International rating agency Moody’s Investors Service in its latest report has said that the launch of government’s flagship health insurance scheme, Ayushman Bharat, is credit positive for India’s insurers as it will help grow health premiums and provide insurers with cross-selling and servicing opportunities. The Ayushman Bharat-National Health Protection Mission (AB-NHBM) will be launched on September 25, 2018. The scheme will cover over 100 million poor families and would provide a health insurance coverage of up to Rs 500,000 per family per year for secondary and tertiary care hospitalisation.
As per the report, health insurance contributes around 23% of general insurance premiums and is one of insurers main drivers of growth. Health premiums have grown at a compound annual growth rate of 18% during financial year 2011-12 to 2016-17. As of FY17, only 440 million people were covered under health insurance schemes, and the rating agency expects the AB-NHBM to increase that number by 500 million.
However, Moody’s said out of the 29 states, 23 have chosen to run the scheme as a trust model, which will diminish insurers’ growth prospects. It expects that insurers with scale advantages and track records of managing large insurance schemes will benefit from the health programme. Trust models entail government funds being allocated to a trust fund rather than to insurance premiums, and the trust fund making disbursements for claims, rather than insurers disbursing claims. When the trust fund is depleted, the government will need to provide additional funds.