Expansion of Health Insurance in India

Over the last fifteen years, health insurance has emerged as the flagship approach to achieving financial protection in healthcare. Most states have launched their own publicly financed health insurance programmes, while the Union Government’s Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PM-JAY) now covers nearly 60 crore people. This represents a huge shift from direct provision of care by government facilities to a model that emphasises purchasing services from a mix of public and private providers. Budgets for these schemes have ballooned, making them one of the largest items of health spending in many states.

The Risks in Over-Reliance on Insurance

Jean Drèze and others caution that health insurance, though politically popular, carries serious risks. First, it channels large sums of public money into private hospitals, which may prioritise profit over patient welfare. Reports of overbilling, unnecessary procedures, and weak grievance redressal mechanisms underline these dangers. Second, insurance schemes largely cover inpatient care, while outpatient consultations, medicines, and diagnostic tests  which account for most household health expenditure  are often excluded. Third, insurance expansion risks diverting attention and resources away from strengthening public health services, which are essential for equity and preventive care.

India’s Health Strategy and Policy Goals

India’s health policy documents, including the National Health Policy 2017 and the Ayushman Bharat framework, highlight broader goals beyond insurance. The strategy aims to expand access to primary care through Health and Wellness Centres, upgrade district hospitals, and increase the supply of trained doctors, nurses, and allied health professionals. It also emphasises universal immunisation, maternal and child health, and tackling non-communicable diseases. Insurance is seen as one pillar, but not a substitute, for robust public health systems.

Financing and Sustainability

Public health spending in India has risen in recent years but remains modest at around 2% of GDP  much lower than global averages. Within this limited budget, the growing share absorbed by insurance schemes raises concerns about fiscal sustainability. The long-term viability of state health insurance depends on cost control, regulation of providers, and greater investment in preventive health to reduce the burden of expensive hospitalisation. Without these, governments risk escalating deficits and compromised services.

Governance, Regulation and Accountability

Insurance models create complex governance challenges. Effective regulation of empanelled hospitals is critical to prevent fraud, over-treatment, or denial of legitimate claims. Yet, monitoring capacity is weak in many states. Transparency of data, independent audits, and citizen grievance mechanisms remain patchy. Stronger accountability structures are needed to ensure that insurance serves public interest rather than private enrichment.

Equity and Inclusion

India’s health strategy also faces the test of equity. While tens of crores are covered “on paper,” many poor households still struggle to access care due to lack of awareness, distance to empanelled hospitals, or informal costs. Marginalised groups  women, informal workers, tribals, and people in remote districts  remain at risk of exclusion. Insurance, by itself, cannot overcome these structural inequalities. Public facilities, especially in rural areas, remain indispensable for inclusive healthcare delivery.

The Digital and Innovation Push

An important new dimension of India’s health strategy is digital transformation. The Ayushman Bharat Digital Mission seeks to create health IDs, electronic medical records, and interoperable platforms for patients and providers. Telemedicine is being promoted to bridge rural–urban gaps. While promising, these initiatives must address issues of privacy, digital literacy, and uneven internet penetration. Without parallel strengthening of physical infrastructure, digital tools alone cannot ensure universal access.

The Way Forward

Insurance expansion has given millions some financial protection against hospital costs, but it is not a magic bullet. India must balance insurance with radical investment in public health infrastructure, preventive programmes, and human resources. Greater focus on primary healthcare, regulation of private providers, and equity in access are essential to realise the vision of Universal Health Coverage. As Jean Drèze reminds us, the real backbone of health security lies not in insurance cards, but in strong and trusted public health services.

Important health insurance schemes in India

Dimension	Key Components	Strengths / Progress	Challenges / Gaps
Universal Health Coverage (UHC)	PM-JAY, SHIPs, ensuring financial protection for inpatient care.	Big expansion of coverage, reduced catastrophic expenditure for many.	Outpatient care still often neglected; insurance doesn’t always cover non-hospitalization costs; risk of co-payments, exclusions.
Strengthening Public Health Infrastructure	Growth of health centers, medical colleges, workforce scaling up. National Health Policy’s emphasis.	More medical/nursing colleges, more MBBS/PG seats.	Shortage of staff (especially in rural, remote areas), uneven infrastructure across states, delayed implementation.
Digital Health & Innovation	Ayushman Bharat Digital Mission (ABDM), digital health IDs, telemedicine, digital health records.	Can improve access, reduce leakages, enable better data for planning.	Issues of privacy, interoperability, digital divide (internet access, tech literacy), implementation lag.
Regulation, Governance & Quality Assurance	Public-private partnerships, oversight mechanisms, guidelines for quality, regulation of insurance providers.	Some policy/regulatory frameworks exist; some states doing better than others.	Enforcement weak, quality of care varied, accountability mechanisms often ad hoc. Insurance sometimes encourages over-treatment.
Equity and Inclusion	Efforts to ensure coverage for poor, marginalized, women, rural populations. Special insurance/health programmes in under-served areas.	Many more people now covered, focus on last-mile health, social determinants of health being recognized.	Persistent inequities between states; between urban/rural; between rich/poor; caste/gender/education gaps.
Financing & Sustainability	Government spending on health (central + state), budget allocations; mix of insurance + public spending.	Rising investment, schemes like PMJAY, more recognition of health as investment.	Public expenditure as % of GDP still relatively low; insurance cost escalations; risk of fiscal burden; balancing premiums/subsidies and cost containment.

Scheme	Launch Year	Coverage	Key Features
Rashtriya Swasthya Bima Yojana (RSBY)	2008	BPL families	Cashless health insurance up to ₹30,000 per family per year for hospitalisation. Precursor to later schemes; now largely subsumed under PM-JAY.
Ayushman Bharat – PM Jan Arogya Yojana (PM-JAY)	2018	Bottom 40% of population (10+ crore families)	Health cover up to ₹5 lakh per family per year for secondary and tertiary care. World’s largest government-funded health insurance scheme.
Employees’ State Insurance Scheme (ESIS)	1952	Workers earning below wage ceiling in organized sector	Comprehensive benefits: medical care for insured workers and dependents, cash compensation during sickness, maternity, and employment injury.
Aarogyasri (Andhra Pradesh & Telangana)	2007 (AP)	Low-income families	Covers treatment for catastrophic illnesses and major surgeries in empanelled hospitals.
Chief Minister’s Comprehensive Health Insurance Scheme (Tamil Nadu)	2012 (revamped earlier schemes)	Families with annual income ≤ ₹1.2 lakh	Coverage up to ₹5 lakh per family per year for a wide range of procedures.
Mukhya Mantri Chiranjeevi Swasthya Bima Yojana (Rajasthan)	2021 (expanded version of earlier scheme)	All families in Rajasthan	Cashless treatment up to ₹25 lakh per family per year across public and private hospitals.
Karunya Health Scheme (Kerala)	2012	Poor and financially weak families	Financial assistance for critical illnesses like cancer, heart and kidney diseases.
Other State Schemes (e.g., Bhamashah Swasthya Bima Yojana – Rajasthan, Yeshasvini – Karnataka)	Varies	State-specific groups	Target different vulnerable groups; varying coverage limits and disease packages.