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There is existing and growing inequity in the health insurance and healthcare market of India. More than seven percent of the Indian households incur impoverishment due to healthcare costs burden, annually. The reasons behind it are the socio-economic differences, poor infrastructure, lack of suitable health insurance schemes, adverse selection, and moral hazard. Through this study, we empirically test for adverse selection and moral hazard and make a case for the middle-income sections of the population, which is the most vulnerable section of the society as no health insurance scheme in the country is directed towards this group. We also check for the factors affecting the incidence of catastrophic health expenditure for households having different types of health insurance schemes across expenditure quintiles. We use the Copula regression and Logistic regression for checking for adverse selection and moral hazard, looking at the differences in utilization of healthcare among the insured and uninsured population, and to estimate the effectiveness of various health insurance schemes on the expenditure quintiles, respectively. We use the NSSO’s 75th round on Social Consumption: Health (2017-18) dataset for the same. Our results indicates that there is a section of population prone to financial vulnerability and lack of adequate risk-pooling mechanisms significantly increases their out-of-pocket expenditures. There is a need for evidence-based healthcare policies which involve catering the entire population according to their needs.
