Homing In On HMOs
Various HMO models are being explored in India. But will HMOs take off India in a big way, asks Shardul Nautiyal.
Affordable health insurance for poor urban populace is a dream that eminent physician Dr RD Lele has nurtured for years. And it may be a reality soon through his novel concept of Health Maintenance Organisations (HMOs), offering pre-paid managed care linked to life insurance on a group basis. In an HMO, a group of doctors and other medical professionals offer care to a group of people to achieve preventive, promotive and curative care for a fixed amount. To check the feasibility of such an innovative idea in India, a survey of around 15,000 families was recently conducted in Dharavi, Asia’s largest slum located in the heart of Mumbai city. The study was conducted under the aegis of Padmabhushan Dr Lele in collaboration with family physicians (FPs), NGOs, insurance experts and actuaries to launch a pilot HMO project in Mumbai. As expected, the survey found that the families have no access to pre-paid managed care, leave aside health insurance or life insurance. The survey revealed that on an average each family spends Rs 10,000 per year for medical expenses.
The findings of the Dharavi study have been sent to TTK Healthcare Services, a Bangalore-based TPA and actuary, and a Singapore -based TPA, N-TUC Income, for designing health insurance products and schemes of pre-paid managed care and also for determining premiums for group health insurance schemes.
"The scheme would be formulated keeping in mind the population of urban slums, which is below poverty line and the fact that health insurance is something which they are not aware of"
- Nitin SharmaAssistant Manager,Medical Services TTK Healthcare Services
According to Nitin Sharma, Assistant Manager, Medical Services, TTK Healthcare Services, Mumbai, “The scheme would be formulated keeping in mind the population of urban slums, which is below poverty line (BPL) and the fact that health insurance is something which they are not aware of.”
Based on the survey, a unique scheme has been proposed -- one which would offer a life insurance cover of Rs 50,000 for the bread winner of the family, medicine worth Rs 8,000 for the entire family, cover for hospitalisation, accidents, death and pre-paid managed care through a family physician for common illnesses for the entire family, and further for chronic diseases depending on the premium given by the member of the family. Besides, the family covered under the HMO will be entitled to a free annual check-up for each member of the family and three additional visits to the FP annually.
"I have ascertained the willingness of 2,500 FPs in Mumbai, who are willing to be a part of the HMO"
- Padmabhushan R D LelePioneer, HMO
The HMO project plans to constitute a network of health NGOs, social workers, hospitals, FPs, foreign and insurance companies, actuaries, TPAs, chemists, IT professionals and financial consultants. Patients with chronic disease like arthritis, chronic bronchitis and asthma, diabetes, high blood pressure, coronary artery disease will get pre-paid managed care from a group of 3,000 FPs. One FP will be responsible for the health of 500 to 1,000 families or 5,000 individuals. If needed, the FPs can refer patients to relevant specialists on the same day. Home care and rehabilitation are also part of the managed care. “I have ascertained the willingness of 2,500 FPs in Mumbai, who are willing to be a part of the HMO,” says Dr Lele.
The facilities will be offered at an annual premium of Rs 2,000. Micro-financing through banks will enable the poor family to pay in advance for a five-year cover, to be repaid by regular monthly savings deposited in their bank account. This approach is being explored in the pilot project in collaboration with banks and insurance companies.
“HMO will not only ensure the elimination of the widely-prevalent gender discrimination against females, but it will also put major emphasis on the care of the mother, the female child and adolescent girls. It will cover knowledge regarding nutrition, menstrual hygiene, sanitary napkins, prevention of iron deficiency, sex education and prevention of STD / HIV, emergency contraception, family life education, reproductive health and promotion of breast-feeding. Care of pregnant women will ensure that no baby is born with a birth weight less than 2.5 kg,” informs Dr Lele.
According to Dr Hari Prasad, CEO, Apollo Hospitals, Hyderabad, “HMO is significant when it is able to provide not only primary care, but also high-end secondary and tertiary healthcare. The HMO model should not only be designed for common illnesses, but chronic diseases like cardiac diseases also.” It is a challenging task to provide pre-paid managed care to the three million poor citizens in Dharavi, who have to pay five per cent of their earnings as subscription. Dr Lele has thought of a way through this problem. “Bringing the communities together would help form co-operatives, who can ask the bank for loans, with a small saving of as low as Rs 200. This small amount can then be utilised as premium for the group health insurance scheme. The advantage of this system is that co-operatives and banks have a collateral relation. The group, in this case, can act as a guarantor and hence there would be less chances of the scheme lapsing,” asserts Dr Lele.
Why Is HMO Required?
Why the sudden spotlight on HMO? That is because HMOs emerged first in the US as a response to curb the escalating cost of healthcare fuelled by the private insurance model. Now, HMO is creating ripples in India. It is perceived as an ideal substitute to health insurance, which is mired in low purchase, exclusion of outpatient department payment and high claims ratios. Health insurance is still a loss-making venture for insurers.
“The problems faced by health insurance companies globally indicate that indemnity health insurance in its present form has no future in India and clearly point to an urgent need for health insurance integrated with HMO and pre-paid managed care,” says Dr Lele. In India, HMOs can effectively work through co-operatives, self-help groups and health finance programmes. The usual modus operandi for these groups is to buy group insurance cover for their members from insurance companies,” says Duggal.
CSSC-WIN’s Health Initiative
Based on Dr Lele’s model, the Centre for the Study of Social Change (CSSC) has undertaken the project Women of India Network (WIN) in Mumbai for integrated human development of slumdwellers using health as an entry point. The project is running 20 clinics in the slums of Bandra, Khar and Santacruz. The clinics have been set up to address common illnesses in the form of preventive and promotive healthcare for children and women, besides immunisation and family planning programmes.
Seventeen of these clinics are funded by Switzerland-based NGO, the International Foundation for Population Development (IFPD), supported by women’s groups in Europe, while three clinics are funded by the ICICI Bank.
In this model, one clinic looks after 1,000 families. “We are trying to bring more families into the fold by empowering women through training for income generation, savings (thrift) schemes and health education. To provide healthcare to a unit of 1,000 families, we are working with the government through community-based organisations existing in the slums,” says Dr Ramesh Potdar, Hon Secretary, CSSC.
Apollo’s Co-operative HMO Model
As opposed to group insurance schemes, Family Health Plan Limited (FHPL), a part of Apollo Group of Hospitals, has implemented a co-operative-based HMO. FHPL has run Karnataka Farmers Co-operative Scheme (KFCS) for the past three years as a part of Corporate Social Responsibility. The scheme provides high-end care to the organised group sector like Farmers Societies, Sugarcane Societies, Milk Producers Unions and large Self-Help Groups (SHGs). The scheme, conceptualised, designed and administered by FHPL, covers two million farmers, in the form of co-operatives, which pay to a corpus run by a trust. The International Labour Organisation (ILO) has declared the scheme as the single-largest healthcare scheme in the world under one umbrella. The trust operates the scheme and controls the finances.
"There is a need to introduce schemes in the organised sector as this can provide health insurance to 50 per cent of Indians"
- C Chandra Sekhar Vice President, FHPL Hyderabad
“Indian healthcare system needs to devise its own HMO model, as the health insurance schemes in India can be executed successfully in the organised sector. There is, therefore, a need to leverage government machinery and introduce schemes in the organised sector as this can provide health insurance to 50 per cent of the Indian population,” says C Chandra Sekhar, Vice President, FHPL, Hyderabad.
In the FHPL HMO model in India health insurance is integrated with a healthcare institute, working with discounted tariffs for an identifiable large group of people. “The model primarily envisages large volumes of patients so that cost can be contained,” informs Chandra Sekhar.
Some Recognised Global HMO Models
Group Model: A group of physicians from various specialties, who provide medical care to a defined patient group in return for a fixed capita fee or discounted fees. The physicians also provide healthcare to different groups concurrently.
Staff Model: In this model, the physicians join the HMO as partners, where they receive a fixed payment, bonus, incentives and even share a profit. The specialists are sub-contracted so that the patients can visit the specialist, when required. The staff model is also called the ‘Closed Panel’ as patients can only consult the physicians in the panel of the said HMO.
Independent Practice Association: An organised group of healthcare providers that provide healthcare to an identifiable group of people. Providers maintain their private practices and at the same time adhere to the guidelines established by the health plan, that is why it is called as ‘IPA-HMO model’ or ‘Open-Panel Model’.
HMO Study
A study similar to Dr Lele’s study, called ‘Community Dialogue Tools’, was conducted in the district of Sangli by health NGO Society for Natal Effects on Health in Adult life (SNEHA) and United Nations International Children Emergency Fund (UNICEF) to assess access to healthcare in urban communities. Based on the study, an assessment was made to understand the healthcare needs of the community. “The study initially started with the focus on HIV-related issues, which gradually became broad-based and later on evolved to explore the need for preventive, promotive and curative care, which forms the basis of HMO in India,” explains Dr Armeida Fernandez, Honorary Founder Member, SNEHA.
Hurdles In Implementing HMOs In India
Experts fear that Indian HMOs would repeat the functioning of their counterparts in the US, which in the pursuit of controlling costs and maximising profits, often become very inflexible, thus defeating the purpose for which they were set up.
"For both insurance and HMOs to function, the medical profession and practice has to be regulated"
- Ravi DuggalConsultant, CEHAT Mumbai
Experts are also apprehensive about the difficulty which HMOs will face in running independently. “For both insurance as well as HMOs to function, the medical profession and practice has to be highly regulated. Without strong ethics, HMOs would be doomed to failure,” says Duggal.
Hurdles In Mediclaim
It is availed by only two per cent of urban population (and 0.2 per cent of total population) in India.
It excludes medical termination of pregnancy (MTP), tubectomy and costs of preventive care (like immunisation for Hepatitis B).
The spiralling rise in the claims ratio of Mediclaim policy from 94 per cent in 2002 to 140 per cent in 2004 is alarming for a country like India.
Health insurance is still insignificant though growing at over 30 per cent per annum.

Suggestions For Developing HMOs
Considering the government’s inability to increase the required financial inputs for improving rural healthcare, both preventive and curative, Public Private Partnership is the need of the hour. “Private partners may adopt primary health centres and community health centres. Groups of doctors from cities can be encouraged to migrate to rural areas to run the PHCs and CHCs. By innovative approaches such as micro-financing and micro-health insurance, we can provide them cost-effective healthcare,” avers Dr Lele. Insurance companies/TPAs can also adopt HMO models, which would in turn control the way medical care is given or accessed. “TPAs are mired in cuts and commissions which dictate the terms of the health insurance policies, which has its bearing on healthcare delivery,” an expert quips. The other side of the coin is that most TPAs are focussed on corporate clients. Therefore, if TPAs in India transform themselves into HMOs in collaboration with a network of family physicians specialists and hospitals, the expertise of TPAs can be better utilised.
shardulnautiyal@rediffmail.com