Health Insurance as a Healthcare Financing Mechanism in India: Key Strategic Insights and a Business Model Perspective

Rohit Kumar,Aditya Duggirala

doi:10.1177/02560909211027089

Rohit Kumar, Aditya Duggirala

Open Access

https://doi.org/10.1177/02560909211027089

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Abstract

This study provides strategic insights and a business model perspective on health insurance as a vehicle for financing healthcare. It uses both primary (expert interview) and secondary data to investigate the overall disease burden and healthcare industry trends and track healthcare financing through the health insurance mechanism in India. To identify the critical success factors and to gain a business model perspective within the health insurance industry, telephonic and face-to-face interviews were held with 27 experts in the healthcare, insurance, and strategic management field. The study’s findings suggest that the growth of health insurance as a healthcare financing mechanism in India has been challenged continuously and impacted by multiple changes in the health insurance and healthcare industry over the last decade. One of the critical challenges faced by insurance companies is the high incurred claim ratio. We find the Indian health insurance industry to be very competitive and that the focus on critical success factors can help insurance companies gain a competitive advantage. The health insurance business model is unique, with varying configurations, and broadly comprises strategic choices and consequences. In this article, drawing from the strategic management literature on the resource-based view (RBV) and insights gained from the interviews of healthcare and health insurance experts, we highlight the six critical success factors relevant for competing in the health insurance business. We also list five strategic choices that can help health insurance companies improve their profitability and gain a sustained competitive advantage. We recommend that the insurance companies design and develop an innovative business model centred around lowering the claim ratio and simultaneously increasing the customer willingness to pay. To increase the customer willingness to pay and reduce the claim ratio, the insurance companies should focus on the six critical success factors and invest in the five strategic choices.

Highlights

The urgent call for a sustainable health system, characterized by the delivery of high-quality care while keeping the cost of that care’s provision reasonably low across the world, is not a recent phenomenon (Declaration, 2007)
We find the Indian health insurance industry to be very competitive and that the focus on critical success factors can help insurance companies gain a competitive advantage
To achieve the second and third research objectives, that is, to identify the critical success factors and business model within the health insurance industry, telephonic and face-to-face interviews were held with experts in healthcare, insurance, and strategic management

Summary

Introduction

The urgent call for a sustainable health system, characterized by the delivery of high-quality care while keeping the cost of that care’s provision reasonably low across the world, is not a recent phenomenon (Declaration, 2007). A failed attempt to address these threats and challenges will create huge financial burdens for both individual countries and the citizens living in them. The factors such as focusing on input-based financing and volume rather than value, changing demographic and lifestyle trends, increasing public health emergencies, and high medical inflation burden the health systems. Unless these factors are addressed, health systems are likely to become further unsustainable in future (Thomson et al, 2009). One possible way to manage the financial burden from healthcare is through risk transfer and using health insurance as a healthcare financing mechanism (Lu & Hsiao, 2003)

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