Combined spending by governments, multilateral aid agencies, international organizations, foundations, NGOs, and the private sector makes up less than one third of the total amount spent on healthcare in India. This means that out-of-pocket spending by households on healthcare represents the lion’s share of medical expenses, and in India this reaches as much as 77% of total health expenditure.

While health insurance as a concept is gaining popularity in India, the variety and availability of products is severely limited even for the more affluent segments of the population. As for India’s poor, the situation is worse as many have only partial access to a limited set of health services. Unfortunately, this group must pay most of their healthcare needs out-of-pocket, or forego healthcare altogether.

Currently in India, the few health insurance plans aimed at the poor cannot be tailored to the needs of different communities with different priorities. Often times, the design and pricing do not reflect local conditions, creating a mismatch between what the poor want and actually receive. What’s more, the packages do not cover expensive events and are limited to only a few rare events with low caps, or limits of coverage. Community-based micro health insurance represents a new way for the poor to obtain affordable yet high-impact health insurance products that meet their needs.