Is Health Insurance Actuarially Fair? Quantifying Discrepancies in the Indian Health Insurance Sector

This study investigates the actuarial fairness of health insurance policies by examining discrepancies within the Indian health insurance and their impact on medical costs. By virtue of its creation, the scope of health insurance contracts is to cover medical expenses and the cost of the same is expected to reflect the expected cost of medical services. In practice it is observed that there are discrepancies such as misinformation, accessibility to health care services, hospital quality and inconsistencies in claims processing, increase costs associated with health care of individuals participating in the health insurance, which affect the fairness in pricing of these policies. This study uses Structural Equation Modelling (SEM) to develop latent variables representing these discrepancies and Hierarchical Linear Modelling (HLM) to assess their effect on the cost of medical care. The findings of this study support the presence of region-wise discrepancies in the Indian health insurance sector and the results support the significant impact on the increase in medical expenses. The study concludes with policy recommendations aimed at enhancing the efficiency, effectiveness and fairness of the health insurance policies in India.