Public-Private Partnership Stories India: Meghalaya Health Insurance The Indian state of Meghalaya has been challenged by inadequate access to health care at all levels. Residents of the state grapple with poor infrastructure, a shortage of qualified doctors and medical staff, and limited coverage under the health insur- ance plan for the poor. As part of a broader effort to undertake health care reforms in the state, the government of Meghalaya sought IFC’s assistance to structure a public-private partnership (PPP) to expand the health insurance program to the entire population of the state and to find a qualified private sector partner. ICICI Lombard General Insurance Co Ltd., the largest private general insurance com- pany in India, emerged successfully in a competitive bidding process that involved six qualified bidders. Under the agreement with the government, ICICI will introduce a health insurance scheme that will cover all residents of Meghalaya State, regardless of their income level, complementing and building upon the existing government health insurance program for the poor. The newly-launched health insurance program is among the first of its kind in India, enabling Meghalaya to move steadily toward uni- versal health care coverage. The agreement was signed on November 27, 2012. This series provides an overview of public-private partnership stories in various infrastructure sectors, Meghalaya is among the first low-income states in India to expand health where IFC was the lead advisor. IFC Advisory Services in insurance coverage to those right above the poverty line who are also vulnerable, Public-Private Partnerships 2121 Pennsylvania Ave. NW but excluded from the state-sponsored health insurance Washington D.C. 20433 ifc.org/ppp BACKGROUND health system, supported institutional strengthening and capacity The residents of Meghalaya, a low-income state in northeastern India, building, and provided performance-based incentives for have faced inadequate access to both public and private health care the government health facilities and their staff. services. Infrastructure and facilities are limited; there is a severe shortage of doctors, and the few residents with health insurance are not sufficiently TRANSACTION STRUCTURE covered. The existing public health delivery system in Meghalaya is The transaction was structured to distribute risks and responsibilities complemented by the national health insurance scheme for the poor, efficiently. It used a novel four-stage transaction structure, including Rashtriya Swasthaya Bima Yojna (RSBY), which serves people living replenishment of insurance cover on reaching the annual limit, and below the poverty line. rider coverage for defined higher-cost ailments. These were customized to ensure adequate coverage for common oncology and cardiovascular Under the existing system, 85 percent of households in the state do issues—unprecedented in the government-sponsored health insurance not have any coverage, though they have access to government health space in the country. facilities. Even the 15 percent of residents who are covered by RSBY are only partially covered, largely for secondary care conditions, as the The newly created state government agency for implementing the scheme insurance cover is capped at approximately $550 per family per year. Such was responsible for paying the entire insurance premium for more than coverage is not sufficient for expensive tertiary care required for serious 500,000 eligible households (including the contribution it received for a conditions such as cancer and heart disease. subset of households from the central government). It also was required to provide oversight and administer the plan’s implementation. The government of Meghalaya, as part of a broader health sector reform, sought assistance from IFC and the World Bank to implement The winning bidder would bear the costs incurred for medical treatment an expanded health insurance program for the state’s 3 million people, of enrolled families within the pre-defined parameters of the contract, and regardless of income. Its objectives were to: the enrollment of beneficiaries. The agreement also provided incentives to maximize the number of families enrolled. The insurer would also • Expand health coverage to all residents of Meghalaya; be required to empanel the requisite number and type of hospitals and • Reduce the financial impact of health care on low and middle- providers within the scheme, and assume responsibility for negotiating income households; rates and ensuring quality. Cover a broader range of diseases and align incentives for • optimum health-care delivery in public and private facilities; BIDDING Encourage choice for beneficiaries and foster greater entry of • Six qualified Indian health insurance companies participated in the bid. quality providers in the health-care sector. ICICI Lombard General Insurance Co Ltd., India’s largest private general IFC’S ROLE insurance company, submitted the winning bid. ICICI offered a price IFC worked jointly with the World Bank to design and implement an of about $9 per family per year for the expanded benefit package that insurance plan with participation from the private sector, building on the doubles the RSBY annual limit and adds coverage for defined high-cost existing insurance program, RSBY, which was introduced in the state in ailments, potentially offering a protection of up to about $3,000 per 2009. family of five per year. The joint IFC-World Bank team conducted a detailed feasibility study, EXPECTED POST-TENDER RESULTS proposed a transaction structure, prepared transaction documents, and managed the bid process. In doing so, the team ensured that the new • Meghalaya is among the first low-income states in system would build upon the state’s existing health-care system and India to expand health insurance coverage to those expand the state’s institutional capacity for health-care delivery. above the poverty line. • Addresses operational components to improve the IFC’s contributions included: quality of implementation of the current health insurance system. • Conducting a pre-bid conference with insurance company representa- tives to explain the details of the tender and contracts. This alleviated • Up to $4 million expected to be mobilized for purchas- concerns by potential bidders on rolling out a universal insurance ing inpatient services from public and private hospitals plan. through the health insurance scheme. IFC recommended establishing a separate budgetary allocation for • the insurance scheme and creating a 15 to 20 member organization headed by a senior officer dedicated to executing it. This alleviated 01/2013 concerns about the RSBY’s track record and the state’s commitment and ability to support the program. • IFC also advised the state government to introduce policies to estab- lish the insurance scheme as an integral part of the state’s health sys- tem. This ensured that it would be integrated with the existing public