Health Insurance for the Informal Sector: Problems and Prospects

This paper addresses critical issues with regard to extending health insurance coverage to poor households in India, especially those working in the informal sector. It reviews and draws lessons from health insurance schemes in India and, select Asian and Latin American countries. The paper examines the feasibility of providing health insurance to poor people in terms of willingness and capacity to pay, on the basis of a pilot study undertaken in Gujarat, India in 1999.

The paper identifies sufficient potential and scope to enhance the coverage of health insurance in general and, more specifically, to the poor. It recommends that the State should play an active role in initiating schemes for the poor that use existing infrastructure, institutional arrangements and networks in public sector welfare programs. Other innovative approaches include:

• Tagging a new health insurance scheme with existing crop insurance;
• Making health insurance a component of existing poverty alleviation programs;
• Including health insurance in schemes that empower women;
• Adopting methods used in other countries to cover the self employed, such as earmarked taxation and cesses;
• Using Panchayat Raj institutions to administer, coordinate and manage new health insurance schemes.