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Abstract

Healthcare financing in India has become a source of worry for the government, policy makers and the populace most especially the rural poor and economically vulnerable group. It is estimated that out-of-pocket payment dominates the bulk of healthcare financing in India (NSSO, 2006). Health insurance of any form has been identified to play an important role in rural households’ access to healthcare and turns the unexpected health expenditure into predictable payments in the form of insurance which in turn encourages households to further invest in the wellbeing of their households (Asgary et al., 2004). It increases the fungibility of funds for these households especially when such insurance schemes are well established and households face relatively low out of pocket payments when they use healthcare services. Such households will be better producers of health and also increase the consumption of health related commodities, which further enhances the status of the household members. In the midst of high cost of health care both at the macro and micro levels, health insurance becomes a viable alternative for financing health care in India.