pakistan and the market trend confirms that it is getting

popular. There is a steady growth of the premium rate for this product. Presently, in

Pakistan, the cumulative health insurance premium lies in the range of rupees 500

to 750 million. The companies have very cautiously adopted this product due to the

highly technical nature of this business with a lack of experienced manpower due to

the fact that this is a low profit business at least in the initial phases.

The larger insurance companies have maintained the health insurance product

for a considerable time with the rest of market is in the process of adding this

product in their business portfolios. A whole lot of new insurance companies are

being launched with the plans to include Health Insurance as its product.

New Jubilee Insurance is the most experienced company offering health

insurance in Pakistan. They have excellent expertise of this product with a

significant share of health premium.

EFU Insurance has formed a joint venture with the German Allianz as majorstake holder to create the first health insurance company of Pakistan known as

Allianz -EFU Health. EFU Insurance has been successful in gaining access to

corporate and individual clientele after executing this product on its own. They have

been successful in gaining access in the market with a respectable share in business

yet there is still a wait to the question of profitability. The company has also started

the novel product of individual health insurance but on a limited basis.

Adamjee Insurance being the largest general insurance company in the

country was the first to initiate the health insurance policy decades earlier but till

recently had kept this product dormant. They have earned a considerable premium

8gis.emro.who.int/HealthSystemObservatory/.../Pakistan/...Similar
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under the product health premium yet it is negligible in comparison to its overall

premium.

The older insurance companies American Life and Commercial Union have

been offering corporate or group health insurance but their market acceptability was

not high. The Commercial Union transferred its insurance business to New Jubilee

insurance in Pakistan.

Askari General Insurance Company is relatively a new insurance company

but in terms of premium, it has progressed to be among the first ten insurance

companies of Pakistan. Askari since its inception has offered health insurance.

With one of the best available manpower running health insurance in the country,

they have the second highest premium collection from Health insurance in their

overall premium collection.

PICIC Insurance Limited writes all classes of general insurance business.

PICIC Insurance provides quality medical insurance facility to its clients. Their

special feature is cashless facility which can be availed by using Health Insurance

Credit Card. This facility is available at all network hospitals which are spread all

over country. Expert medical advice and support is provided to clients.

The public sector company, State Life Insurance is largest insurance

company of Pakistan but it is not offering health insurance business currently.

2.2 Role of NGOs and charity hospitals.9

With 70 per cent of population in India living in rural areas and 95 per cent of

work-force working in unorganized sectors, and disproportionately large percentage

of these populations living below poverty line, there is strong need to develop social

security mechanisms for this segment of population. This need for security is

further increased because the poor are the most vulnerable for ill health, accidents,

death, desertion, social disruptions such as riots, loss of housing, job and othermeans of livelihood. There are some efforts in this direction of providing social

security to the poor by a few NGOs. The most prominent among them is that of Self

Employed Women's Association (SEWA). The other scheme by government

9books.google.com.pk/books?isbn=8178357828...


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insurance companies developed to focus on poor is called Jan Arogya Bima Policy

which was introduced in 1995 and covers expenditure up to Rs. 5000 for a premium

of Rs. 70 per annum.

It is estimated that about 5 million people are covered under various NGO

insurance schemes. The experience from other countries suggest that in developed

countries such as USA, UK, the health insurance have grown out of small non-

profit schemes. A large share of health insurance market in USA is in not-for-profit

sector. There is need in India to promote these schemes as they address the needs of

the poor. Over the last few years in India small and big NGO's like Tribhuvandas,

SEW A, ACCORD etc. have implemented the insurance schemes. Many of these

schemes are designed to meet the needs of the poorer segments of the community.

They have developed several innovations such as

Mechanism of monitoring the performance,

Pricing of various services,

Integration of various risks in one single product,

Linking of insurance schemes with savings,

Coverage of many services not included in market based schemes such as

maternity services, transportation, coverage of risks such as from riots, floods

etc.Some NGOs have developed special linkages with public health systems, private

facilities and also accessed resources through insurance companies

2.3 Social Security Organizations.10

Social Security Punjab has approximately 28,000 industrial units registered

with it. The number of secured/registered workers is about 530,000, with

dependents about 320,000. It has a network of dispensaries and hospitals in major

cities of Punjab, which are mostly situated near industries. It provides medical care

facilities to the secured workers and their families. These include

OPD and Indoor in its own Hospitals and Dispensaries,

Dental Care,

10gis.emro.who.int/.../Health%20care%20financing%20and%20expend...Similar
http://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+Social+Security+Punjab+has+approximately+28,000+industrial+units+registered+with+it.+The+number+of+secured/registered+workers+is+about+530,000,+with+dependents+about+320,000.+It+has+a+network+of+dispensaries+and+hospitals+in+major+cities+of+Punjab,+which+are+mostly+situated+near+industries.+It+provides+medical+care+facilities+to+the+secured+workers+and+their+families.+These+include&tbo=1&sa=X&ei=5pvFT5G8EIri4QTaqPHEBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+Social+Security+Punjab+has+approximately+28,000+industrial+units+registered+with+it.+The+number+of+secured/registered+workers+is+about+530,000,+with+dependents+about+320,000.+It+has+a+network+of+dispensaries+and+hospitals+in+major+cities+of+Punjab,+which+are+mostly+situated+near+industries.+It+provides+medical+care+facilities+to+the+secured+workers+and+their+families.+These+include&tbo=1&sa=X&ei=5pvFT5G8EIri4QTaqPHEBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+Social+Security+Punjab+has+approximately+28,000+industrial+units+registered+with+it.+The+number+of+secured/registered+workers+is+about+530,000,+with+dependents+about+320,000.+It+has+a+network+of+dispensaries+and+hospitals+in+major+cities+of+Punjab,+which+are+mostly+situated+near+industries.+It+provides+medical+care+facilities+to+the+secured+workers+and+their+families.+These+include&tbo=1&sa=X&ei=5pvFT5G8EIri4QTaqPHEBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+Social+Security+Punjab+has+approximately+28,000+industrial+units+registered+with+it.+The+number+of+secured/registered+workers+is+about+530,000,+with+dependents+about+320,000.+It+has+a+network+of+dispensaries+and+hospitals+in+major+cities+of+Punjab,+which+are+mostly+situated+near+industries.+It+provides+medical+care+facilities+to+the+secured+workers+and+their+families.+These+include&tbo=1&sa=X&ei=5pvFT5G8EIri4QTaqPHEBQ&ved=0CAsQHzAA


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Surgeries (including Cardiac Surgery at Lahore Hospital),

Physiotherapy,

Diagnostics,

Haemodialysis unit in Islamabad hospital,

Full Maternity Care services (in hospitals only),

Provision of ambulance,

Blood transfusion,

Provision of spectacles, artificial aids and dentures,

Payment of diet charges on admission of workers and their dependents at the

rate of Rs.40/day and to the T.B and Cancer Patients at the rate of Rs.50/day.

Medical care to survivors of deceased workers for one year, and to seasonal

workers for six months.

Reimbursements of expenses of Government Hospitals.

In addition, cash benefits (wages) during sickness, injury and disability and

Pension to survivor of deceased (due to employment injury).

The financial figures for the year 2001-02 show that this department had a total

income from all sources of Rs.1262 Millions, for this year. After all the expenses,

there was a net surplus of Rs.343 Millions. Applying the Law of Economy of

Scales, it would mean that increasing the number of contributors should increase

this surplus more, as the purchase of inputs in large-scale, will cost less and there

will be more effect of risk-spreading. But following factors also need to be

considered:

Contributions to Social Security are authorized and enforced by the laws and are

mandatory.

Secondly, it is the employer who is paying for the workers and not the workers

themselves. Thirdly the utilization-pattern of these health services is not been analyzed and

there is no information available about their current utilization rate and whether

there is any capacity to handle an increase in the demand of services.

This prepaid public insurance system is still efficient than the individual out-of-

pocket payments as it takes into account a few, large, economical transactions in the


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15

purchase of health interventions, instead of many single transactions occurring at

the private health outlets in the province.

Employees social security benefit organization:

Employees social security benefit organization provides health cover to

industrial workers and families allover the country. In Punjab alone it covers

544,800 workers and their 3228600 dependents. It has a network of 14 hospitals and

other health facilities in the province and has about 1300 indoor beds. Mainly

curative services are provided to the secured workers and their families.

Pakistan Bait-ul-Mal: Pakistan Bait-ul-Mal comes under the jurisdiction of

ministry of social welfare and special education and has a wide network in all the

provinces and districts with its head office in Islamabad. It is running a number of

projects in the health, education and social sectors, on behalf of the government of

Pakistan, in partnership with various donors and organizations. Tawana Pakistan

is a social sector project aiming at improving the nutritional status of the girl child

in 29 high poverty districts of Pakistan. It also helps in improving school enrolment

and retention of girls in the schools and is covering around half a million children in

the targeted districts at primary level. Bait-ul-Mal provides individual financial

assistance (IFA) to the poor, destitute women, orphans and disabled persons for

medical treatment and rehabilitation

Others: A number of organizations in public sector are performing a commendable

job in provision of healthcare at various segments. These include Pakistan

Telecommunication organization, Fauji Foundation, Armed Forces Institutions and

others.TP

2.4 Role of Public Sector:

Since we have entered into a scenario of post 18 th Amendment, the provincial

governments are free to make their own policies as the relevant ministries have

been devolved to the respective provinces.


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16

Now the onus is on the provinces now to formulate a policy for providing health

care to the people either through a Health Insurance Scheme or improving its

present health care system.

Here we can study an effort already made by the Sindh Government to provide

health insurance cover, at the beginning to its employees, as a pilot project and its

further extension if results are fruitful.

A meeting of the provincial cabinet was held on July 30 th,2005 under the

chairmanship of Chief Minister, Sindh wherein it was decided to provide health

insurance cover to all employees of Sindh Government.*

Finance Department, as a test case initiated a pilot project whereby health insurance

cover was provided to all government employees of Sindh working at the Sindh

secretariat only. The intent was to weigh benefits and costs and if successful the

facility may be extended to all employees of the Sindh Government. Since july

2006 several annual contracts were awarded to private insurance firms for providing

health cover to approximately 22000 lives which included around 2400 employees

and their families. Every year an approximate amount of Rs100 million is spent.

Over the five years of this initiative, the Finance Department has continuously tried

to make improvements in the facilities being extended to insured employees, but the

insurance companies failed to come up to the expectations of the employees.

Moreover the incidents of fake and forged reimbursement claims by the government

employees have increased multifold. Over the said period of time neither the

insurance companies nor the people insured had achieved the stage of maturity to

provide and avail the world class health cover benefits. Thus it is felt that if the

Government now tries to expand the cover to other non-secretariat employees, it

will not yield desired results.

A summary was moved for Chief Minister Sindh in November,2010 by Finance

Department to discontinue this facility as it was discriminatory to other employees

of Sindh Government and on the basis of enhancement of Medical Allowance of the


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17

non-gazetted staff and 15% medical allowance to gazetted officers. In addition the

fake medical claims with the collaboration of insurance companies was another

reason. Hence the scheme was discontinued from 2010 and the tenders floated for

the period from 2010-2013 were also cancelled.

One can see here that at the first instance, the General Insurance companies who

were contacted by the government, expressed their inability to provide health

insurance to all the employees of Sindh Government due to capacity and financial

constraints. However MS/ Allianz EFU Health Insurance Limited agreed to insure

7000 employees including both secretariat (4000) and non-secretariat(3000)

employees along with the spouse, children and dependent parents at the annual

premium of Rs 4276.00 per person.

Secondly it was no doubt a scheme which was discriminatory in nature that Sindh

Government is only catering Sindh secretariat employees; instead this policy should

have been extended across the board for all Sindh Government employees.

Thirdly there was a financial constraint on part of the Government also as they were

required to pay Rs 9.733 billion annual premium to insurance companies to give

health cover to 540740 provincial as well as dist. Government employees (BPS 1 to

BPS 22) at the premium of Rs 3000 per life. If we take an average of 6 per family,

the total number of lives to be insured comes to 3,244,440.

And lastly there was an element of corruption which was detected on the basis of

false and fake insurance claims of employees in collaboration of insurance

companies as both are the beneficiaries in this business. It is because of the inherent

culture prevailing in the society. Since there was no bonus for the employees who

do not claim for the entire policy period, they can go for forged claims to get the

benefit.


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18

SECTION-3

NEED FOR DESIGNING HEALTH INSURANCE IN

PAKISTAN

3.1 Health Card Scheme.

Pakistan needs to bring reform strategy to its much neglected health sector;

For this a Health card scheme can be introduced which will cover the essential

primary health care services as well as Hospital care at a secondary level. To make

it a successful scheme, private sector, especially NGOs can play its due leading

role. A voluntary insurance scheme can also be managed by regional Health Boards

to be formed as suggested from time to time. Way back in 1997 the then Finance

Minister declared at a seminar that the National Health card Scheme would be

launched very soon to provide health facilities to the poor and the middle class.

Under this scheme the government was planning to lease out its medical facilities to

doctors who will be paid a lump sum per person registered per year to provide

health care to the public.

Knowing the limited scope of the existing scheme, it is not clear what

facilities a health card bearer, who would pay a meager premium per year, would

get. If he can only get the professional services of a doctor, this would hardly be

sufficient Diagnostic services like X-rays, laboratory tests etc would be needed in

many cases as an aid to treatment. These are very costly besides, medicines would

be required whose prices are soaring every day. If diagnostic services and

medicines would not be available under this scheme, then the purpose of this very

scheme would be defeated. Therefore the facilities should be clearly defined.

This scheme also envisages that the government was considering to launch it

as a pilot project in some rural areas. Rural operations in respect of health care had

never been a successful venture. Hence its launching would also be plagued with

lots of ifs and buts.

Lastly who would control the funds collected from individuals against each

health card? This part of scheme is to be elaborated too. It is also true that the

government would not like to abandon its role in expanding primary health


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facilities, if health care is to be made available to everyone. At present only 55% of

the population has access to health services i.e. over 60 million people do not have

any health services. They are uncared for and cannot afford the health care.

Although the government is sincere in eradicating the social evils in order to

provide the masses with a healthy and prosperous life, but the government cannot

do this herculean task alone because it needs billions and billions of rupees.

Unfortunately the government is already short of funds.

Therefore the remedy lies in approaching the Private sector to come forward

and shoulder the responsibility of the government in such altruistic ventures. But we

also know that the private sector has the reputation of investing in those projects

where there is profit.

3.2 Factors affecting premium.

So far the bulk of health insurance business premium comprises of largely

corporate clients. Personal / Individual health insurance has a huge potential but

most of the insurance companies are not fully prepared to market this product due

to lack of expertise and exposure to this aspect of insurance. Health Insurance has

however gained substantial business momentum in the past couple of years in the

Pakistan insurance market. This being a new product with excellent customer

acceptability gave insurance industry another opening for their premium generation.

However being in the early stages of its life cycle, this product has produced some

difficulty in creating profitability for the insurance companies in Pakistan. This fact

is evident by making a comparative study of companies who are marketing

insurance business.

In Pakistan today most of its general insurance companies are marketing the

product of Health Insurance. It is evident from the market trend that this product is

gaining popularity. The growth rate of premium of this product is steadily growing.The cumulative health insurance premium in Pakistan presently lies between rupees

500 to 750 million. The highly technical nature of this business and lack of


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20

manpower expertise in this market together with the fact that its a low profit

business at least in the initial phases the trend to adopt this product is cautious.11

Cost Drivers in Health Insurance

Technology / Specialization

Prescription Drugs

Medical Inflation

Moral Hazard / Adverse Selection

Usage Increase

New treatments

Unnecessary treatments

3.3 Hospital networks associated with Health insurance.

12

There are some 75-100 hospitals all over the country that is on approved

panel list and contract of all the insurance companies doing health insurance

business. Most of these hospitals in Pakistan are not fully aware with the concept

and working of health insurance. This is an added factor in hindering the pace of

progress for health insurance to grow in the country. The basic infrastructure of

insurance oriented hospital appears to be an important organ in establishing health

insurance business. Except for few most of them are below any good standards

worthy of insurance business. It will be obvious that the best amongst these are

attracting the largest share of insurance patients. Agha Khan University Hospital

Karachi and Shifa Intl. Hospital Islamabad are leading hospitals in this respect.

The concept of building up some hospitals by the insurance companies to

provide services to its customer is vaguely present in some minds. This may be a

good idea in order to curtail losses of the insurer but this appears to be a little

premature. Some sort of collaboration between the insurance company and hospital

may become possible in future especially in area of executing Personal / Individual

Health Insurance.


http://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+In+Pakistan+today+most+of+its+general+insurance+companies+are+marketing+the+product+of+Health+Insurance.+It+is+evident+from+the+market+trend+that+this+product+is+gaining+popularity.+The+growth+rate+of+premium+of+this+product+is+steadily+growing.+The+cumulative+health+insurance+premium+in+Pakistan+presently+lies+between+rupees+500+to+750+million.&tbo=1&sa=X&ei=Yp3FT8OHOInV4QT_nNj9BQ&ved=0CA0QHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+In+Pakistan+today+most+of+its+general+insurance+companies+are+marketing+the+product+of+Health+Insurance.+It+is+evident+from+the+market+trend+that+this+product+is+gaining+popularity.+The+growth+rate+of+premium+of+this+product+is+steadily+growing.+The+cumulative+health+insurance+premium+in+Pakistan+presently+lies+between+rupees+500+to+750+million.&tbo=1&sa=X&ei=Yp3FT8OHOInV4QT_nNj9BQ&ved=0CA0QHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+In+Pakistan+today+most+of+its+general+insurance+companies+are+marketing+the+product+of+Health+Insurance.+It+is+evident+from+the+market+trend+that+this+product+is+gaining+popularity.+The+growth+rate+of+premium+of+this+product+is+steadily+growing.+The+cumulative+health+insurance+premium+in+Pakistan+presently+lies+between+rupees+500+to+750+million.&tbo=1&sa=X&ei=Yp3FT8OHOInV4QT_nNj9BQ&ved=0CA0QHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+There+are+some+75-100+hospitals+all+over+the+country+that+is+on+approved+panel+list+and+contract+of+all+the+insurance+companies+doing+health+insurance+business.+Most+of+these+hospitals+in+Pakistan+are+not+fully+aware+with+the+concept+and+working+of+health+insurance.+This+is+an+added+factor+in+hindering+the+pace+of+progress+for+health+insurance+to+grow+in+the+country.&tbo=1&sa=X&ei=sJ3FT4r2MYyL4gSXr_GtBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+There+are+some+75-100+hospitals+all+over+the+country+that+is+on+approved+panel+list+and+contract+of+all+the+insurance+companies+doing+health+insurance+business.+Most+of+these+hospitals+in+Pakistan+are+not+fully+aware+with+the+concept+and+working+of+health+insurance.+This+is+an+added+factor+in+hindering+the+pace+of+progress+for+health+insurance+to+grow+in+the+country.&tbo=1&sa=X&ei=sJ3FT4r2MYyL4gSXr_GtBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+There+are+some+75-100+hospitals+all+over+the+country+that+is+on+approved+panel+list+and+contract+of+all+the+insurance+companies+doing+health+insurance+business.+Most+of+these+hospitals+in+Pakistan+are+not+fully+aware+with+the+concept+and+working+of+health+insurance.+This+is+an+added+factor+in+hindering+the+pace+of+progress+for+health+insurance+to+grow+in+the+country.&tbo=1&sa=X&ei=sJ3FT4r2MYyL4gSXr_GtBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+There+are+some+75-100+hospitals+all+over+the+country+that+is+on+approved+panel+list+and+contract+of+all+the+insurance+companies+doing+health+insurance+business.+Most+of+these+hospitals+in+Pakistan+are+not+fully+aware+with+the+concept+and+working+of+health+insurance.+This+is+an+added+factor+in+hindering+the+pace+of+progress+for+health+insurance+to+grow+in+the+country.&tbo=1&sa=X&ei=sJ3FT4r2MYyL4gSXr_GtBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:gis.emro.who.int/HealthSystemObservatory/PDF/Pakistan/Health%2520care%2520financing%2520and%2520expenditure.pdf+In+Pakistan+today+most+of+its+general+insurance+companies+are+marketing+the+product+of+Health+Insurance.+It+is+evident+from+the+market+trend+that+this+product+is+gaining+popularity.+The+growth+rate+of+premium+of+this+product+is+steadily+growing.+The+cumulative+health+insurance+premium+in+Pakistan+presently+lies+between+rupees+500+to+750+million.&tbo=1&sa=X&ei=Yp3FT8OHOInV4QT_nNj9BQ&ved=0CA0QHzAA


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SECTION-4

COMPARATIVE STUDY OF HEALTH INSURANCE POLICY

WITH OTHER COUNTRIES

4.1 India and other developing countries13

Over the last 50 years India has achieved a lot in terms of health

improvement. But still India is way behind many fast developing countries such as

China, Vietnam and Sri Lanka in health indicators (Satia et al 1999). In case of

government funded health care system, the quality and access of services has

always remained major concern. A very rapidly growing private health market has

developed in India. This private sector bridges most of the gaps between what

government offers and what people need. However, with proliferation of various

health care technologies and general price rise, the cost of care has also become

very expensive and unaffordable to large segment of population. The government

and people have started exploring various health financing options to manage

problems arising out of growing set of complexities of private sector growth,

increasing cost of care and changing epidemiological pattern of diseases.

The new economic policy and liberalization process followed by the

Government of India since 1991 paved the way for privatization of insurance sector

in the country. Health insurance, which remained highly underdeveloped and a less

significant segment of the product portfolios of the nationalized insurance

companies in India, is now poised for a fundamental change in its approach and

management. The Insurance Regulatory and Development Authority (IRDA) Bill,

recently passed in the Indian Parliament, is important beginning of changes having

significant implications for the health sector.

The privatization of insurance and constitution IRDA envisage to improve theperformance of the state insurance sector in the country by increasing benefits from

competition in terms of lowered costs and increased level of consumer satisfaction.

However, the implications of the entry of private insurance companies in health

13www.iimahd.ernet.in/~dileep/PDF%20Files/Insurance.pd fSimilar
http://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:www.iimahd.ernet.in/~dileep/PDF%2520Files/Insurance.pdf+Over+the+last+50+years+India+has+achieved+a+lot+in+terms+of+health+improvement.+But+still+India+is+way+behind+many+fast+developing+countries+such+as+China,+Vietnam+and+Sri+Lanka+in+health+indicators+(Satia+et+al+1999).+In+case+of+government+funded+health+care+system,+the+quality+and+access+of+services+has+always+remained+major+concern.+A+very+rapidly+growing+private+health+market+has+developed+in+India.&tbo=1&sa=X&ei=1Z3FT-ecK6ii4gTjmNywBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:www.iimahd.ernet.in/~dileep/PDF%2520Files/Insurance.pdf+Over+the+last+50+years+India+has+achieved+a+lot+in+terms+of+health+improvement.+But+still+India+is+way+behind+many+fast+developing+countries+such+as+China,+Vietnam+and+Sri+Lanka+in+health+indicators+(Satia+et+al+1999).+In+case+of+government+funded+health+care+system,+the+quality+and+access+of+services+has+always+remained+major+concern.+A+very+rapidly+growing+private+health+market+has+developed+in+India.&tbo=1&sa=X&ei=1Z3FT-ecK6ii4gTjmNywBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:www.iimahd.ernet.in/~dileep/PDF%2520Files/Insurance.pdf+Over+the+last+50+years+India+has+achieved+a+lot+in+terms+of+health+improvement.+But+still+India+is+way+behind+many+fast+developing+countries+such+as+China,+Vietnam+and+Sri+Lanka+in+health+indicators+(Satia+et+al+1999).+In+case+of+government+funded+health+care+system,+the+quality+and+access+of+services+has+always+remained+major+concern.+A+very+rapidly+growing+private+health+market+has+developed+in+India.&tbo=1&sa=X&ei=1Z3FT-ecK6ii4gTjmNywBQ&ved=0CAsQHzAAhttp://www.google.com.pk/search?hl=en&biw=1280&bih=907&q=related:www.iimahd.ernet.in/~dileep/PDF%2520Files/Insurance.pdf+Over+the+last+50+years+India+has+achieved+a+lot+in+terms+of+health+improvement.+But+still+India+is+way+behind+many+fast+developing+countries+such+as+China,+Vietnam+and+Sri+Lanka+in+health+indicators+(Satia+et+al+1999).+In+case+of+government+funded+health+care+system,+the+quality+and+access+of+services+has+always+remained+major+concern.+A+very+rapidly+growing+private+health+market+has+developed+in+India.&tbo=1&sa=X&ei=1Z3FT-ecK6ii4gTjmNywBQ&ved=0CAsQHzAA


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sector are not very clear. The recent policy changes will have been far reaching and

would have major implications for the growth and development of the health

sector. There are several contentious issues pertaining to development in this sector

and these need critical examination. These also highlight the critical need for

policy formulation and assessment. Unless privatization and development of health

insurance is managed well it may have negative impact of health care especially to

a large segment of population in the country.

During the last 50 years India has developed a large government health

infrastructure with more than 150 medical colleges, 450 district hospitals, 3000

Community Health Centers, 20,000 Primary Health Care centers and 130,000 Sub-

Health Centers. On top of this there are large number of private and NGO health

facilities and practitioners scatters though out the country.

Over the past 50 years India has made considerable progress in improving its

health status. Death rate has reduced from 40 to 9 per thousand, infant mortality rate

reduced from 161 to 71 per thousand live births and life expectancy increased from

31 to 63 years.

India spends about 6% of GDP on health expenditure. Private health care

expenditure is 75% or 4.25% of GDP and most of the rest (1.75%) is government

funding. At present, the insurance coverage is negligible. Most of the public

funding is for preventive, promotive and primary care programmes while private

expenditure is largely for curative care. Over the period the private health care

expenditure has grown at the rate of 12.84% per annum and for each one percent

increase in per capital income the private health care expenditure has increased by

1.47%. Number of private doctors and private clinical facilities are also expanding

exponentially. Indian health financing scene raises number of challenges, which

are:

increasing health care costs,

high financial burden on poor eroding their incomes,

increasing burden of new diseases and health risks and

neglect of preventive and primary care and public health functions due to

underfunding of the government health care.


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Given the above scenario exploring health-financing options becomes critical.

Health Insurance is considered one of the financing mechanisms to overcome some

of the problems of our system.

Health insurance is very well established in many countries. But in India it is

a new concept except for the organized sector employees. In India only about 2 per

cent of total health expenditure is funded by public/social health insurance while 18

per cent is funded by government budget. In many other low and middle income

countries contribution of social health insurance is much higher

It is estimated that the Indian health care industry is now worth of Rs. 96,000

crore and expected to surge by 10,000 crore annually. The share of insurance

market in above figure is insignificant. Out of one billion population of India 315

million people are estimated to be insurable and have capacity to spend Rs. 1000 as

premium per annum. Many global insurance companies have plans to get into

insurance business in India. Market research, detailed planning and effective

insurance importance. Given the health financing and demand scenario, health

insurance has a wider scope in present day situations in India. However, it requires

careful and significant effort to tap Indian health insurance market with proper

understanding and training.

There are various types of health coverage in India. Based on ownership the

existing health insurance schemes can be broadly divided into categories such as:

Government or state-based systems

Market-based systems (private and voluntary)

Employer provided insurance schemes

Member organization (NGO or cooperative)-based systems

Government or state-based systems include Central Government Health Scheme

(CGHS) and Employees State Insurance Scheme (ESIS). It is estimated that

employer managed systems cover about 20-30 million of population. The schemes

run by member-based organizations cover about 5 per cent of population in various

ways. Market-based systems (voluntary and private) have Mediclaim scheme which

covers about 2 million of population. There are many employers who reimburse


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costs of medical expenses of the employees with or without contribution from the

employee. It is estimated that about 20 million employees may be covered by such

reimbursement arrangements. There are several government and private employers

such as Railway and Armed forces and public sector enterprises that run their own

health services for employees and families. It is estimated that about 30 million

employees may be covered under such employer managed health services .

General Insurance Corporation (GIC) and its four subsidiary companies and

Life Insurance Corporation (LIC) of India have various health insurance products.

Health insurance in a narrow sense would be an individual or group

purchasing health care coverage in advance by paying a fee called premium. In its

broader sense, it would be any arrangement that helps to defer, delay, reduce or

altogether avoid payment for health care incurred by individuals and households.

Given the appropriateness of this definition in the Indian context, this is the

definition, we would adopt. The health insurance market in India is very limited

covering about 10% of the total population. The existing schemes can be

categorized as:

1) Voluntary health insurance schemes or private-for-profit schemes;

2) Employer-based schemes;

3) Insurance offered by NGOs / community based health insurance, and

4) Mandatory health insurance schemes or government run schemes (namely ESIS, CGHS).

Voluntary health insurance schemes or private-for-profit schemes14

In private insurance, buyers are willing to pay premium to an insurance

company that pools people with similar risks and insures them for health expenses.

The key distinction is that the premiums are set at a level, which provides a profit to

third party and provider institutions. Premiums are based on an assessment of the

risk status of the consumer (or of the group of employees) and the level of benefits

provided, rather than as a proportion ofthe consumers income.

In the public sector, the General Insurance Corporation (GIC) and its four

subsidiary companies (National Insurance Corporation, New India Assurance

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Company, Oriental Insurance Company and United Insurance Company) and the

Life Insurance Corporation (LIC) of India provide voluntary insurance schemes.

Of the various schemes offered, Mediclaim is the main product of the GIC.

The Medical Insurance Scheme or Mediclaim was introduced in November 1986

and it covers individuals and groups with persons aged 580 yrs.

The year 1999 marked the beginning of a new era for health insurance in the

Indian context. With the passing of the Insurance Regulatory Development

Authority Bill (IRDA) the insurance sector was opened to private and foreign

participation, thereby paving the way for the entry of private health insurance

companies. The Bill also facilitated the establishment of an authority to protect the

interests of the insurance holders by regulating, promoting and ensuring orderly

growth of the insurance industry.

ICICI Lombard: ICICI Lombard offers Group Health Insurance Policy. This

policy is available to those aged 5 80 years, (with children being covered with

their parents) and is given to corporate bodies, institutions, and associations. The

sum insured is minimum Rs 15 000/- and a maximum of Rs 500 000/-. The

premium chargeable depends upon the age of the person and the sum insured

selected.

. Royal Sundaram Group: The Shakthi Health Shield policy offered by the

Royal Sundaram group can be availed by members of the womens group, their

spouses and dependent children. No age limits apply. The premium for adults aged

up to 45 years is Rs 125 per year, for those aged more than 45 years is Rs 175 per

year. Children are covered at Rs 65 per year. Under this policy, hospital benefits up

to Rs 7 000 per annum can be availed, with a limit per claim of Rs 5 000. Other

benefits include maternity benefit of Rs 3.

Insurance offered by NGOs / community-based health insurance Community-

based funds refer to schemes where members prepay a set amount each year for

specified services. The premia are usually flat rate (not income-related) and

therefore not progressive. Making profit is not the purpose of these funds, but rather

improving access to services. Often there is a problem with adverse selection

because of a large number of high-risk members, since premiums are not based on


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assessment of individual risk status. Exemptions may be adopted as a means of

assisting the poor, but this will also have adverse effect on the ability of the

insurance fund to meet the cost of benefits. Community-based schemes are typically

targeted at poorer populations living in communities

Central Government Health Scheme (CGHS) Since 1954, all employees of the

Central Government (present and retired); some autonomous and semi-government

organizations, MPs, judges, freedom fighters and journalists are covered under the

Central Government Health Scheme (CGHS). This scheme was designed to replace

the cumbersome and expensive system of reimbursements (GOI, 1994). It aims at

providing comprehensive medical care to the Central Government employees and

the benefits offered include all outpatient facilities, and preventive and promotive

care in dispensaries. Inpatient facilities in government hospitals and approved

private hospitals are also covered. This scheme is mainly funded through Central

Government funds, with premiums ranging from Rs 15 to Rs 150 per month based

on salary scales. The coverage of this scheme has grown substantially with

provision for the non-allopathic systems of medicine as well as for allopathy.

Beneficiaries at this moment are around 432 000, spread across 22 cities.

Employee and State Insurance Scheme (ESIS) The enactment of the Employees

State Insurance Act in 1948 led to formulation of the Employees State Insurance

Scheme. This scheme provides protection to employees against loss of wages due to

inability to work due to sickness, maternity, disability and death due to employment

injury.

4.2 United States of America

The regulation and administration of the Health Care Finance in United States

of America is incoherent as reflected by its Financing. Although it is termed as a

Free Market System yet the government pays for more than two-third of all care.The government programs directly insure one third of the population and for those

who obtain private coverage one-third of the bill is paid through tax subsidy. And

about 15 percent of Americans lack any health insurance at all.


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The variant coverage arrangements add to the complexity. Several Americans

covered under traditional Medicare, still have conventional insurance where they

can consult any provider they wish without the need for prior approval.

A managed care system is adopted by majority of the private polices in which

the insurer oversees coverage, but there is an assortment of managed care

arrangements which span from restrictive HMOs to flexible point-of-service plans.

American health insurance has a complex structure. The three foremost of

interest are the link between employment and coverage, the effect of financing

mechanisms on the business side of health care, and the intertwined roles of

government and the private sector. It is imperative to understand that financing is

central to the overall health care system as it is in every other industry because any

business is shaped by the flow of money.

In todays practice the employment-insurance link produces several

disagreeable effects which consist of the inaccessibility of insurance for those

without regular employment at companies that offer health benefits and crushing

financial burden on firms that do insure their workers.

To need to create an alternative universal system is created based on the

discussion of the disadvantages of employment-based insurance. This universal

system would cover everyone regardless of employment status.

Primary care physicians tend to favor a single payer national system while

specialists tend to oppose the idea. Large employers increasingly favor a national

system which would take the burden of coverage off of their shoulders, while

smaller companies tend to fear the possible tax effects of a new government

program. Hospitals generally favor a national system that would reimburse them for

the uncompensated emergency room care that they must provide. A hidden and

important force is insurance brokers, who exert significant political influence in

support of the present employment-based system because it is the basis for their

business.

The universal coverage necessarily means a single-payer, government-run

system. However, this is only one kind of approach. The Clinton proposal of the

1990s called for multiple private players under federal coordination. A prominent


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current proposal would mandate that individuals purchase coverage for themselves

in the private market. By presenting the many different ways in which universal

coverage could be achieved and the advantages and disadvantages of each, students

can see the complexities that reform presents.

The balance between the government and private roles in health care finance

is particularly complex. The single most important government role is the

administration of Medicare. An important topic for student discussion is the

pervasive influence of Medicare on American health care beyond its insurance for

the elderly. After the successful implementation of DRG reimbursement in the

1980s, many private insurers followed suit. The business dynamics of DRGs have

altered hospital-physician relations, with many institutions structuring their medical

staffs based on utilization efficiency and profitability in addition to quality. Today,

Medicare is piloting programs to rank hospitals according to quality criteria

and to base physician reimbursement on performance measures. If successful, these

innovations are certain to spread to private payers.

Medicaid is the ultimate example of a complex federal-state relationship.

Understanding the complicated arrangements through which the states administer

Medicaid benefits under federal oversight is a daunting task. Medicaid is now

supplemented by state Childrens Health Insurance Programs (SCHIP). It can be

used to explore the balance between state-level flexibility and federally-imposed

consistency that pervades much health policy.

Regulation of the private insurance market best demonstrates the

interconnectedness of disparate regulatory roles in this sphere. In theory, private

insurance is regulated by the states. However, in health care, the situation is far

from straightforward. The federal Employee Retirement Income Security Act of

1974 (ERISA) exempts many aspects of coverage from state jurisdiction in a

convoluted manner that defies clear legal analysis. Federal mandates through

COBRA and HIPAA govern key aspects of the initiation and termination of

employment coverage. Perhaps most importantly of all, federal and state tax

exemptions for premiums paid by employers and employees fund almost one-third

of all premiums. A taste of this complexity will help students to appreciate the


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difficulties that all parties, providers and patients alike, have in navigating the

system.

Antitrust enforcement highlights most starkly the differences between health

care and the traditional business model. The roles of buyers and sellers are reversed

from the situation that the architects of antitrust law envisioned. The federal

Sherman Act was passed in 1890 to protect small purchasers from large monopolies

that fixed prices, limited supply, and engaged in predatory practices. In many

aspects of health care, however, the actual buyers are not the patients but rather

large insurance companies, which often have monopoly power in their markets. The

sellers are often small providers, such as physician practices. The potential for

abuse is mostly on the buyer side, yet the Sherman Act mostly restricts the sellers.

For this reason, physicians are limited in their ability to collectively bargain with

HMOs over reimbursement rates and health systems are limited in the amount of

market share they can acquire to gain bargaining leverage.


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SECTION-5:

ANALYSIS

5.1 Government intentions and capability.

Government intentions and capability are very much evident from the latest

example of announcement of Health insurance scheme launched. State Life

Insurance Corporation Chairman Shahid Aziz Siddiqui and BISP Secretary recently

signed an agreement for the health insurance scheme. But this was done at the

expense of 1.78 million beneficiaries of Benazir Income Support Programme which

were removed from the list of beneficiaries because of budgetary constraints.

Currently about six million families registered with the BISP receive the stipend.

It was announced by BISP chief that under the programme a health insurance

scheme had been launched which will provide free medical treatment to 75000

needy and deserving families.

This scheme had been started in Faisalabad where Rs 25000 would be given

to each deserving family to get treatment from six private hospitals on panel. Once

this scheme is spread across the country, about six million more people will be

benefited during the current financial year.

Government has also consulted private insurance companies before launchingthe scheme. They are planning to open the counters of the State Life Insurance

Corporation in hospitals where the charges will be deducted from the card presented

by the beneficiaries (card holders) after getting the treatment. The money would be

recouped every year to the cards as per ceiling that can only be used for the

treatment of in-house / admitted patients.

This insurance scheme is being financed and technically supported by World

Bank and German company, GIZ. Health scheme is actually one of the four

components of BISP which was announced but yet to be proved successful after its

implementation and operation.

It is quite imperative from the above mentioned scheme that Government has

initiated this scheme on a very small scale as compared to the total population and

that too on a localized basis. Resultantly it is presumed that it is not intended by the


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Government as a general policy to cover the masses at large so the benefit should

reach every corner of the country.

It is probably a smart political move to gain short term favours of the public

and to win their votes for the coming elections.

Another important factor is that the scheme is launched at the cost of another

scheme which was already benefitting other group of people, thus bringing sad

news for them.

What was needed is altogether a new and well designed scheme at a national

level or to be adopted at a provincial level specially in the backdrop of 18 th

amendment, wherein the provinces can take the initiative and lead from the front to

alleviate the basic health requirements of the poor and needy citizens.

5.2 Availability of funds and health financing.

The Government of Pakistan has been spending 0.6 to 1.19% of its GDP and

5.1 to 11.6% of its development expenditure on health over the last 10 years.

However, these figures reflect spending by the Ministry of Health and the

departments of health and do not take into account other public sector health

services, which are delivered by the Employees Social Security institutions, military

sources, the Ministry of Population Welfare and other semiautonomous government

agencies. These estimates are also not inclusive of the expenses incurred on treating

government employees, who are entitled to free treatment in government hospitals

costs that are not clearly visible. The actual level of total public sector expenditure

on the health sector is, therefore, difficult to calculate; however, estimates place this

figure at 3.5% of the GDP.

Even this is meager by many standards. It has been reported that the total

health expenditure doubled in the period 1991/92 to 1997/98; significant increases

in budgetary allocations for health have also been achieved more recently with a100% increase observed over the last five years. However, these figures are not

adjusted for inflation and population increase and thus the real per-capita growth in

health expenditure is never reported. This needs to be determined in order to make a

compelling argument for further increases. Enhanced allocations must also

favourably impact the ratio between development and non-development budgets. A


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comparison of the 2003/04 federal and provincial development and non-

development budgets shows a major dominance of non-development budget in the

provinces? See Figure 6. This gap reflective of a worrying trend appears to have

widened over the last 10 years whereas at the federal level, trends have been

favourable.

Health is a national issue in which federation, provinces, districts and other

partners have important stakes. The existing resource allocation and budgeting

system is based upon budgetary demands covering both the development and

revenue side of the expenses. Budget submissions are supposed to be proposed by

those who manage andhold the budgets.

It is on record that averagely speaking about 80% of the health budget over

the last decade has been provided by government of Pakistan through its federal and

provincial health ministries and ministry of population welfare. The remaining

amount comes from the donor contributions which is approximately 21% and

mostly spent on preventive programmes and also used for technical assistance,

community development and consultancies; This donor share has been fluctuating

from 4-16% in the federal PSDP for the last 5 years but this contribution has

significantly increased as a result of the global changes in political scenario.

The public sector is spending Rs 375.00 (US$ 6.4) per head on health of

Pakistani population in 2004-5, as per our analysis. The share of donors and

international agencies is Rs 80.00 (US$ 1.3) per person out of the total amount. The

reported per capita health spending (THE) in Pakistan is estimated as US$ 18 of

which only one third is spent by the public sector resources. This estimate is

comparable with our analysis.

The minimum level of financing needed to cover essential interventions by

the public sector health care systems amounts to US$ 30-40 per capita. By this

account Pakistan needs to increase its current health sector spending significantly.

In many ways Pakistans resource gap is huge- both local and donor- which is

required to provide health care to all Pakistanis by a certain target date. Pakistan is

already lagging behind in achieving MDG targets in the two important areas of

maternal and child health. At the pace shown in the last about 15 years it will not be


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possible to meet the required reduction in infant and maternal mortality in the next

10 years i.e. by the year 2015.

Achieving the MDG targets for Pakistan will not be a likelihood unless

investment is increased substantially in these two areas of mother and child health

in the public sector by the government and donors alike. A large amount of money

spent in pu

Importance of Health Insurance in Pakistan

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