India’s public spending on health is less than one percent of the country’s GDP, one of the lowest in the world. For India’s poor the lack of health security means that hospitalization can result in financial catastrophe. In fact, studies show that illness is a leading cause of indebtedness for poor households. Consequently, India’s poor do not get proper healthcare.

USAID works with the Healing Fields Foundation (HFF) to test mechanisms for delivering health insurance to India’s very poor – a growing priority for India’s central and state governments. Through micro-lending programs, participants make small monthly payments into a common insurance premium pool managed by community organizations. The money is used to purchase a group health insurance policy that provides for treatment of selected diseases at hospitals where rates have been pre-negotiated by HFF. The policyholder makes only a co-payment (10 to 20 percent of the treatment cost) at the time of discharge with the insurer paying the balance directly to the hospital – eliminating the policyholder’s reliance on reimbursements and the hassle of forms and claims. The program’s fast, accurate administration and direct payment systems reduces costs for both hospitals and patients. Lessons learned from HFF programs help inform the design of statewide systems.