India Healthcare: From Health to Wealth

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This is part 3 of a series on healthcare impact investing in India. In the part 2 of this series, we outlined the common chronic diseases in India and how entrepreneurs are looking to provide affordable preventive solutions to these patients. In this segment, we look beyond the physical complications of chronic disease and onto the health expenses that can perpetuate poverty among India’s low-income population.

Health-related financial shocks perpetuate poverty in India


When preventive services fail to reach India’s rural and peri-urban populations, these patients often only seek help with late-stage non-communicable diseases (NCDs) when only the most invasive and expensive treatments are available. Costly hospitalizations are exacerbated by the fact that 86% of health expenditure is out-of-pocket. When main income earners become sick or die, households will sell family and revenue-generating assets to pay for healthcare. This leaves little disposable income for food and education spending, and results in inadequate support for the next generation. These health-related financial shocks are the leading cause of default among MFI clients and estimated by the WHO to push 3.5% of Indians below the poverty line.  With NCDs now the leading cause of death in low to middle income countries (LMICs), healthcare and health financing innovation are imperative to ensure poverty reduction.

While healthcare innovators work towards affordable diagnostic and preventive care solutions, others have innovated strategies to finance these onerous medical expenses. Entrepreneurs have utilized health insurance, vouchers, and cash-back programs to help absorb medical costs and prevent individual and small-business bankruptcy.

Health insurance penetrance is low, but the market is growing at a CAGR of 32%

Currently less than 15% of Indians are covered by some form of health insurance, evidenced by the high out-of-pocket expenditures. This $2.2 billion industry lags behind other LMICs in terms of penetrance, but over the past eight financial years health insurance premiums have registered a CAGR of 32 percent. While demand-side issues among the BoP have always plagued this industry, several factors are working to sustain this growth:

  • Increasing education and income levels, spurring demand and access to health services
  • Chronic nature and slow onset of NCDs driving consumers to seek insurance
  • Rapidly expanding health infrastructure in Tier II and Tier III cities and a concomitant utilization of resources
  • In early 2013, the Insurance Regulatory Development Authority (IRDA) classified health insurance as a separate category, permitting private insurers to seek tie-ups with banks

Aside from the four public sector health insurers (National, New India, Oriental, and United India), the rest of the market is shared by private sector pioneers. Apollo Munich, for example, launched a potentially game-changing “Disease Management Product” which specifically caters to patients with pre-existing ailments, such as diabetes. This product, previously feared by health insurance companies, allows patients to reduce their premiums by adhering to a regimen of primary care visits and screenings. By incentivizing preventive care, the insurance company alters the client’s risk profile and avoids the large costs of complex hospitalizations. CEO Antony Jacob states, “For every $1 invested in wellness, the company gets a return of $4-$7.” Programs like this have the potential to both provide scalable ROIs and better population health outcomes.

FFH quoteEntrepreneurs can connect patients, healthcare providers, and payers through innovative business models

While large insurance companies, like Apollo Munich, have capital to provide such products to low-income patients, they often rely on community infrastructure and rural health workers for customer acquisition. ICICI Lombard, for example, reaches clients in the informal sector through rural clinics and microfinance institutions that have already gained trust within the community. An interesting potential exists in packaging products like pediatric and family health insurance plans through clinics and schools – particularly affordable private schools.

Alka Hospital in Gujurat, for example, has leveraged their large catchment area of expectant mothers to distribute an insurance and wellness program. The Sampurna Suraksha Card (SSC) is a fixed-cost, total care package that includes antenatal care, delivery services (including Caesarean section if needed) and postnatal care at the facility. SSC costs INR 1,500 (less than $30) and can be paid in three installments of INR 500 (less than $10). This scheme covers both normal and complicated deliveries as well as regular check-ups and investigations such as ultrasound and fetal monitoring to detect abnormalities and ensure proper fetal development and mother’s health. Between 2005-2009, Alka handled 24,000 deliveries, one fifth of which were covered by SSC. This is significant because Alka has achieved financial viability, and SSC cardholders contribute to 30% to 40% of the total revenue generated by the hospital. The demand for schemes of this nature exist because although the government subsidizes care for mothers under the poverty line, there are many more that cannot afford piecemeal private care. Due to Alka Hospitals and other health initiatives, Gujarat experienced a 33.3% decrease in maternal mortality between 2003 and 2012.

medicash2Other early-stage entrepreneurs seek to fill the gaps of India’s health insurance market, like Manu Swarup and Ravitej Yadalam from MediCash. Their company offers a free cash-back program on all forms of out-of-pocket expenses, ranging from maternity care to plastic surgery. Their business model provides free health discounts to their beneficiaries (patients) and increased market visibility and penetrance to their customers (partnered hospitals and clinics).  This model has the benefit of being more intuitive than current insurance programs. Companies like MediCash have found ways around the large capital requirements of traditional insurance companies to facilitate health payment.

The health insurance market in India is largely unrealized. Much of this is due to demand-side issues, such as distrust of large insurers and the opportunity costs and complexity of filing a claim. The potential exists to connect low-income populations with medical treatment via external stakeholders such as employers, schools, and MFIs. A Freedom From Hunger report (2008) noted, “MFIs have a vested interest in protecting their clients from health-related financial shocks, so they can increase assets and become more informed and stable consumers of microfinance services.” Entrepreneurs who can incentivize demand for insurance products will surely provide value to the various institutions that rely on the health of India’s low-income population. While many hospitals and device manufacturers have made impressive strives to cost-innovate, health financing can connect BoP families to these services and ensure their economic security.

In the next segment, we will explore the unique challenges and opportunities within the maternal and neonatal health sector.

Read India Healthcare: Protecting Mother & Child >
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