Modicare: Ayushman Bharat scheme credit positive for insurers, says Moody's

The government's flagship health insurance scheme, Ayushman Bharat, is credit positive for insurance companies as it will aide in higher premium growth, international rating agency Moody's said in a report.

Prime Minister Narendra Modi, in his August 15 speech, has said that the Ayushman Bharat-National Health Protection Mission (AB-NHBM) will be launched on September 25.

The scheme will cover over 10 crore poor families and would provide a health insurance coverage of up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation.

"The launch of universal health coverage is credit positive for the country's insurers because it will help grow health premiums and provide insurers with cross-selling and servicing opportunities," said the report.

Health insurance contributes around 23 per cent of general insurance premiums and is one of insurers main drivers of growth, according to the report.

During fiscal year 2011-12 to 2016-17, health premiums have grown at a compound annual growth rate of 18 per cent.

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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.

The report, however, said out of the 29 states, 23 have chosen to run the scheme as a trust model, which will diminish insurers' growth prospects.

However, the ratings agency 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.